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JUDGMENT OF THE COURT (Ninth Chamber)
4 June 2015 ( *1 )
‛Reference for a preliminary ruling — Directive 2000/13/EC — Labelling and presentation of foodstuffs — Articles 2(1)(a)(i) and 3(1)(2) — Labelling such as could mislead the purchaser as to the composition of foodstuffs — List of ingredients — Use of the indication ‘raspberry and vanilla adventure’ and of depictions of raspberries and vanilla flowers on the packaging of a fruit tea not containing those ingredients’
In Case C‑195/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesgerichtshof (Germany), made by decision of 26 February 2014, received at the Court on 18 April 2014, in the proceedings
Bundesverband der Verbraucherzentralen und Verbraucherverbände — Verbraucherzentrale — Bundesverband e.V.
v
Teekanne GmbH & Co. KG,
THE COURT (Ninth Chamber),
composed of K. Jürimäe, President of the Chamber, M. Safjan (Rapporteur) and A. Prechal, Judges,
Advocate General: E. Sharpston,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
the Bundesverband der Verbraucherzentralen und Verbraucherverbände — Verbraucherzentrale Bundesverband e.V., by J. Kummer and P. Wassermann, Rechtsanwälte,
—
Teekanne GmbH & Co. KG, by A. Meyer, Rechtsanwalt,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the Portuguese Government, by L. Inez Fernandes and C. Madaleno, acting as Agents,
—
the European Commission, by S. Grünheid and K. Herbout-Borczak, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 2(1)(a)(i) and 3(1)(2) of Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs (OJ 2000 L 109, p. 29), as amended by Regulation (EC) No 596/2009 of the European Parliament and of the Council of 18 June 2009 (OJ 2009 L 188, p. 14, ‘Directive 2000/13’).
The request has been made in proceedings between the Bundesverband der Verbraucherzentralen und Verbraucherverbände — Verbraucherzentrale Bundesverband e.V. (the Federal Union of Consumer Organisations and Associations, ‘the BVV’) and Teekanne GmbH & Co. KG (‘Teekanne’) concerning the allegedly misleading nature of the labelling of a foodstuff.
Legal context
European Union ( ‘EU ’) law
Directive 2000/13
Directive 2000/13 was repealed with effect from 13 December 2014, pursuant to Article 53(1) of Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers, amending Regulations (EC) No 1924/2006 and (EC) No 1925/2006 of the European Parliament and of the Council, and repealing Commission Directive 87/250/EEC, Council Directive 90/496/EEC, Commission Directive 1999/10/EC, Directive 2000/13/EC of the European Parliament and of the Council, Commission Directives 2002/67/EC and 2008/5/EC and Commission Regulation (EC) No 608/2004 (OJ 2011 L 304, p. 18). However, having regard to the date of the facts of the dispute in the main proceedings, that dispute is still governed by Directive 2000/13.
Under recitals 6, 8 and 14 in the preamble to Directive 2000/13:
‘(6)
The prime consideration for any rules on the labelling of foodstuffs should be the need to inform and protect the consumer.
...
(8)
Detailed labelling, in particular giving the exact nature and characteristics of the product which enables the consumer to make his choice in full knowledge of the facts, is the most appropriate since it creates fewest obstacles to free trade.
...
(14)
The rules on labelling should also prohibit the use of information that would mislead the purchaser ... To be effective, this prohibition should also apply to the presentation and advertising of foodstuffs.’
Article 1(1) and (3)(a) of that directive states:
‘1. This Directive concerns the labelling of foodstuffs to be delivered as such to the ultimate consumer and certain aspects relating to the presentation and advertising thereof.
...
3. For the purpose of this Directive,
(a)
“labelling” shall mean any words, particulars, trade marks, brand name, pictorial matter or symbol relating to a foodstuff and placed on any packaging, document, notice, label, ring or collar accompanying or referring to such foodstuff.’
Article 2(1)(a)(i) of that directive provides:
‘The labelling and methods used must not:
(a)
be such as could mislead the purchaser to a material degree, particularly:
(i)
as to the characteristics of the foodstuff and, in particular, as to its nature, identity, properties, composition, quantity, durability, origin or provenance, method of manufacture or production; …’
Article 3(1) of Directive 2000/13 provides:
‘In accordance with Articles 4 to 17 and subject to the exceptions contained therein, indication of the following particulars alone shall be compulsory on the labelling of foodstuffs:
(1)
the name under which the product is sold;
(2)
the list of ingredients;
...’
Article 6 of that directive is worded as follows:
‘1. Ingredients shall be listed in accordance with this Article and Annexes I, II, III and IIIa.
...
(a)
“Ingredient” shall mean any substance, including additives and enzymes, used in the manufacture or preparation of a foodstuff and still present in the finished product, even if in altered form.
...
5. The list of ingredients shall include all the ingredients of the foodstuff, in descending order of weight, as recorded at the time of their use in the manufacture of the foodstuff. It shall appear preceded by a suitable heading which includes the word “ingredients”.
...
6. Ingredients shall be designated by their specific name, where applicable, in accordance with the rules laid down in Article 5.
However:
...
—
flavourings shall be designated in accordance with Annex III,
…
7. Community provisions or, where there are none, national provisions may lay down that the name under which a specific foodstuff is sold is to be accompanied by mention of a particular ingredient or ingredients.
...’
Regulation (EC) No 178/2002
Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ 2002 L 31, p. 1), provides in Article 8 thereof, entitled ‘Protection of consumers’ interests’:
‘1. Food law shall aim at the protection of the interests of consumers and shall provide a basis for consumers to make informed choices in relation to the foods they consume. It shall aim at the prevention of:
(a)
fraudulent or deceptive practices;
(b)
the adulteration of food; and
(c)
any other practices which may mislead the consumer.’
Article 16 of that regulation provides:
‘Without prejudice to more specific provisions of food law, the labelling, advertising and presentation of food or feed, including their shape, appearance or packaging, the packaging materials used, the manner in which they are arranged and the setting in which they are displayed, and the information which is made available about them through whatever medium, shall not mislead consumers’.
German Law
Paragraph 4(11) of the German Law against unfair competition (Gesetz gegen den unlauteren Wettbewerb), in the version applicable to the dispute in the main proceedings (BGBl. 2010 I, p. 254) (‘the UWG’) provides:
‘Examples of unfair commercial practices
A person shall be regarded as acting unfairly in particular where he
...
11.
infringes a statutory provision that is also intended to regulate market behaviour in the interests of market participants’.
Paragraph 5(1)(1) of the UWG provides:
‘Misleading commercial practices’
(1)
A person shall be regarded as acting unfairly where he uses a misleading commercial practice. A commercial practice shall be deemed to be misleading if it contains untruthful information or other information which could mislead, regarding the following circumstances:
1.
the essential characteristics of the goods or services, such as availability, nature, execution, benefits, risks, composition, accessories, method or date of manufacture, delivery or provision, fitness for purpose, uses, quantity, specification, after-sale customer assistance, complaint handling, geographical or commercial origin, the results to be expected from their use, or the results or material features of tests carried out on the goods or services.’
Paragraph 11, headed ‘Protection against misleading practices’, in the German Code on foodstuffs, consumer items and animal feed (Lebensmittel- Bedarfsgegenstände- und Futtermittelgesetzbuch), in the version applicable to the case in the main action (‘the LFGB’), provides:
‘It shall be prohibited to sell foodstuffs under names, indications or presentations liable to mislead and, in general or in individual cases, to advertise those foodstuffs by means of misleading representations or other statements. The following in particular are misleading:
1.
in the case of a foodstuff, the use of names, indications, presentations, representations or other statements concerning characteristics, in particular those concerning the type, condition, composition, amount, perishability, place of manufacture, origin, or method of manufacture or derivation, which are liable to mislead;
...’
The dispute in the main proceedings and the question referred for a preliminary ruling
It is apparent from the order for reference that Teekanne markets a fruit tea under the name ‘Felix Himbeer-Vanille Abenteuer’ (‘Felix raspberry and vanilla adventure’) (‘the fruit tea’). The packaging for that tea comprises a foldable carton in the form of a parallelepiped, containing 20 bags.
That packaging comprises a number of elements of various sizes, colour and font, in particular (i) depictions of raspberries and vanilla flowers, (ii) the indications ‘Früchtetee mit natürlichen aromen’ (‘fruit tea with natural flavourings’) and ‘Früchtetee mit natürlichen aromen – Himbeer-Vanille-Geschmack’ (‘fruit tea with natural flavourings – raspberry-vanilla taste’) and (iii) a seal with the indication ‘nur natürliche Zutaten’ (‘only natural ingredients’) inside a golden circle.
The referring court found that the fruit tea does not in fact contain any vanilla or raspberry constituents or flavourings. The list of ingredients, which is on one side of the packaging, is as follows: ‘Hibiscus, apple, sweet blackberry leaves, orange peel, rosehip, natural flavouring with a taste of vanilla, lemon peel, natural flavouring with a taste of raspberry, blackberries, strawberry, blueberry, elderberry’.
The BVV brought an action against Teekanne before the Landgericht Düsseldorf (Regional Court, Düsseldorf), submitting that the items on the fruit tea’s packaging misled the consumer with regard to the tea’s contents. The BVV argues that because of those items, the consumer expects the tea to contain vanilla and raspberry or at least natural vanilla flavouring and natural raspberry flavouring.
Consequently, the BVV claimed that the Landgericht Düsseldorf should order Teekanne, on pain of specified penalties, to desist from advertising, or causing to be advertised, the fruit tea in the course of business. In addition, the BVV sought reimbursement of the costs of the letter of formal notice which it had sent, amounting to EUR 200.
By judgment of 16 March 2012, the Landgericht Düsseldorf upheld that action.
Teekanne lodged an appeal and the Oberlandesgericht Düsseldorf (the Higher Regional Court, Düsseldorf) set aside that judgment by judgment of 19 February 2013 and dismissed the BVV’s application. That court held that there had been no misleading of the consumer either within the meaning of Paragraph 4(11) of the UWG, in conjunction with Paragraph 11(1), second sentence, point 1, of the LFGB, or as provided for in Paragraph 5(1), first sentence and second sentence, point 1, of the UWG.
The Oberlandesgericht Düsseldorf found that, in accordance with Directive 2000/13, those provisions of the UWG and the LFGB were to be interpreted by reference to the expectations of the average consumer. In the present case, it was clear from the fruit tea’s list of ingredients, printed on the packaging, that the natural flavourings used have the taste of raspberry or vanilla. That list thus expresses, in a manner free from doubt, the fact that the flavourings used are not obtained from vanilla and raspberries but only taste like them. In accordance with the case-law of the Court of Justice, correct and complete information provided by the list of ingredients on packaging constitutes sufficient grounds on which to rule out the existence of any misleading of consumers.
The BVV brought an appeal on a point of law against that judgment before the Bundesgerichtshof (the Federal Court of Justice).
The referring court states that the repeated eye-catching depiction of raspberries and vanilla flowers on the fruit tea’s packaging, the similarly repeated indication ‘mit natürlichen Aromen’ (‘with natural flavourings’) and the depiction of a seal featuring the words ‘nur natürliche Zutaten’ (‘only natural ingredients’) suggest that the taste of that tea is in part determined by flavours obtained from raspberries and vanilla flowers. The fruit tea is therefore presented in such a way as to be capable, even in the case of a reasonably well-informed and reasonably observant and circumspect consumer, of creating a false impression as to its composition. The presentation of the fruit tea is also such as to dissuade the consumer from taking note of the list of ingredients (reproduced — in much smaller print — on the product packaging), which sets out the true state of affairs.
The referring court considers that, in the light of recitals 6 and 8 in the preamble to Directive 2000/13, the labelling of the fruit tea and methods used are such as could mislead the purchaser within the meaning of Article 2(1)(a)(i) of that directive.
In those circumstances, the Bundesgerichtshof decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Is it permissible for the labelling, presentation and advertising of foodstuffs to give the impression, by means of their appearance, description or pictorial representation, that a particular ingredient is present, even though that ingredient is not in fact present and this is apparent solely from the list of ingredients provided for under Article 3(1)(2) of Directive 2000/13/EC?’
The question referred for a preliminary ruling
By its question, the referring court asks, in essence, whether Articles 2(1)(a)(i) and 3(1)(2) of Directive 2000/13 must be interpreted as precluding the labelling of a foodstuff and methods used for the labelling from giving the impression, by means of the appearance, description or pictorial representation of a particular ingredient, that that ingredient is present, even though it is not in fact present and this is apparent solely from the list of ingredients on the foodstuff’s packaging.
In the present case, first, the fruit tea’s packaging includes, in particular, depictions of raspberries and vanilla flowers, the indications ‘Früchtetee mit natürlichen aromen’ (‘fruit tea with natural flavourings’) and ‘Früchtetee mit natürlichen aromen – Himbeer-Vanille-Geschmack’ (‘fruit tea with natural flavourings – raspberry-vanilla taste’) as well as a seal with the indication ‘nur natürliche Zutaten’ (‘only natural ingredients’).
Secondly, according to the list of ingredients on one side of the packaging, as provided for in Article 3(1)(2) of Directive 2000/13, which is agreed to be correct and complete, that tea contains natural flavourings with the ‘taste of vanilla’ and ‘taste of raspberry’. It is therefore established that the tea does not contain natural ingredients from vanilla or raspberry or flavouring obtained from them.
In the main proceedings, the question is therefore whether the labelling of the fruit tea is such as could mislead the purchaser inasmuch as it gives the impression that it contains raspberry and vanilla-flower or flavourings obtained from those ingredients, even though such constituents or flavourings are not present in that tea.
As stated in recitals 6 and 8 of Directive 2000/13, the prime consideration of that directive is the need to inform and protect the consumer, with the detailed labelling, in particular giving the exact nature and characteristics of the goods, therefore having to enable the consumer to make his choice in full knowledge of the facts.
In that regard, Article 2(1)(a)(i) of Directive 2000/13 provides, echoing recital 14 of that directive, that the labelling and methods used must not be such as could mislead the purchaser, particularly as to the characteristics of the foodstuff and, in particular, as to its nature, identity, properties, composition, quantity, durability, origin or provenance, method of manufacture or production.
Consequently, Article 2(1)(a)(i) requires that the consumer have correct, neutral and objective information that does not mislead him (see, to that effect, judgment in Commission v Italy, C‑47/09, EU:C:2010:714, paragraph 37).
It must be added that, as set out in Article 16 of Regulation No 178/2002, without prejudice to more specific provisions of food law, the labelling, advertising and presentation of food or feed, including their shape, appearance or packaging, the packaging materials used, the manner in which they are arranged and the setting in which they are displayed, and the information which is made available about them through whatever medium, must not mislead consumers.
Although Directive 2000/13 is a more specific provision of food law, within the meaning of Article 16 of Regulation No 178/2002, Article 16 of that regulation, read in conjunction with Article 8 thereof, restates that the labelling of food cannot mislead.
So far as concerns a reply to the referring court, it must be recalled that, as a general rule, it is not for the Court of Justice, pursuant to the division of jurisdiction between the EU Courts and national courts, to rule on the question whether the labelling of certain products is likely to mislead the purchaser or consumer or to determine whether a sales description is potentially misleading. That task is for the national court. When giving a preliminary ruling on a reference, however, the Court of Justice may, in appropriate cases, give further clarification as guidance to the national court in its decision (see, in particular, judgments in Geffroy, C‑366/98, EU:C:2000:430, paragraphs 18 to 20, and Severi, C‑446/07, EU:C:2009:530, paragraph 60).
In order to assess the capacity of labelling to mislead, the national court must in essence take account of the presumed expectations, in light of that labelling, which an average consumer who is reasonably well informed, and reasonably observant and circumspect has, as to the origin, provenance, and quality associated with the foodstuff, the critical point being that the consumer must not be misled and must not be induced to believe, incorrectly, that the product has an origin, provenance or quality which are other than genuine (see, to that effect, judgment in Severi, C‑446/07, EU:C:2009:530, paragraph 61 and the case-law cited).
In that regard, it is apparent from the case-law that the Court has acknowledged that consumers whose purchasing decisions depend on the composition of the products in question will first read the list of ingredients, the display of which is required by Article 3(1)(2) of Directive 2000/13 (see, to that effect, judgments in Commission v Germany, C‑51/94, EU:C:1995:352, paragraph 34, and Darbo, C‑465/98, EU:C:2000:184, paragraph 22).
However, the fact that the list of ingredients is displayed on the packaging of the goods at issue in the main proceedings does not in itself exclude the possibility that the labelling of those goods and methods used for it may be such as to mislead the purchaser within the meaning of Article 2(1)(a)(i) of Directive 2000/13.
The labelling, as defined in Article 1(3)(a) of that directive, is composed of any words, particulars, trade marks, brand name, pictorial matter or symbol relating to a foodstuff and placed on its packaging. Some of those items may in practice be misleading, erroneous, ambiguous, contradictory or incomprehensible.
In that case, the list of ingredients, even though correct and comprehensive, may in some situations not be capable of correcting sufficiently the consumer’s erroneous or misleading impression concerning the characteristics of a foodstuff that stems from the other items comprising its labelling.
Therefore, where the labelling of a foodstuff and methods used for the labelling, taken as a whole, give the impression that a particular ingredient is present in that foodstuff, even though that ingredient is not in fact present, such labelling is such as could mislead the purchaser as to the characteristics of the foodstuff.
In the event, it is for the referring court to carry out an overall examination of the various items comprising the fruit tea’s labelling in order to determine whether an average consumer who is reasonably well informed, and reasonably observant and circumspect, may be misled as to the presence of raspberry and vanilla-flower or flavourings obtained from those ingredients.
In the context of that examination, the referring court must in particular take into account the words and depictions used as well as the location, size, colour, font, language, syntax and punctuation of the various elements on the fruit tea’s packaging.
In the light of the foregoing considerations, the answer to the question referred is that Articles 2(1)(a)(i) and 3(1)(2) of Directive 2000/13 must be interpreted as precluding the labelling of a foodstuff and methods used for the labelling from giving the impression, by means of the appearance, description or pictorial representation of a particular ingredient, that that ingredient is present, even though it is not in fact present and this is apparent solely from the list of ingredients on the foodstuff’s packaging.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Ninth Chamber) hereby rules:
Articles 2(1)(a)(i) and 3(1)(2) of Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs, as amended by Regulation (EC) No 596/2009 of the European Parliament and of the Council of 18 June 2009, must be interpreted as precluding the labelling of a foodstuff and methods used for the labelling from giving the impression, by means of the appearance, description or pictorial representation of a particular ingredient, that that ingredient is present, even though it is not in fact present and this is apparent solely from the list of ingredients on the foodstuff’s packaging.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Seventh Chamber)
3 September 2015 ( *1 )
‛Reference for a preliminary ruling — Approximation of laws — Cosmetic products — Consumer protection — Regulation (EC) No 1223/2009 — Scope — Non-corrective colour contact lenses featuring designs — Statement on the outer packaging describing the product in question as a cosmetic product — Consumer protection’
In Case C‑321/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Landgericht Krefeld (Germany), made by decisions of 4 June and 4 August 2014, received at the Court on 4 July and 11 August 2014 respectively, in the proceedings
Colena AG
v
Karnevalservice Bastian GmbH,
THE COURT (Seventh Chamber),
composed of J.-C. Bonichot, President of the Chamber, A. Arabadjiev and C. Lycourgos (Rapporteur), Judges,
Advocate General: N. Jääskinen,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Karnevalservice Bastian GmbH, by C. Ballke, Rechtsanwalt,
—
the Czech Government, by M. Smolek and S. Šindelková, acting as Agents,
—
the French Government, by F. Gloaguen and D. Colas, acting as Agents,
—
the European Commission, by G. Wilms and P. Mihaylova, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Regulation (EC) No 1223/2009 of the European Parliament and of the Council of 30 November 2009 on cosmetic products (OJ 2009 L 342, p. 59).
The request has been made in proceedings between Colena AG (‘Colena’) and Karnevalservice Bastian GmbH (‘Karnevalservice’) concerning the marketing by the latter of non-corrective colour contact lenses featuring designs (‘the lenses at issue’).
EU law
Recital 6 in the preamble to Regulation No 1223/2009 reads as follows:
‘This Regulation relates only to cosmetic products and not to medicinal products, medical devices or biocidal products. The delimitation follows in particular from the detailed definition of cosmetic products, which refers both to their areas of application and to the purposes of their use.’
Recital 7 in the preamble to that regulation states as follows:
‘The assessment whether a product is a cosmetic product has to be made on the basis of a case by case assessment, taking into account all characteristics of the product. …’
Article 1 of Regulation No 1223/2009, entitled ‘Scope and objective ‘, provides as follows:
‘This Regulation establishes rules to be complied with by any cosmetic product made available on the market, in order to ensure the functioning of the internal market and a high level of protection of human health.’
Article 2 of Regulation No 1223/2009, entitled ‘Definitions’, provides in paragraph 1 thereof as follows:
‘For the purposes of this Regulation, the following definitions shall apply:
(a)
“cosmetic product” means any substance or mixture intended to be placed in contact with the external parts of the human body (epidermis, hair system, nails, lips and external genital organs) or with the teeth and the mucous membranes of the oral cavity with a view exclusively or mainly to cleaning them, perfuming them, changing their appearance, protecting them, keeping them in good condition or correcting body odours;
(b)
“substance” means a chemical element and its compounds in the natural state or obtained by any manufacturing process, including any additive necessary to preserve its stability and any impurity deriving from the process used but excluding any solvent which may be separated without affecting the stability of the substance or changing its composition;
(c)
“mixture” means a mixture or solution composed of two or more substances;
…’
Under the heading ‘Labelling’, Article 19 of Regulation No 1223/2009 provides in paragraph 1 thereof, in essence, that cosmetic products are to be made available on the market only where the container and packaging of such products provide various items of information in indelible, easily legible and visible lettering, including the name or registered name and the address of the responsible person, the nominal content at the time of packaging, the date until which the cosmetic product, stored under appropriate conditions, will continue to fulfil its initial function, particular precautions to be observed in use, the batch number of manufacture or the reference for identifying the cosmetic product and a list of ingredients.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Karnevalservice markets the lenses at issue in Germany. The purpose of those products is not to remedy any kind of visual deficiency but, rather, to alter the user’s appearance, especially on festive occasions. The outer packaging of the lenses at issue includes the following information: ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’.
On 24 October 2013, Colena brought proceedings before the Landgericht Krefeld (Regional Court, Krefeld) for an injunction to prevent Karnevalservice marketing the lenses at issue unless the packaging of the lenses provided certain information required under Article 19(1) of Regulation No 1223/2009. By decisions of 29 October 2013 and 11 December 2013, that court refused to grant the injunction, holding that the lenses at issue could not be classified as ‘cosmetic products’ within the meaning of that regulation and, as a consequence, the regulation was not applicable.
Colena brought an appeal against that decision before the Oberlandesgericht Düsseldorf (Düsseldorf Higher Regional Court). By decision of 9 January 2014, that court reversed the decision of the Landgericht Krefeld and granted the injunction sought, finding that, notwithstanding the fact that the lenses at issue could not be classified as ‘cosmetic products’ within the meaning of Regulation No 1223/2009, they must none the less be subject to the provisions of that regulation, in view of the statement on the outer packaging of the lenses that they are a ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’, which will give to the ‘average consumer, who is reasonably well informed and reasonably observant and circumspect’ for the purpose of German law, the impression that the product is in fact a cosmetic product within the meaning of the regulation.
On 30 January 2014, Karnevalservice challenged the injunction before the referring court, which is required to decide whether the injunction granted by the Oberlandesgericht Düsseldorf is justified.
In the order for reference, the referring court expresses the view that the answer to the question whether a product which is not a cosmetic product within the meaning of Regulation No 1223/2009 must none the less satisfy the requirements laid down in that regulation because its packaging contains a statement describing it as a cosmetic product ‘subject to the EU Cosmetics Regulation’ is crucial to the resolution of the dispute before it. The decision given on appeal by the Oberlandesgericht Düsseldorf, reversing the conflicting decision of the referring court, and the existence of conflicting decisions by the Landgericht Essen (Regional Court, Essen) reflect the uncertainty that exists in national case-law concerning the scope of Regulation No 1223/2009.
Moreover, the referring court observes that conflicting judicial decisions exist in Germany concerning whether contact lenses such as those at issue in the main proceedings are covered by Regulation No 1223/2009. That court considers that the answer to that question is also crucial for the purpose of the decision in the case before it.
In those circumstances, the Landgericht Krefeld decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Must Regulation No 1223/2009 be interpreted as meaning that a product which does not come under Regulation No 1223/2009 must none the less comply with the requirements of that regulation solely by reason of a statement on the outer packaging that the product is a “cosmetic eye accessory, subject to the EU Cosmetics Directive”?
(2)
Must Regulation No 1223/2009 be interpreted as meaning that “non-corrective contact lenses featuring designs” come within the scope of that regulation?’
Consideration of the questions referred
By its questions, which it is appropriate to examine together, the Landgericht Krefeld seeks to ascertain, in essence, whether Regulation No 1223/2009 must be interpreted as meaning that the contact lenses at issue fall within the scope of that regulation on the ground either that they satisfy the requirements laid down for so doing or, if that is not the case, that their outer packaging bears the statement ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’.
In order to determine whether a product falls within the scope of Regulation No 1223/2009, it is necessary to refer to Article 1 of the regulation, which provides that its objective is to establish rules to be complied with by ‘any cosmetic product made available on the market’. That article is supplemented by a definition of ‘cosmetic products’ in Article 2(1)(a) of the regulation.
It follows from a combined reading of those two provisions that Regulation No 1223/2009 is applicable to all products which satisfy the definition given in Article 2(1)(a) of the regulation, and only those products. By stating that the objective of the regulation is to establish a regulatory framework applicable to all cosmetic products, Article 1 limits the scope of the regulation to such products alone, and the detailed definition of ‘cosmetic product’ subsequently given in Article 2 of the regulation makes that limitation clear.
That conclusion is confirmed by recital 6 of Regulation No 1223/2009, which, while specifically making a distinction between cosmetic products on the one hand and medicinal products, medical devices or biocidal products on the other, states that the regulation relates ‘only to cosmetic products’.
It is therefore necessary to examine whether the lenses at issue meet all the criteria set out in the definition of ‘cosmetic product’ in Article 2(1)(a) of Regulation No 1223/2009. As is apparent from that provision, that definition is based on three cumulative criteria: (i) the nature of the product in question (substance or mixture); (ii) the part of the human body with which it is intended to be placed in contact; and (iii) the purpose of its use.
With regard to the first criterion, relating to the nature of the product in question, Article 2(1)(b) of Regulation No 1223/2009 defines ‘substance’ as ‘a chemical element and its compounds in the natural state or obtained by any manufacturing process, including any additive necessary to preserve its stability and any impurity deriving from the process used but excluding any solvent which may be separated without affecting the stability of the substance or changing its composition’. Article 2(1)(c) of the regulation states that the word ‘mixture’ means ‘a mixture or solution composed of two or more substances’. In the light of the objective characteristics of the lenses at issue, on the basis of which they may be classified as ‘objects’, they cannot be regarded as a ‘substance’ or a ‘mixture’ within the meaning of that provision.
With regard to the second criterion, Article 2(1)(a) of Regulation No 1223/2009 sets out, in the definition of ‘cosmetic product’, the parts of the human body with which such a product is intended to be placed in contact. It gives an exhaustive list, as is abundantly clear from the detailed, precise wording of that provision, and from the fact that the EU legislature refrained in the drafting of that provision from adding any terms such as ‘as’, ‘for example’, ‘including’ or ‘etc.’, which would have indicated that the items listed were given merely by way of example. The lenses at issue are placed on the eye’s cornea, which is not referred to in that exhaustive list and does not appear in any other provision of Regulation No 1223/2009. It follows that the lenses at issue do not satisfy the second criterion.
With regard to the third criterion, which relates to the purpose of using the product, it should be noted that, as the function of the lenses at issue is to change the appearance of the eye’s cornea, on which they are placed, their sole or main function is not to clean, perfume, change the appearance of, protect or keep in good condition any of the parts of the body listed in Article 2(1)(a) of Regulation No 1223/2009, or to correct body odours. Accordingly, the third criterion is not met.
It follows from an assessment which, in accordance with recital 7 of Regulation No 1223/2009, takes into account all the characteristics of the lenses at issue, that such lenses do not satisfy any of the three cumulative criteria that need to be met in order to fall within the definition of ‘cosmetic product’ in Article 2(1)(a) of the regulation. Accordingly, the Court finds that the lenses at issue cannot be classified as ‘cosmetic products’ as defined in that regulation and therefore fall outside the scope of the regulation.
That conclusion is not affected by the fact that it is stated on the outer packaging of the lenses at issue that they are a ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’.
Unlike the choice made by the EU legislature for other products, in particular medicinal products, the definition in Article 2(1)(a) of Regulation No 1223/2009 does not contain a category of cosmetic products defined by reference to their ‘presentation’, whereby it is possible to categorise a product as a ‘cosmetic product’ as a matter of law for the sole reason that it is presented as such.
That assessment is, however, without prejudice to the application, where appropriate, of rules enabling the competent authorities to verify whether or not the statement on the outer packaging of the lenses at issue that the product is a ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’ constitutes misleading commercial practice.
In the light of the foregoing considerations, the answer to the questions referred is that Regulation No 1223/2009 must be interpreted as meaning that the lenses at issue do not fall within the scope of that regulation, notwithstanding the fact that their outer packaging bears the statement ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Seventh Chamber) hereby rules:
Regulation (EC) No 1223/2009 of the European Parliament and of the Council of 30 November 2009 on cosmetic products must be interpreted as meaning that non-corrective colour contact lenses featuring designs do not fall within the scope of that regulation, notwithstanding the fact that their outer packaging bears the statement ‘cosmetic eye accessory, subject to the EU Cosmetics Directive’.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Third Chamber)
28 January 2016 ( *1 )
‛Reference for a preliminary ruling — Articles 49 TFEU and 56 TFEU — Freedom of establishment — Freedom to provide services — Betting and gaming — Judgment of the Court of Justice which declared the national rules on licences for the collection of bets incompatible with EU law — Reorganisation of the system by way of a new call for tenders — Free-of-charge transfer of the rights to use tangible and intangible assets owned by licensees and which constitute their network for the management and collection of bets. — Restriction — Overriding reasons in the public interest — Proportionality’
In Case C‑375/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunale di Frosinone (District Court, Frosinone, Italy), made by decision of 9 July 2014, received at the Court on 6 August 2014, in criminal proceedings against
Rosanna Laezza,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Second Chamber, acting as President of the Third Chamber, A. Arabadjiev, C. Toader (Rapporteur), E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: N. Wahl,
Registrar: V. Giacobbo-Peyronnel, Administrator,
having regard to the written procedure and further to the hearing on 17 September 2015,
after considering the observations submitted on behalf of:
—
Ms R. Laezza, by D. Agnello, R. Jacchia, A. Terranova, F. Ferraro and M. Mura, avvocati,
—
the Italian Government, by G. Palmieri, acting as Agent, and P. Marrone and S. Fiorentino, avvocati dello Stato,
—
the Belgian Government, by J. Van Holm, L. Van den Broeck and M. Jacobs, acting as Agents, and P. Vlaemminck, B. Van Vooren and R. Verbeke, advocaten,
—
the European Commission, by E. Montaguti and H. Tserepa-Lacombe, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 26 November 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 49 TFEU and 56 TFEU.
The request has been made in criminal proceedings brought against Ms Laezza for failing to comply with the Italian legislation governing the collection of bets.
Legal context
Article 10(9g) and (9h) of Decree-Law No 16 laying down urgent measures related to fiscal simplification, improving effectiveness and reinforcing monitoring procedures (decreto-legge — Disposizioni urgenti in material di semplificazioni tributarie, di efficientamento e potenziamento delle procedure di accertamento) of 2 March 2012 (GURI No 52 of 2 March 2012) converted, after amendment, into statute by Law No 44 of 26 April 2012 (Ordinary Supplement to the GURI No 99 of 28 April 2012) (‘Decree-Law 2012’), provides:
‘(9g) As part of a reform of the legislation relating to public gambling, including that relating to the collection of bets on sporting events, including horse racing, and non-sporting events, the provisions of the present paragraph have the aim of promoting that reorganisation, through an initial alignment of the expiry dates of the licences for the collection of bets in question, while observing the requirement that the national rules on the selection of persons who, on behalf of the State, collect bets on sporting events, including horse racing, and non-sporting events, are adjusted to the principles laid down by the judgment of 16 February 2012 in [Costa and Cifone (C‑72/10 and C‑77/10, EU:C:2012:80)].To that end, in view of the impending expiry of a group of licences for the collection of those bets, the Independent Authority for the Administration of State Monopolies [now the Customs and Monopolies Agency, Agenia delle dogane e dei Monopoli, ‘the CMA’] shall immediately, or in any event by 31 July 2012 at the latest, launch a call for tenders for the selection of persons who are to collect such bets with due regard, at the very least, to the following criteria:
(a)
the possibility of participation for persons already carrying out an activity related to the collection of bets in one of the States of the European Economic Area, as a result of having their legal and operational seat there, on the basis of a valid and effective authorisation issued under the provisions in force in the law of that State and who fulfil the requirements as to reputation, reliability and financial capacity specified by the [CMA], account being taken of the provisions in this matter referred to in Law No 220 [laying down provisions for drawing up the annual and multiannual budget of the State (Stability Law 2011) (legge n. 220 — Disposizioni per la formazione del bilancio annual e pluriennale dello State [legge di stabilita’ 2011) of 13 December 2010 (Ordinary Supplement to the GURI No 297 of 21 December 2010), as amended by Law No 111 of 15 July 2011 (‘the Stability Law 2011’)] and by Decree-Law No 98 of 6 July 2011, converted, after amendment, into statute by Law No 111 of 15 July 2011;
(b)
the award of a licence, expiring on 30 June 2016, for the collection, exclusively in a physical network, of bets on sporting events, including horse racing, and non-sporting events, from agencies, up to a maximum of 2000, whose sole activity is the marketing of public gambling products, without restriction as to the minimum distances between those agencies or with respect to other collection points, which are already active, for identical bets;
(c)
provision, as a price component, for a basic contract value of EUR 11000 for each agency;
(d)
the conclusion of a licence agreement whose content is consistent with any other principle laid down by the above-mentioned judgment of the Court of Justice of the European Union of 16 February 2012 and with the compatible national provisions in force regarding public gambling;
(e)
the possibility of managing agencies in any municipality or province, without numerical limits on a territorial basis or more favourable conditions compared to licensees who are already authorised to collect identical bets or which may, in any event, be favourable to those licensees;
(f)
the lodging of deposits consistent with the provisions of Article 24 of Decree-Law No 98 of 6 July 2011, converted, after amendment, into statute by Law No 111 of 15 July 2011.
(9h) The licensees who are to collect bets referred to in paragraph 9g, whose contracts expire on 30 June 2012, shall continue their collection activities until the date of the conclusion of the licence contracts awarded in accordance with the above paragraph.’
On the basis of the provisions of Decree-Law 2012 cited above, licences of 40 months were issued, whereas licenses issued previously had been for a period of between 9 and 12 years.
Under Article 1(77) of the Stability Law 2011:
‘In order to ensure a correct balance between public and private interests in the context of the organisation and management of public gaming, in view of the State monopoly in respect of gaming … and of the principles, of the European Union also, with regard to competitive selection, which apply in that sector, and by contributing also to consolidating the bases for improved efficiency and effectiveness of action to combat the spread of irregular or illegal gambling in Italy, for the protection of consumers, in particular minors, for maintaining public order, for discouraging gambling by minors and combating infiltration by organised crime into the betting and gaming sector … [the CMA] shall take steps without delay to update the standard formula for an agreement giving access to licences for operating and collecting public bets, but not remotely, or at any event by means of a physical network.’
According to Article 1(78)(b)(26) of the Stability Law 2011, the licence agreement must contain a clause providing for ‘the transfer free of charge or the devolution of the infrastructure network for the management and collection of bets to the [CMA] on expiry of the term of the licence, exclusively at the prior request of the latter, communicated at least six months before such expiry, or communicated on the occasion of the decision to revoke or terminate the licence.’
The draft licence agreement, annexed to the call for tenders organised in 2012 (‘the draft agreement’), sets out the grounds for revocation and termination of licences.
Thus, according to Article 23(2)(a), (e) and (k) of the draft agreement, licences may be revoked or terminated, inter alia, if there is a reference to a court for offences that the CMA regards as proving the lack of reliability, professionalism and moral quality required of licensees, in cases in which public bets are organised, operated and collected according to rules and techniques that differ from those laid down by the laws, regulations and agreements in force, or in the case of infringements established by the competent bodies which lay down the rules for the control of betting and gaming.
Article 25 of the draft agreement provides:
‘1. At the express request of the CMA, and during the period prescribed by that authority, the licensee shall undertake to transfer free of charge at the time of the cessation of business owing to the expiry of the final term of the licence or as a result of measures revoking or terminating that licence, to the CMA (or to another licensee chosen by that authority following a competitive tendering procedure) the rights to use the tangible and intangible assets which he owns and which constitute his network for the management and collection of bets, free from the rights and claims of third parties, pursuant to the rules set out in the following paragraphs.
2. The assets forming the subject of the transfer shall be designated in the inventory and its subsequent amendments, according to the provisions of Article 5(1)(e).
3. The transfer operations — which shall take place inter partes between the CMA and the licensee, with appropriate written records being made — shall begin in the six-month period preceding the expiry of the term of the agreement, preserving, during that period, the requirement not to impair the functioning of the system since the assets shall be transferred to the CMA under conditions ensuring continuity of the operation of the electronic communication games network. The costs of any physical transfer of equipment, fittings or any other component of the electronic communication network shall be the licensee’s responsibility.
…’
The dispute in the main proceedings and the question referred for a preliminary ruling
Stanley International Betting Ltd, a company incorporated in the United Kingdom and its Maltese subsidiary Stanleybet Malta Ltd, are engaged in the collection of bets in Italy, through operators known as ‘data transmission centres’ (‘DTCs’). For about 15 years, DTC owners have carried on their activities in Italy on the contractual basis of a mandate, without any licence or police authorisation.
A check carried out on 5 June 2014 by the Customs and Financial Police (Guardia di Finanza) in Frosinone (Italy) at the premises of a DTC managed by Ms Laezza and affiliated to Stanleybet Malta Ltd, which brought to light the unauthorised collection of bets at that centre, resulted in the seizure of certain computer equipment which had been used for receiving and transmitting those bets.
By decision of 10 June 2014, the judge responsible for preliminary investigations at the Tribunale di Cassino (District Court, Cassino) validated that seizure and issued a preventive attachment order with respect to that equipment.
Before the referring court, Ms Laezza lodged an application seeking to have that decision set aside. In that application, Ms Laezza also referred to the action brought by the companies of the Stanley Group, to which the DTC she manages is affiliated, against the call for tenders organised on the basis of Article 10(9g) and (9h) of Decree-Law 2012 for the award of gaming licences in Italy, on the ground that it is discriminatory.
The referring court observes that the Consiglio di Stato (Council of State) has already referred two questions to the Court of Justice for a preliminary ruling concerning, inter alia, the shorter period of validity of the new licences as compared with the old licences in the case which gave rise to the judgment in Stanley International Betting and Stanleybet Malta (C‑463/13, EU:C:2015:25), but considers that EU law does not preclude the national provision which lays down that period of validity.
However, the referring court points out that Article 25 of the draft agreement imposes the obligation on licensees to transfer free of charge, at the time of the cessation of the business owing to the expiry of the licence or as a result of measures revoking or terminating that licence, the rights to use tangible and intangible assets which they own and which constitute their network for the management and collection of bets.
According to that court, although the existence of such a provision, which is without legislative precedent in Italy, may be justified in terms of imposing a penalty, where the cessation of business results from a decision revoking or terminating the licence, it appears especially disadvantageous where the cessation of business occurs solely as a result of the expiry of the licence period. In addition the licensee is obliged to bear all the costs of the free-of-charge transfer.
The referring court doubts that such a difference in treatment between old and new licensees can be justified by an overriding reason in the public interest.
In those circumstances, the Tribunale di Frosinone (District Court, Frosinone) decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
The question referred for a preliminary ruling
By its question, the referring court asks essentially whether Articles 49 TFEU and 56 TFEU must be interpreted as meaning that they preclude a national provision, such as that at issue in the main proceedings, which makes it compulsory for licensees to transfer free of charge, at the time of the cessation of business as a result of the expiry of the licence period or as a result of measures revoking or terminating that licence, the rights to use tangible and intangible assets which they own and which constitute their network for the management and collection of bets.
As a preliminary point, it should be made clear, as the Advocate General observed in points 27 and 28 of his Opinion, that the present case is concerned only with the compatibility with EU law of Article 25 of the draft agreement, and cannot be regarded as being intended to call into question, in its entirety, the new licensing system put in place in Italy in 2012 in the betting and gaming sector.
The existence of a restriction on the freedoms guaranteed by Articles 49 TFEU and 56 TFEU
In the first place, it must be recalled that all measures which prohibit, impede or render less attractive the exercise of the freedoms guaranteed by Articles 49 TFEU and 56 TFEU must be regarded as restrictions on the freedom of establishment and/or the freedom to provide services (judgment in Stanley International Betting and Stanleybet Malta, C‑463/13, EU:C:2015:25, paragraph 45 and the case-law cited).
The Court has already ruled that legislation of a Member State which makes the exercise of an economic activity subject to a licensing requirement and which specifies situations in which the licence is to be withdrawn, constitutes an obstacle to the freedoms thus guaranteed by Articles 49 TFEU and 56 TFEU (judgment in Stanley International Betting and Stanleybet Malta, C‑463/13, EU:C:2015:25, paragraph 46 and the case-law cited).
In the present case, as the Advocate General noted in points 62 and 63 of his Opinion, a national provision, such as that at issue in the main proceedings, which requires the licensee to transfer free of charge the rights to use equipment for the collection of bets at the time of the cessation of business, including the situation in which the cessation of business is due solely to the expiry of the final term of the licence, may render the exercise of that activity less attractive. The risk that an undertaking may have to transfer, without financial consideration, the rights to use the assets in its possession may prevent it from obtaining a return on its investment.
Therefore, it must be held that the national provision at issue in the main proceedings constitutes a restriction on the freedoms guaranteed by Articles 49 TFEU and 56 TFEU.
The alleged discriminatory nature of the restriction on the freedoms guaranteed by Articles 49 TFEU and 56 TFEU
In the second place, although the Court has already recognised a certain number of overriding reasons in the public interest which may justify a restriction on the freedoms guaranteed by Articles 49 TFEU and 56 TFEU, those objectives cannot be relied upon to justify discriminatory restrictions (see, to that effect, judgment in Blanco and Fabretti, C‑344/13 and C‑367/13, EU:C:2014:2311, paragraph 37).
If the restrictive provision at issue in the main proceedings is discriminatory, it may be justified only on the grounds of public interest, public safety or public health, laid down in Articles 51 TFEU and 52 TFEU, which do not include combatting criminality linked to betting and gaming or ensuring the continuity of the lawful activity of collecting bets relied on in the present case (see, by analogy, judgment in Servizi Ausiliari Dottori Commercialisti, C‑451/03, EU:C:2006:208, paragraph 36 and the case-law cited).
In that connection, Ms Laezza submits that the provision at issue in the main proceedings is discriminatory as it establishes a difference in treatment between operators having obtained a licence at the time of the call for tenders organised on the basis of Article 10(9g) and (9h) of Decree-Law 2012, on one hand, and operators having obtained a licence at the time of the previous calls for tender, on the other hand, since the latter were able to benefit, before possibly being required to transfer free of charge the rights to use equipment for collecting bets on the expiry of the licence, from a longer writing-off period in respect of that equipment.
However, as the Advocate General observes in essence in points 66 and 67 of his Opinion, it seems clear from the evidence submitted to the Court that the measure at issue in the main proceedings applies without distinction to all the operators who have taken part in the call for tenders launched in 2012 on the basis of Article 10(9g) and (9h) of Decree-Law 2012, irrespective of their place of establishment.
Thus, the fact that the Italian authorities decided, at a given moment, to change the conditions under which all authorised operators carry on their business of collecting bets in Italy does not appear relevant for the determination of whether the provision at issue in the main proceedings is discriminatory.
However, it is for the national court to determine, after an overall examination of all the circumstances surrounding the new tender procedure, whether that provision is discriminatory.
The justification for the restriction on the freedoms guaranteed by Articles 49 TFEU and 56 TFEU
Thirdly, it must be determined whether the restriction on the freedoms guaranteed by Articles 49 TFEU and 56 TFEU, constituted by the provision at issue in the main proceedings, may be allowed as a derogation, on grounds of public policy, public security or public health, as expressly provided for under Articles 51 TFEU and Article 52 TFEU, which are also applicable in the area of freedom to provide services by virtue of Article 62 TFEU or, if the referring court finds that that provision is applied in a non-discriminatory manner, whether it is justified by overriding reasons in the public interest (see, to that effect, judgment in Digibet and Albers, C‑156/13, EU:C:2014:1756, paragraph 22 and the case-law cited), such as consumer protection and the prevention of both fraud and incitement to squander money on gambling (judgment in HIT and HIT LARIX.C‑176/11, EU:C:2012:454, paragraph 21 and the case-law cited).
In that connection, as regards the Italian legislation relating to betting and gambling, the Court has held previously that the objective of combating criminality linked to betting and gambling is capable of justifying restrictions on fundamental freedoms under those rules (see, to that effect, judgment in Biasci and Others, C‑660/11 and C‑8/12, EU:C:2013:550, paragraph 23).
In the present case, the Italian Government submits that the provision at issue in the main proceedings is justified, as part of the objective of combating criminality linked to betting and gambling, by the interest in ensuring the continuation of the lawful activity of collecting bets in order to curb the growth of parallel illegal activities.
Such an objective may be a reason of overriding public interest capable of justifying a restriction on fundamental freedoms, such as that at issue in the main proceedings.
In any event, the identification of the objectives in fact pursued by the national legislation is within the jurisdiction of the referring court (see, to that effect, judgment in Pfleger and Others, C‑390/12, EU:C:2014:281, paragraph 47).
The proportionality of the restriction on freedoms guaranteed by Articles 49 TFEU and 56 TFEU
Fourthly, it must be determined whether the restriction at issue in the main proceedings is suitable for ensuring the attainment of the objective pursued and does not go beyond what is necessary in order to achieve that objective, given that such restrictive national legislation fulfils that condition only if it genuinely reflects a concern to attain it in a consistent and systematic manner (see, to that effect, judgment in HIT and HIT LARIX.C‑176/11, EU:C:2012:454, paragraph 22 and the case-law cited).
In that connection, it should be recalled that it is for the referring court, taking account of the indications given by the Court of Justice, to verify, in an overall assessment of the circumstances surrounding the grant of the new licences, whether the restrictions imposed by the Member State concerned satisfy the conditions laid down in the Court’s case-law concerning their proportionality (see, to that effect, judgment in Digibet and Albers, C‑156/13, EU:C:2014:1756, paragraph 40 and the case-law cited).
Regarding the question whether the restriction at issue in the main proceedings is suitable to ensure the attainment of the objective pursued, the referring court must examine, inter alia, as the Advocate General observed in points 91 to 93 of his Opinion, whether the fact that the transfer free of charge to the CMA or to another licensee of the rights to use tangible and intangible assets owned by the licensee and which constitute his network for the management and collection of bets is not imposed systematically, but only ‘[a]t the express request of the CMA’, affects the ability of the provision at issue in the main proceedings to attain the objective pursued.
As far as concerns the question whether that provision goes further than is necessary in order to attain the objective pursued, it is conceivable that, in the case of expiry or revocation of the licence agreement concerned as a penalty, the free of charge transfer to the CMA or to another licensee of the rights to use tangible and intangible assets which constitute the network for the management and collection of bets is proportionate.
By contrast, that is not necessarily the case, as the Advocate General noted in point 88 of his Opinion, where the cessation of business occurs solely because the licence expires.
In the case where the licence agreement, which was concluded for a substantially shorter period than that of agreements concluded before the adoption of Decree-Law 2012 reaches its set expiry date, the fact that such a compulsory transfer is free of charge seems to be contrary to the requirement of proportionality, particularly where the objective of continuity of the authorised activity of the collection of bets could be attained by less restrictive measures, such as a compulsory transfer, but in return for payment of the market price of the assets concerned.
Thus, as the Advocate General observed, in points 96 and 97 of his Opinion, in the examination of the proportionality of the provision at issue in the main proceedings, the referring court must also take account of the market value of the assets which are the subject of the compulsory transfer.
Moreover, it must be underlined that the lack of transparency of the provision at issue in the main proceedings is likely to undermine the principle of legal certainty. That provision, which provides that the transfer free of charge of the rights to use assets which constitute the network for the management and collection of bets is not imposed systematically, but only ‘[a]t the express request of the CMA’, does not specify the conditions and detailed rules pursuant to which such an express request must be made. The conditions and detailed rules of a call for tenders, such as that at issue in the main proceedings, must be drawn up in a clear, precise and unequivocal manner (see, to that effect, judgment in Costa and Cifone, C‑72/10 and C‑77/10, EU:C:2012:80, paragraph 92 and the operative part).
Having regard to all of those considerations, the answer to the question referred is that Articles 49 TFEU and 56 TFEU must be interpreted as precluding a restrictive national provision, such as that at issue in the main proceedings, which requires a licensee to transfer, free of charge, on the cessation of business as a result of the expiry of the final term of the licence, the rights to use tangible and intangible assets which he owns and which constitute his network for the management and collection of bets, in so far as that restriction goes beyond what is necessary to attain the objective actually pursued by that provision, which is for the referring court to verify.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
Articles 49 TFEU and 56 TFEU must be interpreted as precluding a restrictive national provision, such as that at issue in the main proceedings, which requires a licensee to transfer, free of charge, on the cessation of business as a result of the expiry of the final term of the licence, the rights to use tangible and intangible assets which he owns and which constitute his network for the management and collection of bets, in so far as that restriction goes beyond what is necessary to attain the objective actually pursued by that provision, which is for the referring court to verify.
[Signatures]
( *1 ) Language of the case: Italian. |
ORDER OF THE COURT (Seventh Chamber) 1 December 2015 (*)
(Appeal — Article 181 of the Rules of Procedure of the Court of Justice — Action for damages — Restrictive measures against certain persons and entities in view of the situation in Zimbabwe — Removal of the person in question from the list of persons and entities concerned — Compensation for the damage allegedly suffered) In Case C‑545/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 27 November 2014, Aguy Clement Georgias, residing in Harare (Zimbabwe),
Trinity Engineering (Private) Ltd, established in Harare,
Georgiadis Trucking (Private) Ltd, established in Harare,
represented by H. Mercer, QC, and I. Quirk, Barrister, appellants, the other parties to the proceedings being: Council of the European Union, represented by G. Étienne and B. Driessen, acting as Agents,
and European Commission, represented by S. Bartelt and M. Konstantinidis, acting as Agents,
defendants at first instance, THE COURT (Seventh Chamber), composed of C. Toader, President of the Chamber, A. Rosas (Rapporteur) and A. Prechal, Judges, Advocate General: M. Wathelet, Registrar: A. Calot Escobar, having decided, after hearing the Advocate General, to give a decision by reasoned order, pursuant to Article 181 of the Rules of Procedure of the Court of Justice,
makes the following Order 1 By their appeal, Mr Georgias, Trinity Engineering (Private) Ltd and Georgiadis Trucking (Private) Ltd seek to have set aside the judgment of the General Court of the European Union of 18 September 2014 in Georgias and Others v Council and Commission (T‑168/12, EU:T:2014:781) (‘the judgment under appeal’), by which that court dismissed their action seeking compensation for the damage they claim they suffered as a result of the adoption of Commission Regulation (EC) No 412/2007 of 16 April 2007 amending Council Regulation (EC) No 314/2004 concerning certain restrictive measures in respect of Zimbabwe (OJ 2007 L 101, p. 6).
Background to the dispute 2 Recitals 1 to 4 in the preamble to Council Common Position 2002/145/CFSP of 18 February 2002 concerning restrictive measures against Zimbabwe (OJ 2002 L 50, p. 1) are worded as follows:
‘(1) On 28 January 2002, the Council expressed its serious concern about the situation in Zimbabwe, in particular the recent escalation of violence and intimidation of political opponents and the harassment of the independent press. It noted that the Government of Zimbabwe has not taken effective measures to improve the situation as called for by the European Council in Laeken last December.
(2) The Council further expressed serious concern about recent legislation in Zimbabwe which, if enforced, would seriously infringe on the right to freedom of speech, assembly and association, mainly the Public Order and Security Act and the General Laws Amendment Act (both of which violate the norms and standards for free and fair elections as agreed by [Southern African Development Community (SADC)] Parliamentarians in March 2001) and the proposed legislation to regulate the media.
(3) Therefore, the [European Union] decided it will close the consultations conducted under Article 96 of the ACP-EC Partnership Agreement and implement targeted sanctions if:
– the Government of Zimbabwe prevents the deployment of an EU election observation mission starting by 3 February 2002, or if it later prevents the mission from operating effectively, or
– the Government of Zimbabwe prevents the international media from having free access to cover the election, or – there is a serious deterioration on the ground, in terms of a worsening of the human rights’ situation or attacks on the opposition, or
– the election is assessed as not being free and fair. (4) The Council has assessed that the Government of Zimbabwe continues to engage in serious violations of human rights and of the freedom of opinion, of association and of peaceful assembly. Therefore, for as long as the violations occur, the Council deems it necessary to introduce restrictive measures against the Government of Zimbabwe and those who bear a wide responsibility for such violations.’
3 By Articles 3 and 4 of Common Position 2002/145, the Council imposed a travel ban within the territory of the European Union and a measure freezing the funds of the persons listed in the annex to that common position ‘who are engaged in activities that seriously undermine democracy, respect for human rights and the rule of law in Zimbabwe’. Listed in that annex are, inter alia, the names of the President of the Republic of Zimbabwe, the President of the Parliament, nine Ministers, Secretaries, Generals and a number of senior civil servants.
4 By Council Common Position 2002/600/CFSP of 22 July 2002 amending Common Position 2002/145 (OJ 2002 L 195, p. 1), approximately 50 further persons were added to the list of persons subject to restrictive measures. These were Ministers, Ministers of State, Secretaries, Deputy Ministers, Deputy Secretaries and the wife of the President of the Republic of Zimbabwe.
5 Following a government reshuffle in Zimbabwe, that list was replaced by the list in the annex to Council Decision 2002/754/CFSP of 13 September 2004 implementing Common Position 2002/145 (OJ 2002 L 247, p. 56). That list included 79 persons, including 23 Ministers, 12 Deputy Ministers, 23 Secretaries or Deputy Secretaries and various other political figures and military officers.
6 By Council Common Position 2003/115/CFSP of 18 February 2003 amending and extending Common Position 2002/145 (OJ 2003 L 46, p. 30), Common Position 2002/145 was extended for a period of 12 months.
7 Following the adoption of each of the common positions and decisions referred to above, the Council adopted a regulation providing, inter alia, for the freezing of the funds of the persons on the list annexed to the regulation, which was drawn up in accordance with the lists annexed to those common positions and decisions.
8 Council Common Position 2004/161/CFSP of 19 February 2004 renewing restrictive measures against Zimbabwe (OJ 2004 L 50, p. 66) provided for the renewal of the restrictive measures introduced by Common Position 2002/145.
9 Recitals 2, 6 and 7 in the preamble to Common Position 2004/161 are worded as follows:
‘(2) By Common Position [2002/14] the Council also imposed a travel ban and a freezing of funds on the Government of Zimbabwe and persons who bear a wide responsibility for serious violations of human rights and of the freedom of opinion, of association and of peaceful assembly.
… (6) In view of the continued deterioration in the human rights situation in Zimbabwe, the restrictive measures adopted by the European Union should be renewed for a further 12 months.
(7) The objective of these restrictive measures is to encourage the persons targeted to reject policies that lead to the suppression of human rights, of the freedom of expression and of good governance.’
10 Article 4(1) of Common Position 2004/161 provides as follows:
‘Member States shall take the necessary measures to prevent the entry into, or transit through, their territories of the natural persons listed in the Annex, who are engaged in activities that seriously undermine democracy, respect for human rights and the rule of law in Zimbabwe.’
11 Article 5(1) of Common Position 2004/161 is worded as follows:
‘All funds and economic resources belonging to individual members of the Government of Zimbabwe and to any natural or legal persons, entities or bodies associated with them as listed in the Annex shall be frozen.’
12 Council Regulation (EC) No 314/2004 of 19 February 2004 concerning certain restrictive measures in respect of Zimbabwe (OJ 2004 L 55, p. 1) was adopted, as stated in recital 5 in the preamble thereto, in order to implement the restrictive measures laid down by Common Position 2004/161.
13 Recital 2 in the preamble to that regulation reads as follows:
‘The Council continues to consider that the Government of Zimbabwe is still engaging in serious violations of human rights. Therefore, for as long as the violations occur, the Council deems it necessary to maintain restrictive measures against the Government of Zimbabwe and those who bear prime responsibility for such violations.’
14 Article 6(1) of Regulation No 314/2004 provides as follows:
‘All funds and economic resources belonging to individual members of the Government of Zimbabwe and to any natural or legal persons, entities or bodies associated with them as listed in Annex III shall be frozen.’
15 Mr Georgias is a Zimbabwean businessman. He is the owner and chief executive of Trinity Engineering (Private) Ltd. Georgiadis Trucking (Private) Ltd is a subsidiary of that company. Mr Georgias is also chief executive of Georgiadis Trucking (Private) Ltd.
16 On 29 November 2005, Mr Georgias was appointed a non-constituency Senator by the President of the Republic of Zimbabwe. On 6 February 2007, the President of the Republic of Zimbabwe appointed Mr Georgias Deputy Minister for Economic Planning and Development.
17 Council Decision 2007/235/CFSP of 16 April 2007 implementing Common Position 2004/161 (OJ 2007 L 101, p. 14) amended the annex to the latter to include, inter alia, the following entry as regards Mr Georgias: ‘Georgias, Aguy; [Deputy] Minister for Economic Development, born 22. 6. 1935’. The Commission adopted, on the same day, Regulation (EC) No 412/2007, which amended Annex III to Regulation No 314/2007. The annex thus amended includes, inter alia, an entry in relation to Mr Georgias which has the same wording as the original entry.
18 On 25 May 2007, Mr Georgias arrived at Heathrow Airport (United Kingdom) with a view to visiting family living in that Member State and then, on the following day, to taking a flight to New York (United States). He was refused leave to enter the United Kingdom or transit through United Kingdom airports on his way to New York. He was compelled to spend the night detained in Heathrow Airport and to take a return flight to Harare (Zimbabwe) the following day.
19 Council Decision 2007/455/CFSP of 25 June 2007 implementing Common Position 2004/161 (OJ 2007 L 172, p. 89) again amended the annex to that common position. The following sentence was added to the entry relating to Mr Georgias set out in paragraph 17 above:
‘Member of the Government and as such engaged in activities that seriously undermine democracy, respect for human rights and the rule of law’.
20 Commission Regulation (EC) No 777/2007 of 2 July 2007 amending Regulation No 314/2004 (OJ 2007 L 173, p. 3) amended Annex III to Regulation No 314/2004 once more. Mr Georgias remained listed with, now, an entry worded in the same terms as those set out in the preceding paragraph.
21 Council Decision 2011/101/CFSP of 15 February 2011 concerning restrictive measures against Zimbabwe (OJ 2011 L 42, p. 6) repealed Common Position 2004/161. That decision laid down, against the persons who were listed in the annex thereto, restrictive measures comparable to those laid down by Common Position 2004/161. However, Mr Georgias was not listed in that annex. Commission Regulation (EU) No 174/2011 of 23 February 2011 amending Regulation No 314/2004 (OJ 2011 L 49, p. 23), which was adopted subsequently, replaced Annex III to the latter regulation with a new annex in which Mr Georgias was again not listed.
The judgment under appeal 22 Mr Georgias and the two companies owned by him brought an action for damages before the General Court seeking compensation for the damage caused to Mr Georgias as a result of his detention at Heathrow Airport, namely reimbursement in respect of, first, the medical costs incurred by him as a result of the deterioration in his state of health due to the ‘personal stress’ caused by the restrictive measures adopted against him and, second, the legal fees incurred by him, as well as compensation for the business losses suffered by the two companies because of the alleged ‘extraterritorial effects’ of Regulation No 314/2004, which led some of their business partners no longer to trade with them.
23 With regard to the damage arising from Mr Georgias’ detention at Heathrow Airport, the General Court considered that the immediate cause of the damage claimed was a decision of the competent United Kingdom authorities, which was taken in the exercise of those authorities’ sovereign powers, namely powers relating to controlling the entry of citizens of third countries to the territory of that Member State. Accordingly, only between that decision and the damage claimed by Mr Georgias can there be said to be a definite and direct causal nexus. It follows that, even if it is the measure freezing Mr Georgias’ assets which led the United Kingdom authorities to adopt that decision, the damage allegedly suffered is not a sufficiently direct consequence of that measure.
24 As regards the other heads of damage, the applicants put forward four pleas in law in support of their claim before the General Court, namely: (i) manifest error of assessment; (ii) insufficient statement of reasons in the contested regulations; (iii) misuse of powers; and (iv) breach of the rights of defence. The General Court rejected each of those pleas and dismissed the action.
Forms of order sought by the parties 25 The appellants claim that the Court should:
– set aside the judgment of the General Court in its entirety; – grant the relief sought by the appellants in the proceedings before the General Court, namely that: – the European Union, the Commission and/or the Council should make good the damage caused to the appellants by paying them compensation, such compensation to be determined by the General Court;
– if, and to the extent that the Court finds it necessary, there shall be an inquiry into the amount of damages suffered by the appellants, such inquiry to be supervised by the General Court; and
– the Council and/or the Commission shall pay the appellants’ costs; – in the alternative, the case be referred back to the General Court; and – in any event, the Council and the Commission be ordered to pay the appellants’ costs. 26 The Council contends that the Court should:
– dismiss the appeal as unfounded; and – order the appellants to pay the costs. 27 The Commission contends that the Court should:
– dismiss the fourth ground of appeal as inadmissible; – dismiss the first three grounds of the appeal as manifestly unfounded; and – order the appellants to pay the costs. The appeal 28 Under Article 181 of its Rules of Procedure, where the appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court may at any time, acting on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide by reasoned order to dismiss that appeal in whole or in part.
29 That provision should be applied in the present case.
The first three grounds of appeal 30 By the first three grounds of appeal, which it is appropriate to examine together, the appellants take issue with the General Court’s interpretation of the legislation at issue and the conclusion drawn by the General Court from that interpretation, namely that it was possible for Mr Georgias to be listed in Annex III to Regulation No 314/2004 on the sole basis of his status as Member of the Government, without there being any need to prove that his activities had seriously undermined democracy, respect for human rights and the rule of law in Zimbabwe.
31 By their first ground of appeal, the appellants submit that the General Court was incorrect not to take account of Article 4 of Common Position 2004/161, which states that the persons listed in the annex thereto were also engaged in activities that seriously undermine democracy, respect for human rights and the rule of law in Zimbabwe. By their second ground of appeal, the appellants maintain that the General Court erred in its interpretation of Article 5(1) of Common Position 2004/161 and, as a result, misapplied Regulation No 314/2004. By their third ground of appeal, the appellants claim that, at paragraph 58 of the judgment under appeal, the General Court misinterpreted the addition of the words ‘as such’ to Senator Georgias’ listing in Annex III to that regulation, by taking the view that the addition was a ‘mere clarification’ of the fact that status as member of the government was sufficient justification in itself for the person concerned to be included in the list in that annex.
32 The appellants essentially claim that Article 6(1) of Regulation No 314/2004 — which provides that funds belonging to individual members of the Government of the Republic of Zimbabwe and to any natural or legal persons, entities or bodies associated with them are to be frozen — must be interpreted not only in the light of Article 5(1) of Common Position 2004/161, which provides for the freezing of such funds in accordance with the same general criteria, but also in the light of Article 4(1) of Common Position 2004/161, under which Member States are to take the necessary measures to prevent the entry into, or transit through, their territories of the natural persons listed in the annex to that common position, who are engaged in activities that seriously undermine democracy, respect for human rights and the rule of law in Zimbabwe. In the appellants’ submission, the persons and entities concerned, who are on a single list, should satisfy the criteria laid down by the various relevant provisions and, in particular, fulfil the requirement that they have undermined democracy, respect for human rights and the rule of law in Zimbabwe.
33 In that regard, it should be noted that that argument is based on the assumption that the general criteria for inclusion on the lists at issue require, with regard to Members of the Government of the Republic of Zimbabwe, not only that their status be established by specific evidence but also the fact that they have undermined democracy, respect for human rights and the rule of law in Zimbabwe. However, that assumption is at odds with the wording of Regulation No 314/2004 and the interpretation of that regulation in the light of not only Common Position 2004/161 but also of the historical context in which the provisions were adopted by the European Union, Regulation No 314/2004 being one such provision.
34 Both Article 5(1) of Common Position 2004/161 and Article 6(1) of Regulation No 314/2004 provide that funds belonging to individual members of the Government of the Republic of Zimbabwe and to any natural or legal persons, entities or bodies associated with them are to be frozen. The terms of those provisions are clear and there is nothing to indicate that they are to be interpreted as meaning that, as regards the members of that government, not only must their status be established by specific evidence but also the fact that they have seriously undermined democracy, respect for human rights and the rule of law in Zimbabwe.
35 On the contrary, the grounds for the restrictive measures adopted against the Government of the Republic of Zimbabwe are clear from the common positions and decisions taken under the common foreign and security policy since 2002. It is apparent in particular from recital 4 in the preamble to Common Position 2002/145 that the Council had established that that government continued to engage in serious violations of human rights and of the freedom of opinion, of association and of peaceful assembly and that, as a consequence, for as long as the violations occurred, it was necessary to impose restrictive measures on that government and those who bore a wide responsibility for such violations.
36 In recital 6 in the preamble to Common Position 2004/161, the Council stated that, in view of the continued deterioration in the human rights situation in Zimbabwe, the restrictive measures adopted by the European Union should be renewed and, in recital 7 thereto, that the objective of those restrictive measures was to encourage the persons targeted to reject policies that led to the suppression of human rights, of the freedom of expression and of good governance.
37 Recital 2 in the preamble to Regulation No 314/2004 states that the Council continued to consider that the Government of the Republic of Zimbabwe was still engaging in serious violations of human rights. Therefore, for as long as the violations occurred, the Council deemed it necessary to maintain restrictive measures against that government and those who bore prime responsibility for such violations.
38 An examination of the lists of persons who were subject to those restrictive measures shows that those lists are composed of political figures or persons holding positions such as President, Vice President, Minister, Deputy Minister, Secretary, Provincial Governor, Army Officer or Police Commissioner.
39 It is clear from both recital 7 in the preamble to Common Position 2004/161 and recital 2 in the preamble to Regulation No 314/2004 that the Council’s objective was to adopt restrictive measures targeted at members of the Government of the Republic of Zimbabwe and other persons holding key positions who were likely to influence the policy of that State and thereby exert pressure on those persons to reject policies that undermine human rights, freedom of expression and good governance.
40 Article 5(1) of Common Position 2004/161 and Article 6(1) of Regulation No 314/2004 must therefore be interpreted as meaning that the natural persons associated with members of the Government of the Republic of Zimbabwe are precisely those who, according to Article 4 of that common position, are referred to in the annex thereto as also being engaged, in the same way as the members of that government, in activities that seriously undermine democracy, respect for human rights and the rule of law in Zimbabwe.
41 As the General Court observed in paragraph 51 of the judgment under appeal, Regulation No 314/2004 was adopted on the base of Articles 60 EC and 301 EC. Article 60(1) EC provides that ‘[i]f, in the cases envisaged in Article 301 [EC], action by the Community is deemed necessary, the Council may, in accordance with the procedure provided for in Article 301 [EC], take the necessary urgent measures on the movement of capital and on payments as regards the third countries concerned’. For its part, Article 301 EC provides that ‘[w]here it is provided, in a common position or in a joint action adopted according to the provisions of the Treaty [EU, in the version prior to the Treaty of Lisbon] relating to the common foreign and security policy, for an action by the Community to interrupt or to reduce, in part or completely, economic relations with one or more third countries, the Council shall take the necessary urgent measures’.
42 According to the Court’s case-law, having regard to the wording of Articles 60 EC and 301 EC, in particular the expressions ‘as regards the third countries concerned’ and ‘with one or more third countries’ used there, those provisions concern the adoption of measures vis-à-vis third countries, since that concept may include the rulers of such countries and also individuals and entities associated with or controlled, directly or indirectly, by them (judgments in Kadi and Al Barakaat International Foundation v Council and Commission, C‑402/05 P and C‑415/05 P, EU:C:2008:461, paragraph 166, and Tay Za v Council, C‑376/10 P, EU:C:2012:138, paragraph 53).
43 However, the question raised by the first three grounds of appeal does not relate to whether the Council was entitled to include on the lists at issue persons who were not Members of the Government of the Republic of Zimbabwe but who held key positions within that State unless it could be shown, by means of sufficient evidence, that those persons had personally undermined democracy, respect for human rights and the rule of law in Zimbabwe.
44 Indeed, Mr Georgias takes issue with the General Court in this appeal for endorsing the Council’s decision not to apply the criteria laid down in Articles 4 and 5 of Common Position 2004/161 cumulatively for the purpose of justifying the listing of a person in Annex III to Regulation No 314/2004.
45 It is not disputed that Mr Georgias was a Member of the Government of the Republic of Zimbabwe. In that capacity, he was a leading member of a third country to whom restrictive measures based on Article 60 EC and 301 EC could be applied, in accordance with the case-law cited in paragraph 42 above.
46 As indicated in paragraphs 39 and 40 above, the Council’s objective was to adopt restrictive measures targeted at Members of the Government of the Republic of Zimbabwe and other persons associated with those members performing important functions on the ground that, by carrying out those functions, those persons contributed to the undermining of democracy, respect for human rights and the rule of law in Zimbabwe.
47 It follows from all the foregoing that the General Court did not err in law in finding, in paragraph 57 of the judgment under appeal, that the Council intended to freeze the assets of Members of the Government of the Republic of Zimbabwe on the sole basis of their status as members of that government, and, in paragraph 58 of that judgment, that the phrase ‘as such’ is a mere clarification.
48 Consequently, the first three grounds of appeal must be rejected as manifestly unfounded.
The fourth ground of appeal 49 By their fourth ground of appeal, the appellants maintain that the General Court erred in law in finding that Mr Georgias had not explained what arguments and evidence he would have relied on and how that evidence would have lead to his removal from the annex in question earlier if he had been given the opportunity to be heard. By that ground of appeal, Mr Georgias takes issue with paragraph 108 of the judgment under appeal.
50 Mr Georgias argued before the General Court that there had been a breach of his rights of defence, since Common Position 2004/161 provided for constant and regular review of the maintenance of sanctions against him. First, he was not informed of the reasons and relevant evidence which justified renewal of the restrictive measures imposed on him; second, he was not given an opportunity to request a review of those measures; and, third, there was no evidence that a review of his situation had in fact taken place.
51 At paragraph 106 of the judgment under appeal, the General Court referred to the established case-law of the Court of Justice to the effect that, in the context of an action for annulment, before an infringement of the rights of the defence can result in the annulment of the act at issue, it must be demonstrated that, had it not been for that irregularity, the outcome of the procedure might have been different (judgment in Belgium v Commission, C‑142/87, EU:C:1990:125, paragraph 48, and order in Kish Glass v Commission, C‑241/00 P, EU:C:2001:556, paragraph 36).
52 The General Court observed, at paragraph 107 of the judgment under appeal, that, in a case in which the applicant seeks, by means of an action for damages, compensation for the damage which he claims to have suffered because of the adoption of an act or the extension of its validity, in breach of his rights of defence, and where that party has not brought an action for annulment of the act concerned, the claim of an alleged breach of his rights of defence is not by itself sufficient to establish that his action for damages is well founded. It is also necessary to explain, according to the General Court, what arguments and evidence the person concerned would have relied on if his rights of defence had been respected and to demonstrate, where appropriate, that such arguments and evidence might have led in his case to a different result — in other words, in this case and as regards Mr Georgias, to the restrictive measure at issue, the freezing of his assets, not being renewed.
53 The General Court found, in paragraph 108 of the judgment under appeal, that ‘in this case, the applicants have not met that requirement’ and that ‘[t]hey do not explain, in their written pleadings, what arguments and evidence [Mr Georgias] would have relied on if he had been heard before each annual renewal of the validity of Common Position 2004/161 and how such arguments and evidence would have led in his case to a different result, namely the removal, on a date earlier than 15 February 2011, of his name from the list of persons subject to a freezing of their assets’.
54 By their fourth ground of appeal, the appellants maintain that, when restrictive measures are due for renewal, the Council is required to grant the person concerned the opportunity properly to make known his views. In the submission of the appellants, the case-law cited in paragraph 106 of the judgment under appeal requires ‘an exercise in speculation’ where the Council has failed in its fundamental obligation to abide by the rights of defence, so that Mr Georgias is not required to prove that he would have been removed from the lists.
55 It should, however, be noted that the case-law cited by the General Court in paragraph 106 of the judgment under appeal is established case-law of the Court of Justice (see, inter alia, the judgment in Kamino International Logistics and Datema Hellmann Worldwide Logistics, C‑129/13 and C‑130/13, EU:C:2014:2041, paragraph 79 and the case-law cited) and that the General Court did not err in law in referring to that case-law.
56 The appellants also argue that the submissions made before the General Court establish that the inclusion of Mr Georgias on the list at issue was unlawful and that he had proven that, if he had been given the opportunity to put forward his arguments, he would have been removed from the list because, when he approached the Council for that purpose, he was immediately removed from the list.
57 It must be noted in that regard that the fact that it may be established that the inclusion on that list was unlawful does not prove that the requirements laid down by the case-law cited in paragraphs 51 and 55 above are met.
58 With regard to the letter sent to the Council by Mr Georgias and the circumstances of his removal from the list at issue, it should be recalled that the General Court addressed that question in paragraphs 115 et seq. of the judgment under appeal. However, Mr Georgias does not take issue with that part of that judgment and simply repeats the argument he put forward at first instance. It follows that, on this point, his argument is inadmissible.
59 It follows from the foregoing considerations that the fourth ground of appeal is in part manifestly inadmissible and in part manifestly unfounded.
60 Accordingly, the appeal must be dismissed.
Costs 61 Under Article 137 of the Rules of Procedure of the Court of Justice, applicable to the procedure on appeal by virtue of Article 184 of those rules, a decision as to costs is to be given in the order which closes the proceedings.
62 Under Article 138(1) of those rules, which apply to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party must be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
63 Since the Council and the Commission have applied for costs to be awarded against Mr Georgias, Trinity Engineering (Private) Ltd and Georgiadis Trucking (Private) Ltd and the latter have been unsuccessful, they must be ordered, in addition to bearing their own costs, to pay the costs incurred by the Council and the Commission.
On those grounds, the Court (Seventh Chamber) hereby orders: 1. The appeal is dismissed. 2. Mr Aguy Clement Georgias, Trinity Engineering (Private) Ltd and Georgiadis Trucking (Private) Ltd are ordered to bear their own costs and to pay the costs incurred by the Council of the European Union and by the European Commission. [Signatures]
* Language of the case: English. |
OPINION OF ADVOCATE GENERAL
WAHL
delivered on 15 September 2016 ( )
Case C‑524/14 P
European Commission
v
Hansestadt Lübeck
‛Appeal — State aid — Airport charges — Article 108(2) TFEU — Fourth paragraph of Article 263 TFEU — Decision to initiate the formal investigation procedure — Admissibility of an action for annulment — Person individually concerned — Legal interest in bringing proceedings — Article 107(1) TFEU — Selectivity criterion’
1.
By its appeal, the European Commission asks the Court to set aside the judgment of the General Court of the European Union of 9 September 2014, Hansestadt Lübeck v Commission, ( ) by which the General Court partially annulled Commission Decision C(2012) 1012 final ( ) in so far as that decision concerns the schedule of airport charges of Lübeck Airport (Germany) adopted in 2006 (‘the 2006 schedule’) and dismissed the action as to the remainder.
2.
Among the questions raised by this appeal, two deserve particular attention. The first concerns examination of the admissibility of an action brought by a public entity which operates an airport against a decision to initiate the formal investigation procedure in respect, inter alia, of a schedule fixing, for that airport, the amount of the airport charges payable by airlines. The second relates to assessment of the selectivity of a measure consisting of such a schedule.
3.
The case therefore offers, in the very specific context of a decision initiating the formal investigation procedure, the opportunity to specify the scope of the condition that, to be classified as ‘State aid’, the disputed measures at issue must, in particular, as Article 107(1) TFEU expressly requires, ‘[favour] certain undertakings or the production of certain goods’. That condition, commonly known as the ‘selectivity criterion’, is — as Advocate General Wathelet noted in his recent Opinion in Commission v Banco Santander and Santusa, ( ) which admittedly concerned tax measures very different from the measures to which this case relates — one of the most controversial issues in the field of State aid. The explanations which the Court will therefore be prompted to give in this case will help to provide the clarification awaited in the specific context of measures which fix charging rates — such as schedules of airport charges — and are used to finance infrastructure.
I – Background to the proceedings
A – Lübeck Airport
4.
Lübeck Airport is in Germany, in the Land of Schleswig-Holstein.
5.
Until 31 December 2012, it was operated by Flughafen Lübeck GmbH (‘FL’). Up to 30 November 2005, FL was wholly owned by the applicant at first instance, Hansestadt Lübeck (the City of Lübeck). From 1 December 2005 to the end of October 2009, FL was 90% owned by the private New Zealand company Infratil and 10% owned by the City of Lübeck. From November 2009, FL was again wholly owned by the City of Lübeck. On 1 January 2013, Lübeck Airport was sold to Yasmina Flughafenmanagement GmbH, FL being incorporated into the assets of the City of Lübeck and removed from the commercial register on 2 January 2013.
B – The 2006 schedule
6.
Under Paragraph 43a(1) of the Luftverkehrs-Zulassungs-Ordnung (Air Traffic Licensing Rules, ‘the LuftVZO’) of 19 June 1964, ( ) as in force in 2006, before the commencement of the airport’s operation an airport operator had to submit to the supervisory authority for its approval rules governing use and, in respect of the airports, a schedule of charges for the take-off, landing and parking of aircraft as well as for the use of facilities for air passengers.
7.
Pursuant to that provision, FL adopted the 2006 schedule fixing the amount of the airport charges, which was approved by the supervisory authority, namely the aviation authority of the Land of Schleswig-Holstein, and which has applied since 15 June 2006 to all airlines using Lübeck Airport unless an agreement has been concluded between the airport operator and an airline. That schedule lays down a landing charge, a ‘passenger’ charge, a charge for terminal and apron services, a security charge, a charge for exceptional use and a parking charge.
8.
In 2007, the Commission adopted a decision to initiate the formal investigation procedure in relation to a contract concluded between FL and the airline Ryanair which fixed for that airline charges lower than those provided for by the schedule of charges that was in force.
9.
Taking the view, inter alia, that the 2006 schedule could also contain State aid within the meaning of Article 107(1) TFEU, the Commission, by the decision at issue, initiated the formal investigation procedure provided for in Article 108(2) TFEU in respect of various measures concerning Lübeck Airport, including that schedule.
II – Procedure before the General Court and the judgment under appeal
10.
By application lodged at the Registry of the General Court on 19 October 2012, FL brought an action for the annulment of the decision at issue in so far as it initiates the formal investigation procedure in relation to the 2006 schedule (first head of claim) and requires the Federal Republic of Germany to reply to an information injunction in relation to that schedule (second head of claim).
11.
In its reply lodged at the Court Registry on 20 February 2013, the City of Lübeck stated that it was taking the place of FL in order to pursue the action brought by FL.
12.
In support of its first head of claim, the City of Lübeck raised five pleas in law alleging: (i) infringement of the rights of defence of the Federal Republic of Germany, (ii) infringement of the obligation to carry out a diligent and impartial examination, (iii) infringement of Article 108(2) and (3) TFEU and Article 4, Article 6 and Article 13(1) of Regulation (EC) No 659/1999, ( ) (iv) infringement of Article 107(1) TFEU and (v) infringement of the duty to state reasons.
13.
By the judgment under appeal, the General Court held that the first head of claim was admissible on the ground, first, that when the action was brought FL was directly and individually concerned by the decision at issue and therefore had locus standi and, secondly, that FL had retained a legal interest in bringing proceedings after the sale of Lübeck Airport. On the merits of the case, it upheld the fourth plea, in respect of the part alleging infringement of Article 107(1) TFEU with regard just to the selectivity criterion, and, consequently, annulled the decision at issue in so far as it initiates the formal investigation procedure in respect of the 2006 schedule. As regards the second head of claim, since the single plea, alleging infringement of Article 10(3) of Regulation No 659/1999 was rejected as manifestly unfounded, the action was dismissed as to the remainder.
III – Forms of order sought and procedure before the Court
14.
The Commission claims that the Court should:
—
set aside the judgment under appeal;
—
declare the action at first instance inadmissible;
—
in the alternative, declare the action devoid of purpose;
—
also in the alternative, declare that the part of the fourth plea in the action by which the City of Lübeck alleges infringement of Article 107(1) TFEU so far as concerns the selectivity criterion is unfounded, and refer the case back to the General Court as regards the other parts of that plea and the first, second, third and fifth pleas in the action;
—
order the City of Lübeck to pay the costs at first instance and on appeal or, in the alternative, if the case is referred back to the General Court, reserve the decision as to the costs at first instance and on appeal.
15.
The City of Lübeck contends that the Court should:
—
dismiss the appeal in its entirety and uphold the claims that it put forward at first instance in their entirety;
—
order the Commission to pay the costs.
16.
By decisions of the President of the Court of 26 March and 14 April 2015, the Federal Republic of Germany and the Kingdom of Spain were granted leave to intervene in support of the City of Lübeck.
17.
The parties set out their positions in writing and orally at the hearing held on 31 May 2016.
IV – Analysis of the appeal
18.
In support of its appeal, the Commission advances five grounds of appeal. The first two concern the examination of the admissibility of the action at first instance. The third ground of appeal concerns the assessment of the selectivity of the measures at issue. The fourth alleges defects in the reasoning of the judgment under appeal. The fifth alleges that the General Court failed to have regard to the limited nature of judicial review of decisions to initiate the formal investigation procedure in relation to State aid.
A – The first ground of appeal, alleging that FL was not individually concerned by the decision at issue
1. Arguments of the parties
19.
By its first ground of appeal, the Commission criticises the General Court for having held that FL was individually concerned by the decision at issue on the ground that, in granting State aid, it had exercised powers conferred on it alone. By so doing, the General Court erred in law because, under the applicable national law, a schedule of charges must be approved by the supervisory authority of the Land, which is itself bound by the federal legislation on airport charges. Therefore, the fact that the public undertaking which operates the airport is responsible for proposing that schedule does not mean that it, and not the State, has the power itself to decide its management and formulate the policies which it applies by means of that schedule. The General Court’s interpretation of the criterion of individual concern is, in that regard, inconsistent with that contained in the judgment of 10 July 1986, DEFI v Commission. ( )
20.
The City of Lübeck maintains that the General Court did not commit an error of assessment by holding that FL was individually concerned by the decision at issue. It states that, at the time when the action was brought, FL, which was then 90% owned by a private investor, had a power of its own to adopt and implement the 2006 schedule. It notes in particular that the airport operator would be able to apply such a schedule even if it were refused the authorisation provided for in Paragraph 43a(1) of the LuftVZO. The General Court’s conclusion is in accordance with national law and, in any event, cannot be called into question in an appeal.
21.
The Federal Republic of Germany states that in Germany airport charges are fixed, in the exercise of their discretion, by undertakings operating airports, by means of schedules which are implemented by private law contracts concluded with the airlines. The supervisory authority’s approval provided for in Paragraph 43a(1) of the LuftVZO has no ‘constitutive effect’ with regard to the validity of the schedule of airport charges. That provision merely establishes a preventive control — designed to prevent abuse — of the relationship between airport operators and users, in the interests of the proper functioning of air traffic and competition. The Federal Republic of Germany maintains, moreover, that the interests of private-law airport undertakings, such as FL, are separate from the interests of the State and that, unlike the body at issue in the case giving rise to the judgment of 10 July 1986, DEFI v Commission, ( ) those undertakings cannot be regarded as an emanation of the State.
2. Assessment
22.
It is apparent from paragraphs 29 to 34 of the judgment under appeal that the General Court concluded, in essence, that FL was individually concerned by the decision at issue in so far as it relates to the 2006 schedule since it affected a measure of which FL was one of the authors and prevented FL from exercising its own powers as it saw fit. The Court considered that, although, under the applicable national law, in this instance Paragraph 43a(1) of the LuftVZO, the schedule of charges drawn up and proposed by the airport operator had to be approved by the supervisory authority, that authority had no power of its own to determine the airport charges itself.
23.
In that regard, it is well established that the condition of individual concern resulting from the fourth paragraph of Article 263 TFEU is satisfied if the contested measure affects the applicant by reason of certain attributes which are peculiar to him or by reason of circumstances in which he is differentiated from all other persons and by virtue of these factors distinguishes him individually just as in the case of the person addressed. ( )
24.
Natural or legal persons must be regarded as individually concerned by a measure which directly prevents them from exercising their own powers, consisting inter alia in the grant of alleged aid to undertakings, as they see fit ( ) and which brings about a change in contractual relations with the undertaking or undertakings alleged to be the beneficiaries of the measures at issue. ( )
25.
In the present case, it is necessary to determine whether the General Court correctly concluded that, under the relevant national law (Paragraph 43a(1) of the LuftVZO), FL had a power of its own in the adoption and implementation of the 2006 schedule.
26.
In paragraph 29 of the judgment under appeal, the General Court analysed Paragraph 43a(1) of the LuftVZO, which lays down the rules for implementing the 2006 schedule. It deduced in particular that, since the supervisory authority, unlike FL, had no power of its own to fix airport charges, the power to adopt the 2006 schedule lay with FL and not with the State authorities (see paragraph 32 of the judgment under appeal).
27.
Where what is at issue is an interpretation of national law by the General Court, review by the Court of Justice must be limited to establishing that the General Court has not distorted that law. ( )
28.
It is settled case-law that that distortion must be apparent in findings which the documents in the file show to be substantially incorrect, without there being any need for the Court to carry out a new assessment of the facts and the evidence. ( ) In other words, such a distortion must be obvious. ( ) As regards, more specifically, a matter of interpretation of national law, the Court has jurisdiction to examine, first, whether the General Court, on the basis of documentary and other evidence before it, distorted the wording of the national provisions at issue, the tenor of national case-law relating to them or the academic writings concerning them; secondly, whether the General Court, as regards those particulars, made findings that were manifestly inconsistent with their content; and, lastly, whether the General Court, in examining all the particulars, attributed to one of them, for the purpose of establishing the content of the national law at issue, a significance which is not appropriate in the light of the other particulars, where that is manifestly apparent from the documentation in the case-file. ( )
29.
However, in the present case, in spite of the doubts which may be entertained as to whether the airport operator is really autonomous and, accordingly, whether it has an interest of its own, separate from that of the supervisory authority, in maintaining the 2006 schedule, the matters put forward by the Commission to call into question the interpretation of the relevant national law are not sufficient to establish any distortion of the evidence presented before the General Court.
30.
Nor can this conclusion be invalidated by the Commission’s arguments that the assessment made by the General Court in this case is inconsistent with the approach taken in the judgment of 10 July 1986, DEFI v Commission. ( ) Although the facts in DEFI v Commission seem, on the face of it, to have certain similarities with those in the present case, such as the possibility that the supervisory authority may not approve the rules for implementing the measure in question, I think that the present case is set apart by the more limited control exercised by the Land over the fixing of the charging rates proposed by the entity managing the airport, inasmuch as it cannot prevent the application of the 2006 schedule, and by the divergent interests of the supervisory authority, FL and the airport users. In DEFI v Commission, the Court had held that the French Government undeniably had the power to determine DEFI’s management and policies and hence also to define the interests which that organisation was to protect (paragraph 18).
31.
In the light of these considerations, I take the view that the first ground of appeal cannot succeed.
B – The second ground of appeal, alleging that the City of Lübeck had no current legal interest in bringing proceedings
1. Arguments of the parties
32.
By its second ground of appeal, the Commission maintains that the General Court erred in law by holding, first, that FL had an interest in bringing proceedings even after the sale of Lübeck Airport to a private investor (Yasmina Flughafenmanagement GmbH) since the formal investigation procedure had not been closed and the decision at issue therefore continued to produce effects and, secondly, that FL had in any event retained an interest in bringing proceedings in respect of the period prior to the sale. The Commission argues that, even in the absence of a final decision closing the formal investigation procedure, the decision at issue had ceased to produce its sole legal effect, namely the obligation to suspend the aid measure during the investigation, ( ) since no suspension was ordered up until 31 December 2012 and from 1 January 2013, the date on which Lübeck Airport was privatised, the 2006 schedule could no longer be regarded as an aid scheme in the course of implementation because the airport was no longer financed by public funds. The assessment of the General Court is contrary to the case-law according to which the interest must be vested and present and continues to exist only if the action is liable, if successful, to procure an advantage for the party bringing it. The City of Lübeck has indeed not shown that it had any interest in maintaining its action after the privatisation of Lübeck Airport.
33.
The City of Lübeck, supported by the Federal Republic of Germany, submits that FL did in fact have an interest in bringing proceedings at the time when the action was brought, which is the relevant time for assessing the admissibility of the action. It maintains that, on the date on which the action was brought, the adverse effects of the decision at issue consisted in particular in the obligation of suspension owed by FL pursuant to the last sentence of Article 108(3) TFEU. Moreover, the City of Lübeck still has an interest in bringing proceedings since, without the declaration of annulment by the General Court, the decision at issue would continue to produce legal effects adversely affecting it now, after the sale of the airport. It states in particular that national courts would be required, following an application, to order recovery of the alleged advantages. It also considers that, in the absence of a decision concluding that there is no State aid, it is exposed to the risk of repetition of the illegality. Finally, it submits that the annulment of the decision at issue may enable it to prepare an action for damages given that, if a decision had not been taken to initiate the formal investigation procedure, it would have been able to persuade other airlines to use Lübeck Airport, and to obtain, at the time it was sold, a higher price.
2. Assessment
34.
In the present case, it is not disputed by the parties that FL, which the City of Lübeck has replaced, had a vested and current interest at the time when the action against the decision at issue was brought. In this regard, the General Court found, in paragraph 36 of the judgment under appeal, that when the action was brought FL had an interest in bringing proceedings against the decision at issue since it produced binding legal effects such as to affect its own interests.
35.
The Commission does not agree, however, that that interest continued to exist after the sale of Lübeck Airport to a private company. It takes the view that the obligation to suspend implementation of the alleged aid scheme is the only effect of a decision to initiate the formal investigation procedure. Since no such suspension materialised before the sale of Lübeck Airport to a private company, the City of Lübeck’s interest in bringing proceedings disappeared during the proceedings.
36.
In that regard, it should be pointed out that in paragraph 37 of the judgment under appeal the General Court rejected the Commission’s argument that the sale of Lübeck Airport to a private company on 1 January 2013, after the decision at issue had been adopted and the action had been brought before the General Court, put an end to the aid scheme at issue, so that the obligation to suspend that scheme no longer adversely affected the City of Lübeck and the City of Lübeck no longer had an interest in seeking the annulment of the decision at issue. The Court considered that, since the formal investigation procedure was not closed, that decision still produced effects and that the City of Lübeck did at the very least retain an interest in bringing proceedings in respect of the period prior to the sale of the airport.
37.
In order to determine whether the assessment of the General Court is correct, a brief reminder of the case-law concerning the requirement of a vested and present interest in bringing proceedings is needed.
38.
First of all, it is well established that the interest in bringing proceedings, which is an essential and fundamental prerequisite for any legal proceedings distinct from an applicant’s locus standi, ( ) must, in the light of the purpose of the action, exist at the stage of lodging the action, failing which the action will be inadmissible. That purpose must, like the interest in bringing proceedings, continue to exist until the final decision, failing which there will be no need to adjudicate; this presupposes that the action must be liable, if successful, to procure an advantage for the party bringing it. The question whether an applicant retains his interest in bringing proceedings must be assessed in the light of the specific circumstances, taking account, in particular, of the consequences of the alleged unlawfulness and of the nature of the damage claimed to have been sustained. ( ) The Court of Justice endeavours not to define that interest too restrictively.
39.
With regard to a decision to initiate the formal investigation procedure, such as the decision at issue, the Court has acknowledged that such a decision is liable to entail several autonomous legal effects. Accordingly, as well as the obligation to suspend the alleged aid measure during the proceedings brought against that decision, account must be taken of the possibility that an action will be brought before the national courts in order, in particular, for all the appropriate conclusions to be drawn from infringement of the last sentence of Article 108(3) TFEU. ( ) The Court has therefore concluded that, although the assessments carried out in the decision to initiate the formal investigation procedure are preliminary in nature, the decision does not lack legal effects. ( ) The Court has acknowledged, in particular, that the decision to initiate the formal investigation procedure necessarily alters the legal situation of the undertakings which are the beneficiaries of the measure. ( )
40.
Contrary to what the Commission maintains, the Court’s case-law does not find suspension of the measure to be the sole legal effect of the decision to initiate the formal investigation procedure. ( ) The Court has already noted other legal effects stemming from a decision to initiate the procedure. It has held that the national courts ‘are required to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure’. ( ) Among those conclusions, the Court has indicated, inter alia, the possibility of combining suspension of the measure with the obligation to recover payments already made. The national court may also order interim measures in order to safeguard the interests of the parties and the effectiveness of the Commission’s decision. ( )
41.
In the light of all those considerations, I consider that the legal effects of the decision to initiate the formal investigation procedure may continue to exist even after the sale of Lübeck Airport to a private operator. The decision to initiate the formal investigation procedure continues, until the procedure is closed by the Commission, to expose FL to the risk that a national court may order recovery of the aid granted when FL, which has been replaced by the applicant, owned Lübeck Airport.
42.
The General Court therefore did not err in law when it concluded, in paragraph 27 of the judgment under appeal, that the decision to initiate the formal investigation procedure continued to produce autonomous legal effects altering FL’s legal position, so as to confer on it an interest in bringing proceedings.
43.
In that regard, it is to be noted that this case is characterised by the fact that the measure at issue was still in the course of implementation at the time when the action was brought before the General Court and that, according to information provided by the Federal Republic of Germany, that measure is, to this day, still in force. Against that background, it is apparent that FL remains exposed to the risk of an order for recovery of the aid granted when it owned the airport by virtue of the obligation of the national court to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure.
44.
The Commission’s argument that, on the date on which the reply was lodged, no action against approval of the 2006 schedule was pending and that any action subsequent to that date would be time barred cannot be upheld. Even if this latter assertion is correct, it cannot be automatically precluded that, on the date on which the General Court gave its ruling, FL retained an interest in the decision at issue being annulled.
45.
In the light of all those considerations, I consider that the applicant at first instance remained at the very least exposed to the risk that a national court might order recovery of the aid granted prior to the sale of Lübeck Airport. It therefore retained an interest in seeking the annulment of the decision at issue.
46.
The second ground of appeal must, therefore, be rejected.
C – The third ground of appeal, alleging an incorrect assessment of the selectivity of the 2006 schedule
1. Arguments of the parties
47.
By its third ground of appeal, the Commission submits that the General Court misinterpreted the term ‘selectivity’ in the light of Article 107(1) TFEU by holding that, in order to assess whether the 2006 schedule might be selective, it was necessary to ascertain whether it applied in a non-discriminatory manner to all the undertakings using, or able to use, the specific goods or services. The fact that that schedule applies only to airlines using Lübeck Airport is not a relevant criterion.
48.
The Commission takes the view that the assessment of the General Court conflicts with the case-law of the Court of Justice, ( ) according to which a measure is not a general measure of fiscal or economic policy and is thus selective if it applies only to certain economic sectors or certain undertakings in a given sector. It considers that the conditions on which a public undertaking offers its own goods and services always constitute selective measures, and the question of inequality or discrimination is, in that context, not relevant for concluding whether or not there is aid. The General Court was therefore wrong to refer to the criterion adopted in the judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke, ( ) a criterion which applies only to fiscal measures and not to the conditions on which a public undertaking offers its own goods and services. ( ) The deciding factor is, in the latter case, the criterion of a private investor in a market economy.
49.
In the alternative, the Commission maintains that the General Court failed to comply with the case-law of the Court of Justice which states that it is the effects of the measure which are crucial in assessing whether or not it is selective ( ) and that measures which benefit only one economic sector are selective. ( ) It points out that, even though Lübeck Airport is in direct competition with that of Hamburg (Germany), the advantage conferred by the 2006 schedule benefits only airlines using the former airport, which is sufficient to show that the schedule is selective. The approach taken by the General Court amounts to exempting schedules of airport charges from the State aid rules.
50.
In the further alternative, the Commission maintains that the General Court misinterpreted the criterion relating to undertakings in a factual and legal situation that is comparable in the light of the objective pursued by the measure concerned. In order to determine which undertakings are in such a situation, it is necessary to take as a criterion not the scope of the measure at issue but the costs structure of the undertakings concerned. In the present case, the 2006 schedule is selective because it does not observe the principle — enshrined in Paragraph 43a(1) of the LuftVZO — which applies to all German airports, and therefore to all airlines, that airport charges must cover costs.
51.
Finally, the Commission argues that the General Court also erred in law by omitting to examine whether the discounts granted in the 2006 schedule are selective on the ground that only airlines which satisfy certain conditions benefit from them.
52.
The City of Lübeck maintains, in essence, that the General Court correctly found that the 2006 schedule does not favour certain undertakings or the production of certain goods. According to the City of Lübeck, the different treatment of comparable undertakings or of the production of comparable goods is a condition for selectivity. ( ) Therefore, the 2006 schedule is not selective because it does not treat comparable undertakings or the production of comparable goods differently.
53.
The Federal Republic of Germany contests the Commission’s argument that the conditions on which a public undertaking offers its goods and services must always be regarded as selective. A measure is selective in nature only if it grants special conditions to a certain group of undertakings and draws an internal distinction between users with regard to access to and use of the public facilities at issue. Moreover, the users of other airports are not in a comparable factual and legal situation.
54.
The Kingdom of Spain agrees with the interpretation of Article 107(1) TFEU given by the General Court as regards the selectivity criterion and supports the City of Lübeck’s arguments. It adds that the Commission’s premiss that the laying down of conditions on which a public entity offers its goods and services constitutes a selective measure does not result from the case-law. The Kingdom of Spain draws attention to the factors taken into account in the judgment of 14 January 2015, Eventech, ( ) for determining whether undertakings are in comparable situations.
2. Assessment
55.
It should be recalled that, according to Article 107(1) TFEU, save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, in so far as it affects trade between Member States, incompatible with the internal market.
56.
According to the settled case-law of the Court of Justice, classification as ‘State aid’ for the purposes of Article 107(1) TFEU requires that all the conditions set out in that provision are fulfilled. ( )
57.
It is thus well established that, for a national measure to be classified as ‘State aid’ for the purposes of Article 107(1) TFEU, first, there must be an intervention by the State or through State resources; second, that intervention must be liable to affect trade between Member States; third, it must confer a selective advantage on the recipient; and fourth, it must distort or threaten to distort competition. ( )
58.
In the present case, it is solely the interpretation and application of the third criterion, more specifically of the requirement of ‘selectivity’, which have been put in issue.
59.
According to case-law that is also well established, a measure is considered to be selective if it is such as to favour certain undertakings or the production of certain goods over other undertakings which are in a factual and legal situation that is comparable in the light of the objective pursued by the measure in question. ( )
60.
In the present instance, the General Court, in essence, held that the selectivity of a measure by which a public entity offers its goods and services is assessed having regard to all the undertakings using or able to use those goods or services. It held that the charges fixed under the 2006 schedule were applied in a non-discriminatory manner and thus concluded that the schedule was not selective in nature.
61.
In that regard, paragraph 53 of the judgment under appeal seems to beg the question in the following words:
‘In order to assess the potentially selective nature of a fee scale drawn up by a public entity for the use of a product or service in a given sector in relation to certain undertakings, it is necessary, in particular, to refer to all of the undertakings using or able to use that specific product or service and to examine whether only some of them obtain or are able to obtain a potential advantage. The situation of undertakings which do not want to or cannot use the product or service in question is therefore not directly relevant when assessing the existence of an advantage. In other words, the selective nature of a measure consisting of a fee scale drawn up by a public entity for the use of a product or service made available by that entity may be assessed only in relation to current or potential customers of that entity and of the specific product or service in question, and not, in particular, in relation to customers of other undertakings from that sector providing similar products and services. Furthermore, … if it were to be considered that every non-discriminatory fee scale implemented by a public entity in consideration of a given product or service has a selective character, that would, essentially, have the effect of excessively extending the notion of aid “favouring certain undertakings or the production of certain goods” referred to in Article 107(1) TFEU. In addition, in order for a potential advantage, conferred by a public entity in the context of the provision of specific products or services, to favour certain undertakings, it is necessary that … undertakings using or wishing to use that product or that service do not or cannot obtain that advantage from that entity in that particular context.’
62.
In the Commission’s view, that assessment is wrong. There are four parts to its argument. First, it maintains that the conditions on which a public undertaking offers its goods and services always constitute selective measures. Second, it considers that the General Court failed to have regard to the settled case-law of the Court of Justice according to which (i) only the effects of a measure are decisive for assessing its selectivity and (ii) measures which benefit one economic sector are necessarily selective. Third, it submits that the General Court misinterpreted the criterion relating to ‘undertakings in a factual and legal situation that is comparable in the light of the objective pursued by the measure concerned’. Fourth, it maintains that the General Court erred in law by failing to examine whether the discounts granted by the 2006 schedule, which benefit only airlines satisfying certain conditions, are selective.
63.
Before addressing the various parts of the Commission’s line of argument in turn, I would like to set out a number of general considerations which I consider necessary for understanding the meaning and scope of the selectivity condition and which will guide my examination of this ground of appeal.
a) General considerations on the meaning of the selectivity requirement under Article 107(1) TFEU and on its scope in a situation such as that at issue in the present case
64.
As the Commission has pointed out, it is apparent from the scheme and origin of the Treaties ( ) that a distinction must be drawn between general measures of fiscal or economic policy (which now fall within the scope of Articles 113 and 115 to 117 TFEU) and specific measures which lead to the acquisition of advantages by means of State resources (which are, for their part, now covered by Articles 107 to 109 TFEU).
65.
The requirement of ‘selectivity’, according to which measures covered by the prohibition laid down in Article 107(1) TFEU must be directed at ‘certain undertakings or the production of certain goods’, has the principal function, for the purpose of respecting the division of powers between the Member States and the European Union, of distinguishing State aid from general measures of fiscal or economic policy.
66.
Seen as decisive for distinguishing the measures which fall within the scope of State aid discipline from the others, that requirement, although it enables, in principle, ( ) a State measure which benefits without distinction all the undertakings situated in national territory to avoid the prohibition laid down in Article 107(1) TFEU, ( ) does not mean, however, that a measure laid down at regional or local level must necessarily be regarded as selective. Whilst in many cases the reference framework is at national level, it is conceivable that a lower level must be applicable in certain situations. To that effect, the Court specifically stated, in the ‘Azores’ case, ( ) that it is possible that an infra-State body enjoys a legal and factual status which makes it sufficiently autonomous in relation to the central government of a Member State, with the result that, by the measures it adopts, it is that body and not the central government which plays a fundamental role in the definition of the political and economic environment in which undertakings operate. In such a case it is the area in which the infra-State body responsible for the measure exercises its powers, and not the country as a whole, that constitutes the relevant context for the assessment of whether a measure adopted by such a body favours certain undertakings over others in a comparable factual and legal situation, having regard to the objective pursued by the measure or the legal system concerned. ( )
67.
As an extension of that reasoning, it is now accepted that that criterion requires verification as to whether, under a particular legal regime, a measure is such as to favour ‘certain undertakings or the production of certain goods’ over others which, in the light of the objective pursued by that regime, are in a comparable factual and legal situation. ( )
68.
The Court has repeatedly held that, in order to determine whether a measure is ‘selective’ and may therefore be classified as ‘State aid’, it is necessary to focus on the effects it produces. By contrast, the causes and objectives of State interventions and the techniques used to implement those interventions cannot be decisive factors. ( )
69.
Also, the Court has stated that it is not relevant, for the purpose of concluding that a specific measure is selective, only whether or not a large number of undertakings benefit from it, that the circle of beneficiaries of the measure is more, or less, open ( ) or that all the undertakings in a specific economic sector may benefit from the measure. ( )
70.
Moreover, as I have already had occasion to point out, ( ) the requirement as to selectivity or ‘specificity’ of the measure must be clearly distinguished from the detection of an economic advantage. In other words, once an advantage, understood in a broad sense, has been identified as arising directly or indirectly from a particular measure, it then remains for the Commission to establish that that advantage is specifically directed at one or more undertakings. It falls to the Commission, in particular, to show that the measure creates differences between undertakings which, in the light of the objective pursued, are in a comparable situation. ( ) What is prohibited is not the grant of an advantage as such, but the fact that, if carried out in a discriminatory and therefore selective manner, its grant is liable to place certain undertakings in a more favourable situation than others.
71.
That said, the selectivity requirement cannot, in my view, be completely disconnected from the concomitant, albeit separate, identification of an economic advantage.
72.
In this regard, several considerations, some of which I have already set out, ( ) should be addressed.
73.
In the context of the examination of a scheme of a general nature ( ) (subsidy schemes, a system of charges, tax relief, a scheme derogating from the rules of ordinary law in matters of insolvency, facilities for the payment of fees or miscellaneous charges, and so forth), selectivity provides a means of identifying whether the supposed advantage, although directed at economic operators in general, is, in fact and in the light of the objective criteria which it selects, of benefit only to certain types of undertakings or groups of undertakings.
74.
This involves identifying whether the measure in question, notwithstanding the finding that it confers an advantage of general application, does so ‘to the exclusive benefit of certain undertakings or certain sectors of activity’. This approach seeks, by another route, to ensure that State measures do not give rise to a differentiation between undertakings — or, more precisely, between economic operators which, in the light of the objective assigned to the national scheme in question, are in a comparable factual and legal situation — which is not justified by the nature and rationale of the scheme in question.
75.
In that regard, it should be pointed out that the concept of selectivity is linked to that of discrimination. ( ) Although it is true that the Commission cannot be required accurately to identify a category of undertakings with specific characteristics which are the only ones favoured by the measure at issue ( ) in order to conclude that the measure is selective, the fact remains that it must be established that, because it derogates from the common regime — which, as I have already said, may be, but is not always, a national general scheme — it is such as to favour certain undertakings.
76.
Therefore, in order to conclude that an alleged aid measure is selective, it seems to me essential to establish that it gives rise to a derogation from a ‘common’ or ‘normal’ regime, and that applies, in my view, whatever the nature of the regime at issue. I believe that it is now well established ( ) that, in order to assess the selectivity of a measure, a criterion which, in my view, is the expression of the principle of non-discrimination, it is necessary, in every case, to ascertain whether, within the context of a specific regime, that measure constitutes an advantage for certain undertakings in comparison with certain others.
77.
That prior determination of the reference framework, recognised as being essential in tax matters, is, in my view, just as essential in an examination of non-fiscal measures, and in particular of charging schemes designed inter alia to finance infrastructure, like the 2006 schedule at issue in the present case. Just as it could be held that the determination of the reference framework ‘has a particular importance in the case of tax measures, since the very existence of an advantage may be established only when compared with “normal” taxation’, ( ) it must be held that, before assessing the selectivity of a measure fixing charging rates, it is necessary to determine the ‘normally applicable’ regime from which the measure purports to derogate. ( )
78.
Finally, as in the case of the analytical framework which prevails in the examination of tax measures, it seems to me that, once the reference framework has been defined, it is then necessary to determine whether the measure at issue procures an advantage for certain undertakings in relation to others in a comparable factual and legal situation ( ) and, as the case may be, finally, to assess whether the grant of that advantage is justified by the nature and general scheme of the system of which the measure at issue forms part.
79.
It should be pointed out — a matter to which I shall return in the reasoning below — that, although identification of an economic advantage and, as the case may be, an assessment of the justification for it are relatively easy where a measure laying down a tax exemption derogates from the normally applicable tax regime (the ‘normal’ regime which is usually defined at national level), a degree of caution is required in the case of measures which fix charging rates and are designed to finance infrastructure.
b) The first part of the ground of appeal, alleging that the General Court disregarded the fact that the conditions on which a public undertaking offers its goods and services always constitute selective measures.
80.
The Commission maintains, as its principal argument, that the conditions on which a public undertaking offers its own goods and services always constitute selective measures. It relies on the Opinion delivered in the case giving rise to the judgment of 21 November 2013, Deutsche Lufthansa (C‑284/12, EU:C:2013:755), ( ) and on the case-law. ( ) The criterion laid down in the judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598), which served to determine whether or not a tax regime was selective, therefore cannot be transposed to the present case. The Commission considers that paragraph 53 of the judgment under appeal shows that the General Court was guided by considerations of legislative policy designed to remove non-discriminatory rules relating to the charges of public institutions from State aid control.
81.
I am hardly convinced by this line of argument.
82.
First, contrary to what the Commission seems to suggest, it certainly does not follow from the Court’s case-law to which it has referred that a measure fixing charging rates for the use of a public undertaking’s goods and services is, by its very nature, selective.
83.
Thus, in two cases cited by the Commission, namely those giving rise to the judgments of 2 February 1988, Kwekerij van der Kooy and Others v Commission, ( ) and of 29 February 1996, Belgium v Commission, ( ) it is apparent that advantageous charging rates granted by a public undertaking to a group of clients were at issue. As for the cases giving rise to the judgments of 11 July 1996, SFEI and Others, ( ) and of 20 November 2003, GEMO, ( ) they concerned situations in which the advantages, although available to economic operators in general, had, in fact, been of benefit only to a small group of them. To summarise, it is not the supply of goods or services by a public body or a public undertaking which was held, as such, to be selective, but the fact that it had occurred under preferential conditions.
84.
More generally, there is no basis for maintaining that the conditions on which a public undertaking offers its goods and services, in any event where that offer takes the form of a regime applicable to economic operators in general wishing to use those goods or services, always satisfy the selectivity condition.
85.
As I pointed out in the introduction to this ground of appeal, in order to assess the selectivity of a measure, it is necessary to examine whether, under a particular legal regime, that measure constitutes an advantage for certain undertakings over others which are in a comparable factual and legal situation (see point 67 of this Opinion).
86.
In that context, identification of the reference framework — and, based on that, of the advantage possibly created by the derogation at issue — constitutes an essential prerequisite for any consideration of selectivity. Contrary to what the Commission maintains, it is not appropriate to restrict such verification to the case of fiscal or tax regimes. Although it cannot be denied that the method of examining the selectivity of a specific measure has particular features depending on the nature of the measure, I do not think that it is expedient to identify different examination criteria according to whether the measure is a tax measure or a measure establishing charging rates for the services provided to users.
87.
The Court’s case-law confirms that the comparative exercise prescribed in the case of tax regimes is equally valid in the case of other measures. I would point out in particular that the criterion laid down in the judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598), was not established only for a tax measure, but for a ‘State measure’ in general. ( )
88.
It should be noted that the Court has, moreover, conducted that comparative exercise in the case of measures relating to the payment of costs and to the use of infrastructure.
89.
Indeed, in the judgment of 14 January 2015, Eventech (C‑518/13, EU:C:2015:9), ( ) the Court took care to consider, in relation to the authorisation given to London taxis to drive in bus lanes, whether London taxis and minicabs were in a comparable factual and legal situation. The examination of whether the measure is discriminatory is, in essence, coextensive with the examination of whether the measure confers a selective economic advantage on the beneficiary undertakings.
90.
It is apparent from all those considerations that the General Court did not err in law by holding that measures relating to the conditions on which a public entity offers goods and services are not necessarily selective (see paragraphs 53, 54 and 57 of the judgment under appeal).
91.
Contrary to the view taken by the Commission, that conclusion does not necessarily amount to denying any possibility of classifying as ‘State aid’ the conditions under which a public undertaking offers its goods and services where those conditions apply without distinction to all contracting parties. It is still permitted, in such a situation, to show that those conditions, although applicable without distinction, ultimately benefit only one or more quite specific undertakings, particularly those which match a well-defined commercial model.
92.
Whilst it cannot be ruled out at the outset that a scale of charges is selective, it is still necessary to demonstrate — which, as the General Court pointed out, the Commission failed to do — that it has the effect of discriminating against certain economic operators which are in a comparable situation.
93.
Also, although the general nature of the wording used at the beginning of paragraph 53 of the judgment under appeal may suggest that the General Court sought to exclude all the conditions on which a public undertaking offers its goods and services from the application of Article 107 TFEU where those conditions apply without distinction to all contracting parties, I consider that the General Court took care to state, at the end of that paragraph, that, ‘in order for a potential advantage, conferred by a public entity in the context of the provision of specific products or services, to favour certain undertakings, it is necessary that … undertakings using or wishing to use that product or that service do not or cannot obtain that advantage from that entity in that particular context’.
c) The second part of the ground of appeal, alleging that the General Court failed to have regard to the settled case-law of the Court of Justice according to which, first, only the effects of a measure are decisive for assessing its selectivity and, secondly, measures which benefit one economic sector are necessarily selective
94.
The Commission observes that Lübeck Airport is in direct competition with Hamburg Airport and that the ‘advantage’ conferred by the 2006 schedule is available only to airlines using Lübeck Airport. That simple fact is, in its submission, sufficient to establish that the 2006 schedule is selective by virtue of its effects.
95.
At first sight, the reasoning adopted by the General Court and in particular paragraph 53 of the judgment under appeal may be surprising.
96.
In order to conclude that the 2006 schedule was not selective, the General Court merely found that the provisions fixing charging rates in the 2006 schedule applied in a non-discriminatory manner to all the airlines using or wishing to use Lübeck Airport.
97.
In the light of the case-law according to which Article 107(1) TFEU defines State interventions in relation to their effects, ( ) it might be pleaded that a mere finding that the 2006 schedule is formally non-discriminatory is not sufficient to conclude that it is not selective. It would have been necessary to analyse whether the 2006 schedule, by its effects, benefits certain undertakings or the production of certain goods. Thus, in the judgment of 13 February 2003, Spain v Commission, ( ) the Court stated that the argument that a measure is governed by objective criteria of horizontal application shows only that the measure falls within an aid scheme and is not individual aid, but does not show that the measure is not selective.
98.
However, I do not consider that, in the present instance, the General Court failed to have regard to that case-law in the judgment under appeal. By holding that equal treatment of the actual or potential users of Lübeck Airport was the only determining factor, the Court implicitly, but necessarily, took into account the effects of the measure. It did not merely refer to the horizontal criteria for application of the 2006 schedule.
99.
Nor can it validly be maintained that a measure which benefits a ‘single sector’, in the present case the group of undertakings using Lübeck Airport, is necessarily selective. As has been pointed out in the introduction to this ground of appeal, that could be a valid conclusion only if it were concluded that the reference framework is that of a ‘normal’ regime applicable at national level or, at the very least, that it applies beyond the confines of that airport. Use of the concept of ‘sectorial selectivity’ makes sense only if there are measures adopted by the public authorities of a State, whether central, regional or local, which are competent to adopt decisions that may benefit all undertakings. In the case of measures adopted by an airport operator, which is competent only to adopt measures concerning that airport, the sectorial selectivity criterion should not be applicable. Also, where that operator itself determines the level of the airport charges applicable to airlines operating from and into that airport, it is not derogating from the national charging system but putting in place a scale of charges applicable to all the airlines wishing to use that airport.
100.
This shows that a measure adopted by an airport operator in respect of the airlines operating there is not selective if it is granted without discrimination to all those airlines.
101.
On that basis, it is necessary to assess whether the measure at issue introduces differentiation between economic operators which, in the light of the objective pursued, are in a comparable factual and legal situation. ( )
102.
This leads us to study the third part of the Commission’s line of argument.
d) The third part of the ground of appeal, alleging an incorrect examination of the criterion relating to ‘undertakings in a comparable factual and legal situation’
103.
The Commission maintains, first, that even if the comparison required by the judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598), were applicable to examination of the selectivity of measures fixing the charges of certain public entities, the General Court committed the same error as that which was criticised by the Court of Justice in the cases giving rise to the judgments of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraphs 87 and 89), and of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraphs 61 to 67). The Commission takes the view that, if circular reasoning is not to be adopted, the comparability of the factual and legal situation does not depend on the criteria which define the scope of the measure at issue, but must be based on the cost structure of the undertakings concerned.
104.
The Commission submits, secondly, that the General Court failed to take account of the objective pursued by Paragraph 43a(1) of the LuftVZO, a provision applicable to all airports in Germany which prescribes the levying of airport charges that cover costs, for the purpose of protecting the public interest in the proper operation of aviation, and which constitutes the legal basis for the 2006 schedule.
105.
In the present case, the question arises as to whether the fact that the 2006 schedule actually applies only to airlines serving Lübeck Airport creates a difference in treatment between undertakings in a comparable situation.
106.
In that regard, it should be pointed out that, according to the applicable national law, each airport operator is authorised to adopt a scale of airport charges applicable to its own airport.
107.
This means that the 2006 schedule was intended to apply only to Lübeck Airport, which constitutes the relevant reference framework. In that context, the only decisive factor is whether that schedule differentiates between the undertakings using that single airport.
108.
The Commission’s argument that the assessment of the selectivity of the 2006 schedule cannot depend on the scope of the schedule, but should be based only on a comparison of the costs which are the subject of Paragraph 43a(1) of the LuftVZO, is unconvincing.
109.
As the City of Lübeck has pointed out, all airlines are able to use Lübeck Airport and thus to benefit from the advantages supposed to stem from application of the 2006 schedule. The choice made by airlines to use certain airport infrastructure generally depends on their own commercial strategy, according to the advantages and restrictions to which the infrastructure gives rise.
110.
I think that it is also inopportune to require a comparison of the situation of airlines allegedly favoured by the 2006 schedule with that of competing undertakings having the same budgetary expenditure items. Airlines which do not operate from and into Lübeck Airport specifically do not incur expenditure in relation to the charges levied by that airport. The Commission’s argument amounts to taking a different and incorrect approach to the question of the selectivity of the measure, namely ascertaining with what other transport infrastructure — airport, railway or other — Lübeck Airport may possibly compete, irrespective of the status of the operating undertakings and of the nature of the services which they provide. ( )
111.
Nor, in my view, can the argument be accepted in the present case that it was appropriate to take into account the objectives to be attained by a schedule fixing airport charges under Paragraph 43a(1) of the LuftVZO. It is apparent from the General Court’s assessment of the facts that that provision does not involve the general fixing of airport charges applicable to all airports. That provision only authorises each airport operator to adopt its own scale of charges in accordance with priorities which it is for that operator alone to define.
112.
In the end, it must be stated that, in the circumstances of this case, there are no basic general rules or basic reference rules from which the 2006 schedule is designed to derogate in favour of airlines using Lübeck Airport. The relevant reference framework is that of the regime which is applicable only to that airport.
e) The fourth part of the ground of appeal, alleging that the General Court erred in law by failing to examine whether the discounts granted by the 2006 schedule are selective on the ground that they benefit only certain airlines
113.
The Commission submits, in essence, that, even if the criterion laid down in the judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598), were to be relevant for examining the selectivity of measures fixing charging rates such as those at issue in the present case, the General Court should have examined whether the 2006 schedule, owing to the various discounts for which it provides, is selective in that it favours certain airlines using Lübeck Airport to the detriment of other airlines using that airport.
114.
In that respect, the Commission maintains that the General Court was wrong to confine itself to examining the reasoning of the decision at issue contained in paragraph 279 thereof. It submits that paragraphs 55 to 66 of that decision described in detail the system of discounts laid down by the 2006 schedule. The Commission also submits that, contrary to what the General Court seems to suggest in paragraphs 53 and 55 of the judgment under appeal, the fact that the circle of beneficiaries of the discounts in question is open, since those discounts are granted according to objective criteria of horizontal application, does not prevent it from being selective. ( )
115.
In the present instance, I consider that the General Court did not err in law in concluding that the relevant reference framework was that of the charges applicable only to airlines using Lübeck Airport.
116.
The question now arises as to whether the General Court erred in law by not examining whether the system of discounts granted under the 2006 schedule created differentiation between those airlines.
117.
In that regard, it is possible for a scale of charges to be selective owing to the criteria and systems of discounts for which it provides.
118.
That said, it must be emphasised that the Commission did not take that factor as the basis for concluding, in paragraph 279 of the decision at issue, that the 2006 schedule was selective, but only the fact that ‘the advantages at issue benefit only airlines using Lübeck Airport’. Although the issue of the ‘rebates and discounts’ provided for by the 2006 schedule was indeed referred to in the decision at issue, in particular in paragraphs 268 to 277, it was not mentioned in connection with examination of the selectivity of that schedule, but only in the assessment of the existence of an ‘advantage’ for the purpose of Article 107(1) TFEU.
119.
In those circumstances, I consider that the Commission’s objection must be dismissed as inadmissible. In an appeal, the Court’s jurisdiction is confined to examining the assessment by the General Court of the pleas argued before it. ( )
120.
In any event, it should be pointed out that the Commission has not established that the system of discounts and rebates provided for by the 2006 schedule and granted to airlines with a large number of passengers — a system which seems therefore to be based on a common quantitative criterion — could not be justified.
121.
In conclusion, I consider that the third ground of appeal must be rejected.
D – The fourth ground of appeal, alleging insufficient and contradictory reasoning
1. Arguments of the parties
122.
The Commission submits, first, that the judgment of the General Court is vitiated by insufficient reasoning in three respects. First of all, the General Court neglected an essential element of the examination of selectivity, namely determination of the objective pursued by the 2006 schedule. It is in the light of that objective that it should be determined which undertakings are in a comparable factual and legal situation. Next, the General Court failed to state why selectivity of the aid is not at least the consequence of the system of discounts provided for by the 2006 schedule. Finally, the judgment under appeal fails to state why the 2006 schedule was so manifestly not selective that the Commission was not entitled to initiate the formal investigation procedure.
123.
The Commission considers, secondly, that the General Court’s reasoning is contradictory, since it first applies the case-law on the selectivity of fiscal measures (paragraphs 51 and 53 of the judgment under appeal) and then finds that that case-law is not relevant (paragraph 57 of the judgment under appeal).
124.
The City of Lübeck, supported by the Federal Republic of Germany and the Kingdom of Spain, contends that the judgment under appeal is properly reasoned and that the ground of appeal should be rejected.
2. Assessment
125.
I do not think that this ground of appeal can succeed.
126.
In the first place, as to whether the General Court stated sufficient reasons in the judgment under appeal with regard to the assessment of the selectivity of the 2006 schedule, it is apparent, first of all, that the General Court implicitly identified the objective of the 2006 schedule and the context in which it was drawn up. Next, it is to be noted that the General Court did not have to state the reasons why the system of discounts did not render the 2006 schedule selective, since, as I have already mentioned, that question was specifically not discussed before the General Court. Finally, I consider that the General Court likewise did not have to explain why the error committed by the Commission in the assessment of the selectivity of the measure at issue was so manifest that it had to lead to the annulment of the decision at issue.
127.
As regards, in the second place, the complaint alleging contradictory reasoning so far as concerns the relevance of the case-law on tax measures, I see no inconsistency between the considerations contained in paragraphs 51 and 53 of the judgment under appeal and the statement contained in paragraph 57 of that judgment.
E – The fifth ground of appeal, alleging disregard of the limited nature of review of a decision to initiate the formal procedure to investigate aid measures
1. Arguments of the parties
128.
The Commission submits that, although the General Court rightly points out, in paragraph 42 of the judgment under appeal, that judicial review of a decision to initiate the formal investigation procedure is limited, it exceeded the limits of that review.
129.
The Commission maintains in particular that FL, which was then operating Lübeck Airport, had proposed the 2006 schedule with the aim of avoiding State aid controls as regards its price-setting policy in respect of low-cost airlines. The Commission was faced with a situation in which a preliminary examination of the facts had not enabled it to dispel all the doubts as to whether or not that schedule was selective. Consequently, the Commission was required to initiate the formal investigation procedure. The judgment under appeal contains no explanation as to the reasons why the 2006 schedule was so manifestly not selective that the Commission was not entitled to initiate the formal investigation procedure.
130.
The City of Lübeck, supported in this regard by the Federal Republic of Germany and the Kingdom of Spain, contends that this ground of appeal should be rejected. It considers that, since it is manifest that the measure at issue, namely the 2006 schedule, is not selective, the General Court was right to hold that the decision at issue was vitiated by a manifest error of assessment.
2. Assessment
131.
I am also not convinced that the General Court exceeded the limits of judicial review concerning the initiation of the formal investigation procedure.
132.
Admittedly, it cannot be denied that the decision to initiate the formal investigation procedure is based on an analysis, which is necessarily provisional, of the information brought to the notice of the Commission during the preliminary investigation stage. Since that information is by definition ‘fragmentary’, the Commission, at the end of that preliminary stage, can only make suppositions regarding whether there is aid and, consequently, regarding whether the cumulative conditions laid down in Article 107(1) TFEU are fulfilled.
133.
As the Court has repeatedly held, it is necessary to distinguish between the preliminary procedure for reviewing aid established by Article 108(3) TFEU, which is intended only to allow the Commission to form a prima facie opinion as to whether the aid is compatible in part or in whole, and the formal investigation procedure referred to in Article 108(2) TFEU, which permits — and, in my view, requires — an in-depth examination of the State measures and has a dual purpose. ( )
134.
In view of the necessary distinction between those two stages in examining measures, it is not possible to subject the preliminary stage to the same legal requirements as those imposed in connection with the formal procedure.
135.
Consequently, the Commission is authorised to initiate the formal investigation procedure provided for in Article 108(2) TFEU where it has sufficient information to consider that a measure fulfils all the conditions for classification as ‘State aid’ prohibited by Article 107(1) TFEU.
136.
However, it cannot be concluded from this that the Commission may confine itself, in support of its decision to initiate the procedure provided for in Article 108(2) TFEU, to making general statements regarding the fulfilment of the conditions required by Article 107(1) TFEU. As is apparent from Article 6 of Regulation No 659/1999, the decision to initiate the formal investigation procedure is to include a preliminary assessment by the Commission as to the aid character of the proposed measure and is to set out the doubts as to its compatibility with the common market.
137.
Also, although limited to ascertaining whether or not the Commission made a manifest error of assessment in considering that it could not overcome all the difficulties regarding classification of the measure at issue as ‘State aid’ during a first examination of that measure, ( ) the review carried out by the General Court of the decision to initiate the formal investigation procedure and, in particular, of the question of whether the conditions laid down in Article 107(1) TFEU were prima facie satisfied must nevertheless be effective. It should be pointed out, in line with the reasoning stated in connection with the second ground of appeal, that decisions to initiate a preliminary investigation may have specific and significant legal effects for the parties concerned.
138.
By confining itself, in paragraph 279 of the decision at issue, to stating that ‘the advantages [under the 2006 schedule] benefit only airlines using Lübeck Airport [and are therefore] selective for the purpose of Article 107(1) TFEU’, the Commission omitted to state from which general rules the 2006 schedule was intended to derogate. By so doing, it failed to define the relevant reference framework and thus committed a manifest error in its assessment of the measure at issue, an error which, in my view, is unrelated to the existence of complex economic assessments.
139.
In this connection, it cannot reasonably be maintained that the General Court should not have restricted its examination to the assessment contained in paragraph 279 of the decision at issue, but should have taken into account the description of the system of discounts in paragraphs 268 to 274 of that decision, since these latter paragraphs concern the identification of a supposed advantage under the 2006 schedule and not its selectivity.
140.
I therefore consider that the General Court could conclude without committing a manifest error of assessment that the Commission had not adequately explained why it was unable to indicate, at the stage of its preliminary investigation, the reasons why the 2006 schedule was selective, so that it was required to initiate the formal investigation procedure or, at the very least, it was entitled to do so.
V – Conclusion
141.
In the light of all the foregoing considerations, I propose that the Court dismiss the appeal and order the European Commission to pay its own costs and those incurred by Hansestadt Lübeck. The Federal Republic of Germany and the Kingdom of Spain are to bear their own costs.
( ) Original language: French.
( ) T‑461/12, ‘the judgment under appeal’, EU:T:2014:758.
( ) Decision of 22 February 2012 on State aid No SA.27585 and SA.31149 (2012/C) (ex NN/2012, ex CP 31/2009 and CP 162/2010) — Germany (‘the decision at issue’).
( ) Joined Cases C‑20/15 P and C‑21/15 P, EU:C:2016:624, point 5.
( ) BGB1. I, p. 370.
( ) Council Regulation of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1990 L 83, p. 1).
( ) 282/85, EU:C:1986:316.
( ) 282/85, EU:C:1986:316.
( ) See judgments of 15 July 1963, Plaumann v Commission (25/62, EU:C:1963:17, 107); of 3 October 2013, Inuit Tapiriit Kanatami and Others v Parliament and Council (C‑583/11 P, EU:C:2013:625, paragraph 72); and of 19 December 2013, Telefónica v Commission (C‑274/12 P, EU:C:2013:852, paragraph 46).
( ) See, by analogy, judgments of 30 April 1998, Vlaamse Gewest v Commission (T‑214/95, EU:T:1998:77, paragraphs 29 and 30), and of 15 June 1999, Regione Autonoma Friuli-Venezia Giulia v Commission (T‑288/97, EU:T:1999:125, paragraphs 31 and 34). See, a contrario, judgment of 10 July 1986, DEFI v Commission (282/85, EU:C:1986:316, paragraph 18), in which it was held, on the other hand, that the French Government undeniably had the power to determine DEFI’s management and policies and hence also to define the interests which that organisation was required to defend.
( ) It is apparent that rules fixing airport charges are included, like general conditions, in the contracts concluded between the company operating the airport and the airlines.
( ) See judgments of 24 October 2002, Aéroports de Paris v Commission (C‑82/01 P, EU:C:2002:617, paragraph 63), and of 3 April 2014, France v Commission (C‑559/12 P, EU:C:2014:217, paragraph 79 and the case-law cited).
( ) See judgment of 3 April 2014, France v Commission (C‑559/12 P, EU:C:2014:217, paragraph 80 and the case-law cited).
( ) Judgments of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraph 98), and of 10 February 2011, Activision Blizzard Germany v Commission (C‑260/09 P, EU:C:2011:62, paragraph 53).
( ) Opinion of Advocate General Jääskinen in France v Commission (C‑559/12 P, EU:C:2013:766, point 42 and the case-law cited).
( ) 282/85, EU:C:1986:316.
( ) In support of that argument, the Commission refers to the judgments of 16 October 2014, Alro v Commission (T‑517/12, EU:T:2014:890, paragraphs 19 to 67), and of 16 October 2014, Alpiq RomIndustriesandAlpiq RomEnergie v Commission (T‑129/13, not published, EU:T:2014:895, paragraphs 18 to 31).
( ) See, inter alia, judgment of 17 September 2015, Mory and Others v Commission (C‑33/14 P, EU:C:2015:609, paragraphs 58 and 62 and the case-law cited).
( ) See judgment of 28 May 2013, Abdulrahim v Council and Commission (C‑239/12 P, EU:C:2013:331, paragraphs 61 to 65 and the case-law cited).
( ) See judgment of 24 October 2013, Deutsche Post v Commission (C‑77/12 P, not published, EU:C:2013:695, paragraphs 52 and 53).
( ) Judgment of 21 November 2013, Deutsche Lufthansa (C‑284/12, EU:C:2013:755, paragraph 37).
( ) Judgment of 24 October 2013, Deutsche Post v Commission (C‑77/12 P, not published, EU:C:2013:695, paragraph 52).
( ) Judgment of 24 October 2013, Deutsche Post v Commission (C‑77/12 P, not published, EU:C:2013:695, paragraph 53 and the case-law cited).
( ) Judgment of 21 November 2013, Deutsche Lufthansa (C‑284/12, EU:C:2013:755, paragraph 42).
( ) See judgment of 21 November 2013, Deutsche Lufthansa (C‑284/12, EU:C:2013:755, paragraphs 42 and 43), and order of the President of the Court of Justice of 4 April 2014, Flughafen Lübeck (C‑27/13, not published, EU:C:2014:240, paragraphs 25 and 26).
( ) The Commission refers inter alia to the judgments of 20 November 2003, GEMO (C‑126/01, EU:C:2003:622, paragraphs 35 to 39), and of 15 December 2005, Italy v Commission (C‑66/02, EU:C:2005:768, paragraphs 95 to 101).
( ) C‑143/99, EU:C:2001:598, paragraph 41.
( ) The Commission relies on the Opinion of Advocate General Mengozzi in Deutsche Lufthansa (C‑284/12, EU:C:2013:442). It also mentions the judgments of 2 February 1998, Kwekerij van der Kooy and Others v Commission (67/85, 68/85 and 70/85, EU:C:1988:38, paragraphs 28 and 29); of 29 February 1996, Belgium v Commission (C‑56/93, EU:C:1996:64, paragraph 10); of 20 November 2003, GEMO (C‑126/01, EU:C:2003:622, paragraphs 35 to 39); of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraphs 63 to 67); and of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732).
( ) The Commission cites the judgments of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraphs 85 to 89); of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraph 51); and of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraphs 87 to 109).
( ) The Commission refers to the judgments of 17 June 1999, Belgium v Commission (C‑75/97, EU:C:1999:311, paragraph 33); of 15 December 2005, Unicredito Italiano (C‑148/04, EU:C:2005:774, paragraph 45); and of 15 June 2006, Air Liquide Industries Belgium (C‑393/04 and C‑41/05, EU:C:2006:403, paragraphs 31 and 32).
( ) The City of Lübeck refers to the judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598, paragraphs 41 and 42).
( ) C‑518/13, EU:C:2015:9, paragraph 61.
( ) See, inter alia, judgment of 2 September 2010, Commission v Deutsche Post (C‑399/08 P, EU:C:2010:481, paragraph 38 and the case-law cited).
( ) Judgment of 2 September 2010, Commission v Deutsche Post (C‑399/08 P, EU:C:2010:481, paragraph 39 and the case-law cited).
( ) Judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598, paragraph 41).
( ) See in particular the ‘Spaak Report’ (Report of the intergovernmental committee created by the Messina Conference to the Ministers of Foreign Affairs, Brussels, 21 April 1956, p. 59), according to which ‘it should be noted that certain intervention schemes which formally constitute aid or subsidies are not directed specifically at undertakings or sectors, but affect the general economy. In that case, the Commission does not have the power on its own to determine incompatibility’.
( ) The case-law has stated that interventions which are prima facie applicable to all undertakings may have a certain degree of selectivity — particularly where the body granting financial assistance enjoys a degree of latitude which enables it to choose the beneficiaries or the conditions under which the financial assistance is provided — and may therefore be regarded as intended to favour certain undertakings or the production of certain goods (see, inter alia, judgment of 29 June 1999, DM Transport, C‑256/97, EU:C:1999:332, paragraph 27 and the case-law cited).
( ) See, to this effect, judgment of 8 November 2001, Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598, paragraphs 35 and 36).
( ) Judgment of 6 September 2006, Portugal v Commission (C‑88/03, EU:C:2006:511).
( ) Judgment of 6 September 2006, Portugal v Commission (C‑88/03, EU:C:2006:511, paragraph 58).
( ) Judgments of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraph 82), and of 14 January 2015, Eventech (C‑518/13, EU:C:2015:9, paragraphs 54 and 55).
( ) See, inter alia, judgments of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraphs 85 and 89), and of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraph 87).
( ) See, inter alia, judgment of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraph 50 and the case-law cited).
( ) Judgment of 15 June 2006, Air Liquide Industries Belgium (C‑393/04 and C‑41/05, EU:C:2006:403, paragraphs 31 and 32 and the case-law cited).
( ) See my Opinion in Commission v MOL (C‑15/14 P, EU:C:2015:32, point 47).
( ) See judgment of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraph 62).
( ) See my Opinion in Commission v MOL (C‑15/14 P, EU:C:2015:32, points 50 to 55).
( ) In the case of a measure of an individual nature, identification of the economic advantage in principle enables its ‘specificity’ to be presumed and, therefore, the conclusion to be drawn that is also selective.
( ) See, to this effect, judgments of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraph 101), and of 14 January 2015, Eventech (C‑518/13, EU:C:2015:9, paragraph 53). See point 54 of my Opinion in Commission v MOL (C‑15/14 P, EU:C:2015:32) and point 29 of the Opinion delivered by Advocate General Bobek in Belgium v Commission (C‑270/15 P, EU:C:2016:289).
( ) See, in that regard, Opinion of Advocate General Wathelet in Commission v Banco Santander and Santusa (C‑20/15 P and C‑21/15 P, EU:C:2016:624, particularly points 7, 10 and 80 to 87).
( ) See judgment of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraphs 82 and 83 and the case-law cited).
( ) See, in that regard, judgment of 6 September 2006, Portugal v Commission (C‑88/03, EU:C:2006:511, paragraph 56).
( ) I would point out that the Commission, in its recent Notice 2016/C 262/01 on the notion of State aid as referred to in Article 107(1) [TFEU] (OJ 2016 C 262, p. 1), stated that ‘the reference system constitutes the benchmark against which the selectivity of a measure is assessed’.
( ) In the case giving rise to the judgment of 4 June 2015, Commission v MOL (C‑15/14 P, EU:C:2015:362, paragraph 61), the Court held, concerning a measure fixing mining fees in connection with the extraction of hydrocarbons, that ‘the appropriate comparator for establishing the selectivity of the measure at issue in the present case was to ascertain whether [it] draws a distinction between operators that are, in the light of the objective of the measure, in a comparable factual and legal situation, a distinction not justified by the nature and general scheme of the system at issue’.
( ) Opinion of Advocate General Mengozzi in Deutsche Lufthansa (C‑284/12, EU:C:2013:442).
( ) The case-law concerned comprises the judgments of 2 February 1988, Kwekerij van der Kooy and Others v Commission (67/85, 68/85 and 70/85, EU:C:1988:38, paragraphs 28 and 29); of 29 February 1996, Belgium v Commission (C‑56/93, EU:C:1996:64, paragraph 10); of 20 November 2003, GEMO (C‑126/01, EU:C:2003:622, paragraphs 35 to 39); of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraphs 63 to 67); and of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732).
( ) 67/85, 68/85 and 70/85, EU:C:1988:38.
( ) C‑56/93, EU:C:1996:64.
( ) C‑39/94, EU:C:1996:285.
( ) C‑126/01, EU:C:2003:622, paragraphs 35 to 39.
( ) See, in particular, paragraph 41.
( ) See, in particular, paragraphs 54 to 61.
( ) See, inter alia, judgments of 22 December 2008, British Aggregates v Commission (C‑487/06 P, EU:C:2008:757, paragraphs 85 and 89), and of 15 November 2011, Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraphs 87, 88 and 92).
( ) C‑409/00, EU:C:2003:92, paragraph 49.
( ) Judgment of 14 January 2015, Eventech (C‑518/13, EU:C:2015:9, paragraph 55).
( ) See judgment of 14 January 2015, Eventech (C‑518/13, EU:C:2015:9, paragraphs 59 to 61).
( ) The Commission refers to the judgments of 13 February 2003, Spain v Commission (C‑409/00, EU:C:2003:92, paragraph 48); of 15 July 2004, Spain v Commission (C‑501/00, EU:C:2004:438, paragraphs 118 to 128); and of 8 September 2011, Commission v Netherlands (C‑279/08 P, EU:C:2011:551, paragraph 50).
( ) See, inter alia, judgment of 10 July 2014, Telefónica and Telefónica de España v Commission (C‑295/12 P, EU:C:2014:2062, paragraph 99 and the case-law cited).
( ) See, inter alia, judgments of 15 April 2008, Nuova Agricast (C‑390/06, EU:C:2008:224, paragraph 57), and of 21 July 2011, Alcoa Trasformazioni v Commission (C‑194/09 P, EU:C:2011:497, paragraph 57). With regard to the difference between the preliminary examination stage and the formal stage, see, most recently, my Opinion in Club Hotel Loutraki and Others v Commission (C‑131/15 P, EU:C:2016:617, points 25 to 27).
( ) See, inter alia, judgment of 21 July 2011, Alcoa Trasformazioni v Commission (C‑194/09 P, EU:C:2011:497, paragraph 61). |
ORDER OF THE GENERAL COURT (Fourth Chamber)
11 March 2016 ( *1 )
‛Community trade mark — Opposition proceedings — Application for a Community figurative mark Sky BONUS — Earlier national word mark SKY — Relative ground for refusal — Likelihood of confusion — Restriction of the goods designated in the trade mark application — Article 8(1)(b) of Regulation (EC) No 207/2009 — Inadmissibility’
In Case T‑840/14,
International Gaming Projects Ltd, established in Valletta (Malta), represented by M. Garayalde Niño, lawyer,
applicant,
v
Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by D. Walicka, acting as Agent,
defendant,
intervener before the Court, formerly British Sky Broadcasting Group plc, the other party to the proceedings before the Board of Appeal of OHIM, being
Sky plc, established in Isleworth (United Kingdom), represented by J. Barry, Solicitor,
ACTION brought against the decision of the Fourth Board of Appeal of OHIM of 23 October 2014 (Case R 2040/2013-4), relating to opposition proceedings between British Sky Broadcasting Group plc and International Gaming Projects Ltd,
THE GENERAL COURT (Fourth Chamber),
composed of M. Prek, President, I. Labucka and V. Kreuschitz (Rapporteur), Judges,
Registrar: E. Coulon,
having regard to the application lodged at the Court Registry on 23 December 2014,
having regard to the response of OHIM lodged at the Court Registry on 20 May 2015,
having regard to the response of the intervener lodged at the Court Registry on 1 May 2015,
having regard to the replies of 9 and 11 December 2015 submitted by the intervener and the applicant, respectively, to a written question from the Court,
makes the following
Order
Background to the dispute
On 16 March 2012, the applicant, International Gaming Products Ltd, filed an application for registration of a Community trade mark with the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), pursuant to Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1).
The mark in respect of which registration was sought is the following figurative sign:
The goods in respect of which registration was sought are in Classes 9 and 28 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond to the following description:
—
Class 9: ‘Computer programs, electronic components’;
—
Class 28: ‘Automatic slot machines; amusement and gaming machines; amusement and gaming electric and/or electronic machines, apparatus and installations; Video-game machines and apparatus; parts and fittings for all these goods, not included in other classes’.
The application for a Community trade mark was published in the Community Trademarks Bulletin No 2012/086 of 8 May 2012.
On 8 August 2012, British Sky Broadcasting Group plc, the predecessor in title of the intervener, Sky plc, filed a notice of opposition, pursuant to Article 41(1) of Regulation No 207/2009, to registration of the mark applied for in respect of all the goods referred to in paragraph 3 above.
The opposition was based on, inter alia, the earlier United Kingdom word mark SKY, registered on 7 September 2012 under No 2500604 in respect of goods and services in Classes 3, 4, 7, 9, 11, 12, 16 to 18, 25, 28 and 35 to 45. As regards Class 9, the goods in question included ‘computer programs’, ‘electronic interactive computer games’ and ‘parts and fittings for all the aforesaid goods’. As regards Class 28, the goods in question comprised ‘Toys, games and playthings; electronic games; hand-held devices for playing electronic, computer or video games; video games apparatus; parts and fittings for all the aforesaid goods; playing cards; card games; sporting articles; games involving gambling; amusement machines; amusement apparatus and instruments; interactive educational or entertainment games’.
The grounds relied on in support of the opposition were those referred to in Article 8(1)(b), (4) and (5) of Regulation No 207/2009.
By decision of 19 August 2013, the Opposition Division upheld the opposition in respect of all the goods and services in question, on the sole basis of Article 8(1)(b) of Regulation No 207/2009, and rejected the application for registration in its entirety.
On 18 October 2013, the applicant filed a notice of appeal with OHIM, pursuant to Articles 58 to 64 of Regulation No 207/2009, against the Opposition Division’s decision.
By decision of 23 October 2014 (‘the contested decision’), the Fourth Board of Appeal of OHIM upheld the Opposition Division’s decision and dismissed the appeal. To that end, it limited itself to comparing the mark applied for with the earlier mark, and to assessing the likelihood of confusion between those marks within the meaning of Article 8(1)(b) of Regulation No 207/2009. In support of that decision, it found that the goods in question were essentially identical (paragraphs 15 to 17 of the contested decision). When comparing the marks in question, the Board of Appeal first of all noted that the word ‘sky’ was the ‘most dominant and distinctive’ element of the mark applied for, whereas the word ‘bonus’ was only weakly distinctive (paragraph 20 of the contested decision). Furthermore, it found, firstly, that there was an above-average degree of visual similarity between the marks in question, secondly, that those marks were highly similar from a phonetic point of view, and, thirdly, that they were highly similar from a conceptual point of view (paragraphs 21 to 23 of the contested decision). Finally, in the context of a global assessment of the likelihood of confusion, the Board of Appeal found that there was a likelihood of confusion between the marks in question due to the identity and high similarity of the goods in question, the above-average degree of visual similarity and the high degree of phonetic and conceptual similarity between the marks in question and the normal level of inherent distinctiveness of the earlier mark (paragraph 29 of the contested decision).
Forms of order sought
The applicant claims that the Court should:
—
annul the contested decision in part and allow registration of the mark applied for as regards ‘computer programs; electronic components’ in Class 9 and ‘automatic slot machines; amusement and gaming machines; amusement and gaming electric and/or electronic machines, apparatus and installations; Video-game machines and apparatus; parts and fittings for all these goods, not included in other classes’ in Class 28, in so far as those goods relate exclusively to Video Bingo games for recreational machines for casinos and amusement arcades;
—
order OHIM to pay the costs.
OHIM and the intervener contend that the Court should:
—
dismiss the action;
—
order the applicant to pay the costs.
Law
In support of its action, the applicant relies essentially on three pleas in law alleging, respectively, an infringement of the provisions of Article 8(1)(b), (4) and (5) of Regulation No 207/2009.
To that end, at the outset, the applicant restricts the scope of its application for a Community trade mark under Article 43(1) of Regulation No 207/2009 by ‘limiting’ the list of the goods in respect of which registration is sought to ‘computer programs; electronic components’ in Class 9 and to ‘automatic slot machines; amusement and gaming machines; amusement and gaming electric and/or electronic machines, apparatus and installations; Video-game machines and apparatus; parts and fittings for all these goods, not included in other classes’ in Class 28, in so far as those goods relate exclusively to ‘Video Bingo games for recreational machines for casinos and amusement arcades’. The applicant submits, essentially, that this restriction of the list of goods in question corresponds to the arguments that it put forward before the bodies of OHIM, to the effect that a likelihood of confusion between the marks in question was more or less excluded by the fact that its business related solely to the use of recreational or gaming machines in casinos or amusement arcades.
OHIM and the intervener reply that, in accordance with Article 188 of the Rules of Procedure of the General Court, the subject matter of the proceedings before the Board of Appeal must not be altered. In the present case, they submit, the applicant amended the list of goods requested by indicating their purpose and, thus, altered the subject matter of the proceedings, contrary to that provision. That alteration cannot therefore be taken into consideration by the Court since the review of the legality of the contested decision before it must be carried out on the basis solely of the factual and legal background to the dispute at the date on which the decision was adopted. Furthermore, it is submitted, the only claim, containing that alteration to the subject matter of the proceedings, is inadmissible. The applicant expressly declares that it is not seeking annulment of the contested decision in its entirety but only its annulment in part, in respect of the goods as listed subsequent to that restriction. Furthermore, the applicant, it is submitted, declares that it is no longer seeking protection of the goods initially applied for ‘in general as a broader category, given that these kind of goods are restricted to those necessary for the functioning of the Video Bingo games for recreational machines located in casinos and amusement arcades’. Therefore, it is submitted, that only claim, and, thus, the entire application, must be rejected as inadmissible.
In addition, OHIM and the intervener dispute the contention that the Board of Appeal infringed Article 8(1)(b) of Regulation No 207/2009.
Under Article 129 of the Rules of Procedure, on a proposal from the Judge-Rapporteur, the Court may at any time of its own motion, after hearing the main parties, decide to rule by reasoned order on whether there exists any absolute bar to proceeding with a case.
In the present case, in view of, inter alia, the replies submitted by the applicant and the intervener to a written question from the Court concerning the admissibility of the action, the Court considers that it has sufficient information from the documents in the file and decides to rule without taking further steps in the proceedings.
With regard to the objection of inadmissibility raised by OHIM, the Court points out that, under Article 65(2) of Regulation No 207/2009, it may annul or alter a decision of a Board of Appeal of OHIM only ‘on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaty, of [that] Regulation or of any rule of law relating to their application or misuse of power’. In the light of Article 76 of that regulation, that review of legality must be carried out having regard to the factual and legal context of the dispute as it was brought before the Board of Appeal. It follows that the Court may annul or alter a decision against which an action has been brought only if, at the time when the decision was adopted, it was vitiated by one of those grounds for annulment or alteration. The Court may not, however, annul or alter that decision on grounds that come into existence subsequent to its adoption (see, to that effect, the judgment of 20 November 2007 in Tegometall International v OHIM – Wuppermann (TEK), T‑458/05, ECR, EU:T:2007:349, paragraphs 19 and 20 and the case-law cited).
Furthermore, although Article 26(1)(c) of Regulation No 207/2009 requires that ‘an application for a Community trade mark shall contain … a list of the goods … in respect of which the registration is requested’, Article 43(1) of that regulation provides that ‘[t]he applicant may at any time withdraw his Community trade mark application or restrict the list of goods … contained therein’.
In the application lodged at the Court, and thus subsequent to the adoption of the contested decision, the applicant altered the list of goods covered by its application for a Community trade mark by specifying their characteristics and, in particular, their purpose as relating ‘exclusively to Video Bingo games for recreational machines for casinos and amusement arcades’.
It is true that, with regard to an application for a Community trade mark covering a number of goods, the Court has already interpreted a declaration made by a trade mark applicant to it, and thus subsequent to the decision of the Board of Appeal, to the effect that the applicant was withdrawing its application solely in respect of certain of the goods covered by the initial application, either as a declaration that the contested decision was being challenged only in so far as it referred to the remainder of the goods concerned, or, if such a declaration was made at an advanced stage of the proceedings before the Court, as a partial withdrawal of the action. If, however, by its restriction of the list of goods covered by the Community trade mark application, the trade mark applicant is not seeking to withdraw one or more goods from that list, but to alter a characteristic of those goods, such as their purpose or their description, it is possible that that alteration may affect the examination of the Community trade mark carried out by the bodies of OHIM during the administrative procedure. In those circumstances, to allow that alteration at the stage of the action before the Court would amount to changing the subject matter of the proceedings pending, which is prohibited by Article 188 of the Rules of Procedure. Such an alteration therefore cannot affect the legality of the contested decision or be taken into account by the Court when it examines the merits of the case (see, to that effect, judgments in TEK, cited in paragraph 19 above, EU:T:2007:349, paragraphs 23 to 25 and the case-law cited, and of 20 February 2013 in Caventa v OHIM — Anson’s Herrenhaus (B BERG), T‑631/11, EU:T:2013:85, paragraphs 22 to 25).
In the present case, it is clear both from the sole head of claim for annulment and from the arguments set out in support of it in the application that the applicant is not withdrawing any of the goods forming the subject matter of its application for a Community trade mark, but is merely specifying their purpose as relating ‘exclusively to Video Bingo games for recreational machines for casinos and amusement arcades’. As OHIM correctly contends, the applicant itself confirms, at paragraph 16 of the application, that it is no longer trying to protect the goods contained ‘in general as a broader category’ but only in so far as they serve that particular purpose. Furthermore, the applicant expressly requests the Court to take account of that specific statement, formulated during the proceedings, and relating to the purpose of the goods in question for the purposes of their comparison pursuant to Article 8(1)(b) of Regulation No 207/2009, in order to conclude that they are not similar.
It must, however, first be noted that, in the light of the case-law cited in paragraph 22 above, such a specific statement, formulated during the present proceedings and relating to the characteristics and, in particular, the purpose of the goods in question constitutes an alteration of the factual background of the dispute as it was brought before the Board of Appeal and formed the subject matter of the contested decision, in that it implies that all other purposes of those goods which might have come into consideration in the context of the comparison of the goods must be disregarded. As the applicant itself submits, inter alia in paragraphs 50 to 60 of the application, it follows that that alteration is such as to affect the assessment that could have been undertaken by the Board of Appeal on, inter alia, the similarity of the goods in question and, thus, it necessarily altered the subject matter of the proceedings as brought before the Court. Second, in so far as the head of claim seeking partial annulment and the arguments raised in support of it are limited to challenging the legality of the contested decision under the sole condition that the Court take account of this alteration of the subject matter of the proceedings, prohibited under Article 188 of the Rules of Procedure, that head of claim cannot succeed.
By its application, the applicant cannot obtain a partial annulment of the contested decision on the ground that it is based on an assessment — not made by the Board of Appeal — of a likelihood of confusion between the marks in question by including in that assessment goods with a specific purpose on which the Board of Appeal had not been asked to rule. On the contrary, as OHIM rightly contends, in the context of the comparison of the goods in question, the Board of Appeal was deemed to check whether all the potential purposes of those goods gave reason for concluding that they were similar or even identical. In that regard, the Court notes that, in the assessment of the similarity of goods, all the relevant factors of the relationship existing between those goods must be taken into account, including, in particular, their nature, their intended purpose, their method of use and whether they are in competition with each other or are complementary (see, to that effect and by analogy, judgment of 29 September 1998 in Canon, C‑39/97, ECR, EU:C:1998:442, paragraph 23). Furthermore, for the purposes of applying Article 8(1)(b) of Regulation No 207/2009, a likelihood of confusion presupposes both an identity or similarity of the marks in question and an identity or similarity of the goods or services that they designate, those conditions being cumulative (judgments of 13 September 2007 in Il Ponte Finanziaria v OHIM, C‑234/06 P, ECR, EU:C:2007:514, paragraph 48, and 22 January 2009 in Commercy v OHIM — easyGroup IP Licensing (easyHotel), T‑316/07, ECR, EU:T:2009:14, paragraph 42). In the present case, it is precisely the comparison of the goods with their generic and varied characteristics as applied for initially — and not those specified a posteriori — which led the Board of Appeal to find that there was a likelihood of confusion between the marks in question. Consequently, in contrast to a situation in which an applicant withdraws from its application for a Community trade mark certain of the goods for which it had initially requested registration, in the present case the applicant’s application concerns a comprehensive and inseparable assessment by the Board of Appeal in the contested decision, which is not capable of being annulled in part. In this regard, the mere fact that the applicant submitted before the bodies of OHIM, as it stated in its reply to the Court’s written question, that its business concerned solely the use of recreational or gaming machines in casinos and amusement arcades cannot invalidate that assessment, since the goods which were the subject matter of its initial application for a Community trade mark were covered by that application on the basis of their broad meanings and intended purposes.
Finally, it must be noted that the applicant does not apply, even in the alternative, for the contested decision to be annulled in its entirety in that it finds that there is a likelihood of confusion between the marks in question with regard to the goods mentioned in paragraph 3 above. On the contrary, in view of the restriction of the purpose of those goods carried out in the application in the present case, the applicant expressly seeks partial annulment of the contested decision in so far as registration of the mark applied for has been refused in relation to the same goods inasmuch as they ‘relate exclusively to Video Bingo games for recreational machines for casinos and amusement arcades’. In those circumstances, contrary to the situation in the case giving rise to the judgment in TEK, cited in paragraph 19 above (EU:T:2007:349, paragraphs 27 and 28), regard being had to the unambiguous scope of the head of claim seeking annulment, as reiterated in the applicant’s reply to the Court’s written question, and to the clear and precise nature of the arguments advanced in its support in the application and in that reply, it is, in the present case, not possible for the Court to take account of the list of goods covered by the applicant’s initial application for a Community trade mark in order to hear and determine the present action.
It follows from the foregoing that the sole head of claim seeking annulment and, consequently, the application for alteration seeking to secure registration of the mark applied for in respect of the goods in question, as altered, must be declared inadmissible.
Consequently, the action must be dismissed as being inadmissible in its entirety.
Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party must be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the forms of order sought by OHIM and the intervener.
On those grounds,
THE GENERAL COURT (Fourth Chamber)
hereby orders:
1.
The action is dismissed as being inadmissible.
2.
International Gaming Projects Ltd shall pay the costs.
Luxembourg, 11 March 2016
E. Coulon
Registrar
M. Prek
President
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
CRUZ VILLALÓN
delivered on 17 March 2015 ( )
Case C‑39/14
Bodenverwertungs- und -verwaltungs GmbH (BVVG)
joined parties:
Thomas Erbs
Ursula Erbs
Landkreis Jerichower Land
(Request for a preliminary ruling from the Bundesgerichtshof (Germany))
‛Reference for a preliminary ruling — State aid — Programme for privatising land and buildings used for agricultural and forestry purposes in the new Länder in Germany — National law making sale of agricultural land subject to consent — Law on transactions in land (Grundstücksverkehrsgesetz) — Refusal of consent to a contract for the sale of land concluded, following a public call for bids, with the highest bidder — Agreed price grossly disproportionate to the market value of the land — Manner of determining the value of the land — Classification as State aid’
1.
In the present case, a question has been raised before the Court relating to the interpretation of Article 107 TFEU in a dispute involving the conditions and manner of sale of agricultural and forestry land in connection with the privatisation of previously State-owned land and buildings in the new Länder in Germany. ( ) It is therefore a sequel to the judgment in Seydaland Vereinigte Agrarbetriebe, ( ) although it raises a number of new issues which will lead the Court to clarify its case-law on the conditions with which sales of publicly owned land must comply under the rules of the Treaty in the field of State aid.
I – Legal context
2.
According to the order for reference, Bodenverwertungs- und -verwaltungs GmbH (BVVG) ( ) has the statutory object inter alia of implementing the privatisation of formerly State-owned land and buildings used for agricultural and forestry purposes in the Länder of Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia (the new Länder). BVVG, which is a private-law legal person, acts for that purpose on behalf of the Bundesanstalt für vereinigungsbedingte Sonderaufgaben, ( ) a public-law institution with legal capacity and directly under federal control.
3.
The sale of agricultural and forestry land in Germany is subject generally to the provisions of the Law on transactions in land (Grundstücksverkehrsgesetz), ( ) which is concerned with protecting agricultural structures.
4.
Paragraph 2(1) of the GrdstVG states:
‘The sale of land by way of a legal transaction and the contractual agreement concerning it shall require consent. …’
5.
However, Paragraph 4 of the GrdstVG states:
‘Consent shall not be necessary where
1. The Federal Republic or a Land is a party to the sale;
…’
6.
Paragraph 9 of the GrdstVG provides:
‘(1) Consent may be refused or limited by obligations (Paragraph 10) or conditions (Paragraph 11) only if there are circumstances from which it appears that
1.
the sale will result in unsound distribution of real property, or
2.
as a result of the sale, the piece of land or a majority of geographically or economically connected pieces of land which belong to the vendor would be made smaller or split up in an economically inefficient way, or
3.
the consideration for the sale is grossly disproportionate to the value of the piece of land.
(2) Unsound distribution of real property within the meaning of subparagraph 1, point 1, normally exists where the sale is inconsistent with measures for the improvement of agricultural structures.
(3) An economically inefficient reduction or splitting-up within the meaning of subparagraph 1, point 2, normally exists where, as a result of the distribution of the estate among heirs, a transfer agreement or other sale by way of a legal transaction,
1.
an independent agricultural undertaking would cease to be viable;
2.
a piece of agricultural land becomes smaller than one hectare;
…
(4) If the land is sold for other than agricultural or forestry purposes, consent may not be refused on the ground of subparagraph 1, point 3.
…’
II – Facts of the main proceedings
7.
According to the order for reference that, following a public call for bids in which they made the highest bid, Mr and Mrs Erbs purchased approximately 2.6 hectares of agricultural land from BVVG for EUR 29000 by notarial contract of 31 March 2008.
8.
However, by decision of 5 June 2008, the Landkreis Jerichower Land, as the competent local authority, refused consent for the contract of sale, under Paragraph 9(1)(3) of the GrdstVG, ( ) on the ground that the agreed price was grossly disproportionate to the value of the piece of land sold.
9.
The action brought by Mr and Mrs Erbs against the contested decision was dismissed at first instance and on appeal. The appeal court in this case considered that the agreed price of EUR 29000 was grossly disproportionate to the value of the piece of land sold, since an expert report showed that the agricultural market value of the land was EUR 14168.61 if other, earlier BVVG sales were taken into account and EUR 13648.19 if those sales were not included in the comparison. Therefore it held that the agreed price exceeded those values by more than 50% and that a sale at this price would have adverse effects on agricultural structures, bearing in mind that, firstly, a farmer who was heard as a witness but had not taken part in the public call for bids stated that he was willing to purchase the land at a price up to 50% above the agricultural market value and, secondly, Mr and Mrs Erbs were not professional farmers.
III – The question referred for a preliminary ruling and the proceedings before the Court
10.
In those circumstances, the Bundesgerichtshof (Federal Court of Justice, Germany), hearing the appeal on a point of law brought by BVVG, decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
‘Does Article 107(1) TFEU preclude a national provision such as Paragraph 9(1)(3) of the GrdstVG which, for the improvement of agricultural structures, effectively prohibits an emanation of the State, such as Bodenverwertungs- und -verwaltungs GmbH (BVVG), from selling to the highest bidder in a public call for bids agricultural land available for sale, if the highest bid is grossly disproportionate to the value of the land?’
11.
The referring court has been careful to explain that, from its point of view, this question involves three queries. The first problem is whether the sale of publicly owned real property by BVVG at a price below the price established as a result of a public call for bids amounts to preferential treatment for the purchaser if the sale at the price established as a result of the public call for bids is prevented by a general law which also applies to all private sellers. Secondly, if preferential treatment is taken to exist, the further question arises as to whether it may be justified by the purpose of the law, which is the improvement of agricultural structures. Finally, it is necessary to decide whether refusal of the sale at the price determined by a public call for bids is in itself unlawful under Article 107(1) TFEU, even if it does not yet constitute aid, because of its advance effect.
12.
Written observations have been submitted by BVVG, Mr and Mrs Erbs, the German Government and the European Commission. BVVG, Landkreis Jerichower Land, the German Government and the Commission also made oral submissions at the public hearing on 11 December 2014.
IV – Summary of the parties ’ observations
13.
BVVG takes the view, in a very general way, that the question referred for a preliminary ruling by the Bundesgerichtshof should be answered in the affirmative, since all the constituent elements of State aid are present.
14.
Application of the provision at issue involves, first of all, the use of federal resources, in so far as the proceeds from privatising previously State-owned land and buildings are paid into the federal budget. Therefore any refusal to sell land at the highest price offered in a public bidding procedure entails a loss of income for the State, while also having a more general price-squeezing effect. Application of the contested provision also favours professional farmers, who have the opportunity to purchase land which is subject to a public call for bids at a price below the highest bid.
15.
This advantage stems from the method of determining the market value of the land, on the basis of which the competent local authorities can establish the existence of gross disproportion within the meaning of the provision at issue and therefore make a decision to refuse consent. BVVG submits that a value determined by means of an expert valuation can be close to the market value only if the valuation is based on the results of a large number of public bidding procedures, which is not the case here.
16.
Mr and Mrs Erbs take the view, in essence, that the sale of the land did not lead to an uneconomic reduction or splitting up of parcels of land and did not affect an independent agricultural undertaking or a farmer’s profitability.
17.
The German Government submits that the question referred for a preliminary ruling should be answered in the negative, in so far as the provision at issue does not grant any advantage either in the form of a subsidy or by easing a burden. It takes the view that, in any event, no particular undertaking is being favoured, since BVVG has no obligation to sell to a farmer who has applied to purchase land. Although it is true that the decision to refuse consent has a restrictive effect on BVVG and Mr and Mrs Erbs, it does not, on the other hand, create any advantage.
18.
Finally, the Commission points out that it is not, in principle, for the national court to rule on the compatibility of any aid with the Treaty, and submits that the national legislation may constitute ‘State aid’ within the meaning of Article 107(1) TFEU, focusing its observations on whether a selective advantage exists, while leaving it to the referring court to review whether in the present case there is any intervention through State resources.
V – Preliminary observations
19.
Consideration of the question referred by the national court for a preliminary ruling calls for a series of preliminary observations. First of all, I shall consider the scope of the question referred for a preliminary ruling, and this will lead me to propose that the Court reformulate the question. I shall next attempt to explain why a law on transactions in land such as the GrdstVG, which is generally applicable, including regionally, may and, in this case, must be considered in the light of the Treaty provisions on State aid. Having clarified that point, I shall discuss the contents of the provision at issue. Finally, the last part of this Opinion will address the fundamental objection raised by the German Government that the provision at issue cannot be classified as State aid because there is no actual advantage granted to any undertaking.
A – The scope of the question referred for a preliminary ruling
20.
By its question, the referring court is formally requesting the Court to rule on whether Article 107(1) TFEU precludes the provision at issue, that is, whether the measure provided for by that legislation constitutes aid incompatible with the internal market.
21.
Yet, as the Commission has pointed out in its written observations, it is not for the Court or for the referring court to rule on the compatibility of a national measure with Article 107(1) TFEU, since the Commission, subject to review by the judicature of the European Union, ( ) has exclusive competence in that regard. Consequently, a national court or tribunal may not, in a reference for a preliminary ruling under Article 267 TFEU, ask the Court for guidance as to the compatibility with the internal market of a given State aid or an aid scheme. ( ) From this point of view, the Court cannot give an answer, within the context of the present proceedings, to the referring court’s second query.
22.
However, national courts retain jurisdiction to rule on the classification of a measure as State aid and to draw the appropriate conclusions from this pursuant to the last sentence of Article 108(3) TFEU. ( ) In particular, they must offer to individuals the certain prospect that all appropriate conclusions will be drawn from an infringement of the last sentence of Article 108(3) TFEU, in accordance with their national law, as regards the validity of measures giving effect to the aid, the recovery of financial support granted in disregard of that provision, and possible interim measures. ( )
23.
More precisely, the Court has held that the Commission’s power to assess whether aid is compatible with the internal market does not preclude a national court from referring to the Court of Justice a question on the interpretation of the concept of aid. ( ) Accordingly, the Court has jurisdiction, inter alia, to give the national court guidance on the interpretation of EU law to enable it to determine whether a national measure may be classified as State aid under that law. ( )
24.
It should also be borne in mind, in this context, that the Court has stated that, if a national court entertains doubts as to how a measure should be classified, it may ask the Commission for clarification on that point. In its Notice of 23 November 1995 on cooperation between national courts and the Commission in the State aid field, ( ) the Commission expressly encouraged national courts to contact it when they encounter difficulties in applying Article 108(3) TFEU and explained what kind of information it was able to supply. ( ) It should be noted, in that regard, that as a consequence of the duty of sincere cooperation between the Community institutions and the Member States resulting from Article 4(3) TEU, ( ) the Commission must respond as quickly as possible to requests from national courts. ( )
25.
Therefore, if it were to be concluded that the consent mechanism established by the provision at issue may constitute State aid, the competent German authorities would have to notify the Commission for it to decide on its compatibility with the internal market. Pending a final decision from the Commission, the referring court should give direct effect to the last sentence of Article 108(3) TFEU, that is to say, it should safeguard the rights available to the interested parties under that provision by preventing the refusal of consent to the contract of sale concluded between BVVG and Mr and Mrs Erbs and the effects of the refusal. ( )
26.
It should also be borne in mind that, except in instances of de minimis aid, ( ) the Member States must also send the Commission ( ) a summary of information relating to measures likely to be covered by a block exemption, with a view to its publication on the Commission’s website, ( ) and this is to include aid granted in the agricultural sector. ( )
27.
In the light of the above explanations, I propose that the Court should reformulate the question referred for a preliminary ruling by the Bundesgerichtshof as follows: ‘Must Article 107(1) TFEU be interpreted as meaning that a rule of national law which, for the improvement of agricultural structures, in effect prohibits an emanation of the State from selling agricultural land to the highest bidder in a public call for bids, if the highest bid is grossly disproportionate to the value of the land, may be classified as State aid?’
B – The specific nature of the measure at issue
28.
The provision at issue, ( ) in summary, allows the competent local authorities to prevent sales of agricultural or forestry land in public bidding procedures where they consider that the prices agreed are grossly disproportionate to the value of the land.
29.
The measure of which this provision forms part ( ) is based, in this case, on a mechanism for granting consent prior to certain transfers of property relating to agricultural or forestry land covered by contracts of sale; it is triggered when a price threshold is exceeded, and the evaluation of this threshold is based on a system for determining the agricultural market value of the land. The referring court defines the provision at issue as ‘a provision of price law which constitutes a lawful property obligation’.
30.
Consent to the transfer of agricultural or forestry land by way of a contract of sale is not necessary, under Paragraph 4(1) of the GrdstVG, where the State or a Land is a party to the sale; on the other hand, it is necessary, under the case-law of the Bundesgerichtshof, ( ) where BVVG is a party to the sale, which is the situation in the main proceedings. Notwithstanding its statutory object, which is to implement the privatisation of land in the new Länder, BVVG is a private-law legal person and is not covered by the exemption provided for by Paragraph 4(1) of the GrdstVG.
31.
Accordingly, it should be noted that the GrdstVG — a law that, in a very general way, makes transfers of agricultural and forestry land taking place in Germany between private persons subject to consent — is also applicable to all land transactions taking place in connection with the process administered by BVVG of privatising formerly State-owned property, inasmuch as BVVG is not covered by the exemption provided for by Paragraph 4(1) of the GrdstVG.
32.
Consequently, it is that exemption which results in sales of publicly owned agricultural and forestry land being subject to consent where inter alia the conditions of the provision at issue are met. And it is because BVVG conducts sales of formerly State-owned land and pays the proceeds of these sales into the federal budget that the measure at issue may involve State resources and, consequently, may be covered by the Treaty provisions on State aid.
33.
However, the contents of the provision at issue should be considered in greater detail.
C – The contents of the provision at issue
34.
Consent to a transfer of land can be refused only on condition, firstly, that it is agricultural or forestry land and, secondly, that certain circumstances apply, in particular, as far as the provision at issue is concerned, that the price offered and agreed in the contract of sale is grossly disproportionate to the agricultural market value of the land.
35.
Since the GrdstVG does not define the concept of ‘grossly disproportionate’, it has been defined by the German courts and, in particular, by the referring court. A gross disproportion exists where the agreed price exceeds the agricultural market value of the land by more than 50%. ( )
36.
The referring court explains that the provision at issue aims to prevent professional farmers being burdened with such high purchase costs for new land that the continued profitability of their farms would be threatened. Therefore its purpose is to put an end to speculation in farm and forestry land and to promote the improvement of agricultural structures.
37.
The German Government has explained that the decision to refuse consent has the effect of preventing the purchaser registering as owner of the land, which blocks the transfer of the land, with the result that the contract of sale remains temporarily ineffective until there is a final judicial ruling on the decision. If the decision to refuse consent is set aside, the temporarily ineffective contract of sale becomes enforceable at the sale price agreed and the purchaser can be registered as owner of the land. Otherwise, the decision to refuse consent becomes final and the contract becomes null and void. However, if the decision to refuse consent becomes final, that does not entail any right, for a farmer expressing his interest within the framework of the bidding procedure or the contentious procedure against the decision to refuse consent, to acquire the land.
38.
The provision at issue therefore aims to prevent agricultural or forestry land being sold in a bidding procedure at prices which differ substantially — by more than 50% — from prices viewed by the competent local authorities as ‘acceptable’, that is to say, proportionate to what the authorities consider to be the agricultural market value of the land.
39.
That point having been clarified, it should be noted that implementation of the measure at issue, which by definition means that the highest price offered for a given piece of land in a bidding procedure is more than 50% above the agricultural market valuation by the competent local authorities, may theoretically come about in very different situations, which vary inter alia according to the number of bids submitted and the structure of the prices offered.
40.
This underlines the fact that it is not possible to assess the measure at issue and to resolve the question of its classification from the point of view of Article 107 TFEU without taking into account the specific conditions of its implementation and, more precisely, the circumstances in which it is implemented. As I shall have occasion to show, assessment of the disproportionate nature of the price offered in a bidding procedure for a given piece of land differs according to whether this procedure has given rise to a single bid, a very small number of bids, or a large number of bids.
41.
Accordingly, when assessing whether the price offered was disproportionate, the specific manner in which the competent local authorities determined the agricultural market value of the land must be examined, but the number of bids submitted and the structure of the prices offered in the bidding procedure must also be taken into account.
D – The particular circumstances of the situation in the main proceedings
42.
Finally, it is appropriate to dwell on the particular circumstances of the situation in the main proceedings, which are the subject of the referring court’s third query ( ) and which provide the German Government with one of the main arguments in support of its conclusion that the measure at issue cannot be classified as State aid.
43.
The German Government states that the decision to refuse consent at issue in the main proceedings does not entail any obligation for BVVG to sell the land in question to the professional farmer who expressed his interest in acquiring it. Therefore the view cannot be taken that the land in question has been sold at a price below the market price as determined in the public call for bids. The provision at issue cannot, as a result, be classified as State aid, since there has been no actual intervention through State resources.
44.
It is true that, since there has been no sale of the land in question, at a price lower than the highest bid, to the professional farmer who expressed his interest in the framework of the public bidding procedure at issue in the main proceedings the view cannot be taken that there has been actual granting of aid.
45.
However, although that sale has not actually taken effect in the case in the main proceedings, this is first and foremost and essentially because of the fact that the two parties to the contract which is the subject of the decision to refuse consent have challenged this decision before the German courts, and BVVG has raised precisely the question of whether the provision at issue is to be classified as State aid — the question that is at the origin of the present proceedings.
46.
Furthermore, the fact that the competent local authorities have not yet acted on their decision to refuse consent in a given case cannot support the conclusion that the question of classifying the provision at issue as State aid is hypothetical. In particular, the view cannot be taken that the alleged conduct of the competent local authorities will be repeated systematically and indefinitely, as otherwise the provision at issue would be rendered completely meaningless and ineffective.
47.
In any event, the fact that the competent local authorities have a discretionary power to decide what action is to be taken on their decision to refuse consent has no bearing on the question of whether the measure at issue may constitute State aid. The classification of a measure as State aid cannot, without calling into question the permanent system for monitoring State aid set out in Articles 107 and 108 TFEU, be conditional either on a prior finding that it has actually been put into effect or even on a prospective assessment of how frequently it will be applied.
48.
Following these initial arguments, I am now in a position to address the heart of the problem raised by the main proceedings, which is to determine whether and to what extent implementation of the measure at issue may be classified as State aid.
VI – Classification of the measure at issue as State aid
49.
For a national measure to be classified as ‘aid’ within the meaning of Article 107(1) TFEU, there must, inter alia, first of all be an intervention by the State or through State resources and the measure must confer an advantage on the recipient. ( )
50.
According to the case-law of the Court, only advantages granted directly or indirectly through State resources are to be regarded as aid within the meaning of Article 107(1) TFEU. The distinction made in that provision between ‘aid granted by a Member State’ and aid granted ‘through State resources’ does not signify that all advantages granted by a State, whether financed through State resources or not, constitute aid but is intended merely to bring within that definition both advantages which are granted directly by the State and those granted by a public or private body designated or established by the State. ( )
51.
That said, the concept of ‘aid’ within the meaning of Article 107(1) TFEU embraces not only positive benefits, such as subsidies, but also, more generally, measures which in various forms mitigate the charges which are normally included in the budget of an undertaking and which therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect. ( ) It suffices in that regard to establish a sufficiently direct link between, on the one hand, the advantage given to the beneficiary and, on the other hand, inter alia, a reduction of revenue of the State budget. ( )
52.
It should also be pointed out, in order to supplement the answer to be given to the referring court’s second query, ( ) that the mere fact that a measure has a social purpose does not suffice to exclude it outright from classification as ‘aid’ within the meaning of Article 107(1), TFEU, since that provision does not distinguish between measures of State intervention by reference to their causes or their aims but defines them in relation to their effects. ( )
53.
As the Court has already made clear, it cannot be ruled out that a sale of publicly owned land at a price lower than the market value might constitute State aid. ( ) In that case, the Court explained that the sale by public authorities of land or buildings to an undertaking or to an individual involved in an economic activity, such as agriculture or forestry, may include elements of State aid, in particular where it is not made at market value, that is to say, where it is not sold at the price which a private investor, operating in normal competitive conditions, would have been able to fix. ( )
54.
The Court concluded that, where national law establishes rules for calculating the market value of land for sale by public authorities, the application of those rules must, in order to comply with Article 107 TFEU, lead in all cases to a price as close as possible to the market value. ( )
55.
It is by reference to these different factors that it is necessary to consider whether and to what extent the application of the provision at issue involves the granting of an advantage to an undertaking and may, consequently, be classified as State aid; this requires me first of all to analyse the system used by the competent local authorities to determine the agricultural market value of agricultural and forestry land.
A – The system for determining the agricultural market value of land
56.
The agricultural market value of land, which is not defined by the GrdstVG, is, according to the order for reference (paragraph 32), the price that can be obtained for land of the same kind and the same situation in free legal transactions between farmers at the date of conclusion of the contract, that is to say, land transactions within the agricultural sector, bearing in mind that sales to non-farmers must also be taken into account if the object of the sale is continued use as farmland.
57.
Neither the referring court nor the parties who have made written and oral submissions have provided very precise particulars of the manner in which the competent local authority empowered to refuse the consent required by the provision at issue determined the agricultural market value of the land which was the subject of the contract, that being the value which was the basis of the finding of a gross disproportion justifying refusal of consent. However, it is apparent from BVVG’s written observations that this value is determined from reference prices set by valuation committees according to regional reference indicators and values (paragraphs 41 and 42).
58.
The referring court merely explains that, in the main proceedings, the appellate court confirmed the competent local authority’s decision not to give consent on the basis of a valuation which it had commissioned, but does not provide further details. However, in its written observations, BVVG stated that the bids submitted by agricultural undertakings in the public bidding procedure are not taken into account.
59.
For the prior consent mechanism to be triggered, it is thus also necessary that, within the framework of a public bidding procedure for the sale of agricultural land which has resulted in a contract of sale concluded with a purchaser who is not a farmer or with an amateur farmer, a professional farmer has expressed interest in acquiring the land which is the subject of the contract and the price agreed in the contract is more than 50% above the price at which this farmer has declared himself prepared to purchase the land.
B – The existence of an intervention through State resources
60.
There is no doubt that implementation of the provision at issue may involve an intervention through State resources, in that it may entail a loss of income for the State from the proceeds of privatising the land which is the subject of a decision to refuse consent to the transfer of the land. As BVVG has submitted, since its annual profit is paid into the federal budget, it follows that application of the provision at issue could automatically lead to the State forgoing resources corresponding to the difference between the agricultural market value assessed by the competent local authorities and the highest price offered in the public call for bids. ( )
C – The conditions for the existence of an advantage granted to an undertaking
61.
The German Government submits, in essence, that the measure at issue cannot be classified as State aid since it does not favour any undertaking and does not involve granting any tangible advantage to an undertaking or to a particular branch of production. It considers, in particular, that it would be wrong to take the view that the market price of the land in question corresponds to the highest bid submitted in the public bidding procedure, since the case-law of the Court and the Commission Communication of 10 July 1997 on State aid elements in sales of land and buildings by public authorities (Notice No 97/C 209/03) ( ) accept that the market price can perfectly well be established by an independent expert valuation.
62.
First of all, it should be noted that, in its 1997 Communication, the Commission recognises that the sale of publicly owned land and buildings will be deemed not to contain State aid if it follows an open and unconditional bidding procedure or if, in the absence of such procedure, it is preceded by an evaluation by one or more independent asset valuers in order to establish the market value on the basis of generally accepted market indicators and valuation standards.
63.
As I have already pointed out, ( ) the Court has held, in Seydaland Vereinigte Agrarbetriebe, ( ) that if, for the sale by public authorities of agricultural land, national law has established rules for calculating its market value, the application of those rules can be viewed as complying with Article 107 TFEU only provided that it leads in all cases to a price as close as possible to the market value. ( ) The Court confirmed that the best bid or an expert report were likely to provide prices corresponding to actual market values, although it could not rule out that other methods might also achieve the same result. ( ) However, it further stated that a method for valuing agricultural land which does not include a mechanism for updating those valuations which would allow the selling price of the land to reflect, in so far as possible, the market value of that land, especially when prices are rising sharply, is not suitable for reflecting the actual market prices in question. ( )
64.
In the present case, although the measure at issue has some characteristics comparable to those of a market valuation procedure carried out by independent asset valuers, such as the one described in Title II, point 2, of the 1997 Communication, it also has, above all, the specific feature of neutralising the effects of an unconditional bidding procedure such as that contemplated in Title II, point 1, of the 1997 Communication.
65.
As I have already observed, the Court has very little information about the method used by the competent local authorities or by the experts designated by the national courts to evaluate the price of land in connection with implementation of the provision at issue or, more specifically, about the market indicators and valuation standards they use. Therefore it is not possible for the Court to establish whether the valuation procedure is inherently capable of satisfying the requirements of its own case-law and the indications in the 1997 Communication.
66.
However, responsibility for carrying out this assessment lies solely with the referring court, while the Court should make every effort to provide guidance on the interpretation of EU law relevant for that purpose. In that regard, it must be pointed out that this assessment must relate not only to the measure at issue itself, but also to its practical application, and the referring court should satisfy itself in particular that the market valuation of the land by the competent local authorities or by the experts designated by the national courts does not lead to a result far removed from the market value. ( )
67.
As I have already stressed, ( ) this assessment depends not only on the method and the valuation standards used but also on the circumstances of each bidding procedure, in particular the number of bids submitted and the structure of the prices offered.
68.
In that regard, it should first of all be observed that the method used for the agricultural market valuation of land can, in itself, in the spirit of Seydaland Vereinigte Agrarbetriebe ( ) and of the updating requirements established by that judgment, be regarded as satisfying those requirements only to the extent that it takes into account the prices offered in the bidding procedure, this consideration of prices being all the more important where the number of bids submitted is itself high.
69.
Indeed, by definition, the prices offered in an open and unconditional bidding procedure in any event provide the most reliable and most up-to-date indication of the market value of a given piece of land. Consequently, the agricultural market value of land can be as close as possible to the market value, ( ) where it has been set by the competent local authorities or by the experts after a bidding procedure, only to the extent that the valuation method takes into account all the prices offered in that procedure.
70.
Next, and as I have already observed, the classification of the measure at issue depends not only on the method used for the agricultural market valuation by the competent local authorities or the national courts, but also on the circumstances particular to each case, in the different situations which could theoretically be envisaged.
71.
Thus, in a first possible situation, the agricultural market valuation estimated by the competent local authorities could be close to the majority of bids submitted in a bidding procedure, and it may be that the highest bid alone is significantly higher than both the other prices offered and the estimated market value. It may be presumed, in this case, that the highest bid is speculative and that the estimated value corresponds to the market price, so that it could be inferred that the application of the measure at issue does not include elements of State aid.
72.
In a second possible situation, the highest bid may be close to all the other bids submitted in a bidding procedure and the agricultural market value estimated by the competent local authorities may alone be significantly lower than all the bids. It is difficult, in such a case, the view can scarcely be taken that the market valuation corresponds to the market price, and it could accordingly be considered that the application of the measure at issue includes elements of State aid.
73.
Consequently, when the competent local authorities and/or the national courts consider whether the conditions for application of the provision at issue have been met and assess whether the highest price offered in a bidding procedure is disproportionate, by comparing it to the agricultural market value they have estimated, they must take account of the circumstances of each case with particular consideration the structure of the prices offered.
74.
It remains for me to discuss the possible situation in which the bidding procedure gives rise to only one offer. In such a case, the method used by the competent local authorities and the national courts for the agricultural market valuation undoubtedly has a decisive influence.
75.
In the assessment which the referring court will have to make in this connection, it could reasonably take into account, by way of comparison, the system for determining land values developed by BVVG itself, the comparative price system (Vergleichspreissystem, VPS), ( ) which the Federal Republic of Germany has taken care to notify to the Commission. ( ) In the event, the Commission, having obtained an expert opinion on the VPS method, ( ) decided that its application ruled out the presence of elements of State aid within the meaning of Article 107(1) TFEU. More precisely, the Commission considered that the VPS method did not confer any advantage on the purchaser of land in so far as it reflected the market value of that land, bearing in mind that that conclusion was limited solely to sales concluded by BVVG in the course of privatisation of agricultural and forestry land in the new Länder in Germany.
76.
The VPS method, which is based on the comparative value method (Vergleichswertverfahren) used by independent valuation experts in Germany, ( ) sets an average sale price by comparing relevant data from a large number of similar past transactions. The relevant data, which relate inter alia to the regional location, situation, size and quality of the land sold, ( ) are compiled in a database which is continuously refreshed with new transactions and other market indicators, at least once a month and more frequently if necessary. ( )
77.
It is by reference to these factors, inter alia, that the referring court must determine whether the measure at issue and its application favour certain undertakings or the production of certain goods within the meaning of Article 107(1) TFEU, bearing in mind that, according to the case-law of the Court, a measure must be regarded as selective even where it concerns a whole economic sector ( ) if it favours undertakings which, in the light of the objective pursued, are in a comparable factual and legal situation ( ) and in so far as it is not justified by the nature or general scheme of the system of which it is part. ( )
78.
The application of the provision at issue is such as to favour professional farmers who, following bidding procedures organised by BVVG in order to sell agricultural land, have the opportunity to acquire it at a price below the highest bid, or even below all the bids submitted.
79.
It follows from all the above arguments that Article 107 TFEU must be interpreted as meaning that a rule of national law such as that at issue in the main proceedings which, for the improvement of agricultural structures, in effect prohibits an emanation of the State from selling agricultural land to the highest bidder in a public call for bids, if the highest bid is grossly disproportionate to the value of the land, can escape classification as State aid only in so far as this value is as close as possible to the market value, which requires inter alia that the prices offered in the bidding procedure are taken into account when the land is valued. It is for the referring court to assess whether such a rule satisfies those requirements and whether its practical application may lead to a price being set that is far removed from the market value, and to draw the appropriate conclusions.
VII – Conclusion
80.
I propose that the Court reply to the Bundesgerichtshof’s question as follows:
Article 107 TFEU must be interpreted as meaning that a rule of national law such as that at issue in the main proceedings which, for the improvement of agricultural structures, in effect prohibits an emanation of the State from selling agricultural land to the highest bidder in a public call for bids, if the highest bid is grossly disproportionate to the value of the land, can escape classification as State aid only in so far as this value is as close as possible to the market value, which requires inter alia that the prices offered in the bidding procedure be taken into account when the land is valued. It is for the referring court to assess whether such a rule satisfies these requirements and whether its practical application may lead to a price being set that is far removed from the market value, and to draw the appropriate conclusions.
( ) Original language: French.
( ) See, very generally, Kadner, T., ‘Die Transformation des Vermögensrechts in Ostdeutschland nach der Wiedervereinigung’, ZEuP, 1997, p. 86; Rohde, G., ‘Grundstückeigentums- und Bodennutzungsrechtsverhältnisse in den neuen Bundesländern nach dem Einigungsvertrag’, DNotZ, 1991, p. 186.
( ) C‑239/09, EU:C:2010:778.
( ) ‘BVVG’.
( ) The Federal body responsible for special tasks connected with German reunification.
( ) ‘the GrdstVG’.
( ) ‘The provision at issue’.
( ) See, inter alia, judgment in Lucchini (C‑119/05, EU:C:2007:434, paragraph 52).
( ) See, inter alia, judgment in Enirisorse (C‑237/04, EU:C:2006:197, paragraph 23) and order in Acanfora (C‑181/13, EU:C:2014:127, paragraph 22).
( ) See, inter alia, judgments in Steinike & Weinlig (78/76, EU:C:1977:52, paragraph 2); Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et transformateurs de saumon (C‑354/90, EU:C:1991:440, paragraphs 8 to 14); and Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C‑143/99, EU:C:2001:598, paragraphs 26 to 29).
( ) See, inter alia, judgments in Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et transformateurs de saumon (EU:C:1991:440, paragraph 12) and SFEI and Others (C‑39/94, EU:C:1996:285, paragraph 40).
( ) See, inter alia, judgment in DM Transport (C‑256/97, EU:C:1999:332, paragraph 15).
( ) See, inter alia, judgments in Fallimento Traghetti del Mediterraneo (C‑140/09, EU:C:2010:335, paragraph 24) and Paint Graphos and Others (C‑78/08 to C‑80/08, EU:C:2011:550, paragraph 36).
( ) OJ 1995 C 312, p. 8.
( ) See also Commission notice of 9 April 2009 on the enforcement of State aid law by national courts (OJ 2009 C 85, p. 1, paragraph 89 et seq.).
( ) See order in Zwartveld and Others (C‑2/88 IMM, EU:C:1990:315, paragraphs 17 and 18).
( ) See, inter alia, judgment in SFEI and Others (EU:C:1996:285, paragraph 50).
( ) See, inter alia, judgments in SFEI and Others (EU:C:1996:285, paragraph 28) and Piaggio (C‑295/97, EU:C:1999:313, paragraphs 29 to 32).
( ) See Article 3 of Commission Regulation (EC) No 1535/2007 of 20 December 2007 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid in the sector of agricultural production (OJ 2007 L 337, p. 35). However, the second subparagraph of Article 4(1) of this regulation states that where the de minimis ceiling laid down in Article 3(2) of the regulation is exceeded (EUR 7500 granted to any one undertaking over any period of three fiscal years), the Member State concerned shall ensure that the aid measure leading to the ceiling being exceeded is notified to the Commission or recovered from the beneficiary. In accordance with the second paragraph of Article 7 of the regulation, it applied from 1 January 2008 to 31 December 2013. It was replaced by Commission Regulation (EU) No 1408/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in the agriculture sector (OJ 2013 L 352, p. 9), which came into force on 1 January 2014. This new regulation, apart from amending the de minimis ceiling, provides in Article 6 for a new monitoring mechanism, which no longer includes the notification requirement provided for in the second subparagraph of Article 4(1) of Regulation No 1535/2007.
( ) See Article 3(2) of Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (OJ 1998 L 142, p. 1).
( ) See Article 1(3) of Council Regulation (EU) No 733/2013 of 22 July 2013 amending Regulation (EC) No 994/98 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (OJ 2013 L 204, p. 11), amending inter alia Article 3(2) of Regulation No 994/98.
( ) Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 (OJ 2006 L 358, p. 3); that regulation was repealed by Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union (OJ 2014 L 193, p. 1), which has been in force since 1 July 2014.
( ) See, inter alia, Schramm, L., ‘Probleme der Grundstücksverkehrsgenehmigung und des siedlungsrechtlichen Vorkaufsrechts in den neuen Bundesländern’, NL-BzAR, 2005, No 8, p. 322.
( ) ‘The measure at issue’.
( ) Judgment of 27 November 2009 (BLw 4/09, NJW-RR 2010, 886, No 12).
( ) See judgment of the Bundesgerichtshof of 27 April 2001 (BLw 14/00, NJW-RR 2001, 1021), cited by the German Government.
( ) See point 11 of this Opinion.
( ) See, inter alia, judgments in Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, EU:C:2003:415, paragraphs 74 and 75) and Libert and Others (C‑197/11 and C‑203/11, EU:C:2013:288, paragraph 74).
( ) See, inter alia, judgments in van Tiggele (82/77, EU:C:1978:10, paragraphs 24 and 25) and PreussenElektra (C‑379/98, EU:C:2001:160, paragraph 58).
( ) See, inter alia, judgments in Banco Exterior de España (C‑387/92, EU:C:1994:100, paragraph 13); SFEI and Others (EU:C:1996:285, paragraph 58); Seydaland Vereinigte Agrarbetriebe (EU:C:2010:778, paragraph 30); and Eventech (C‑518/13, EU:C:2015:9, paragraph 33).
( ) See, inter alia, judgment in Eventech (EU:C:2015:9, paragraph 34).
( ) See points 11 and 20 of this Opinion.
( ) See, inter alia, judgment in Heiser (C‑172/03, EU:C:2005:130, paragraph 46).
( ) Judgment in Seydaland Vereinigte Agrarbetriebe (EU:C:2010:778, paragraph 31).
( ) See judgments in Commission v Scott (C‑290/07 P, EU:C:2010:480, paragraph 68) and Seydaland Vereinigte Agrarbetriebe (EU:C:2010:778, paragraph 34).
( ) See judgment in Seydaland Vereinigte Agrarbetriebe (EU:C:2010:778, paragraph 35).
( ) See, inter alia, a contrario, judgment in Eventech (EU:C:2015:9, paragraph 44).
( ) OJ 1997 C 209, p. 3, ‘the 1997 Communication’.
( ) See points 53 and 54 of this Opinion.
( ) EU:C:2010:778.
( ) See paragraphs 35 and 48.
( ) Paragraph 39.
( ) See paragraph 43.
( ) See judgment in Seydaland Vereinigte Agrarbetriebe (EU:C:2010:778, paragraph 52).
( ) See point 40 of this Opinion.
( ) EU:C:2010:778, paragraph 43.
( ) Seydaland Vereinigte Agrarbetriebe (EU:C:2010:778, paragraph 35).
( ) ‘The VPS method’.
( ) Commission Decision C(2012) 9457 of 19 December 2012 on a proposed alternative method for the valuation of agricultural and forestry land in Germany sold by the public agency BVVG (http://ec.europa.eu/competition/state_aid/cases/246093/246093_1396874_125_2.pdf).
( ) See points 21 to 23 of the decision, where it is explained that the expert whose opinion had been sought had to ascertain whether the VPS method was a suitable way to establish the market value of agricultural and forestry land and was based on commonly recognised valuation principles, in accordance with Title II, point 2(a), of the 1997 Communication.
( ) The valuation standards in this instance are laid down in the Allgemeine Grundsätze der Immobilienwertermittlungsverordnung (‘ImmoWertV’); see point 28 of the decision.
( ) See points 17 and 29 of the decision.
( ) See point 32 of the decision.
( ) See, inter alia, judgment in Unicredito Italiano (C‑148/04, EU:C:2005:774, paragraph 45).
( ) See, inter alia, judgments in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (EU:C:2001:598, paragraph 41); GIL Insurance and Others (C‑308/01, EU:C:2004:252, paragraph 68); Heiser (EU:C:2005:130, paragraph 40); and Eventech (EU:C:2015:9, paragraph 55).
( ) See, inter alia, judgment in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (EU:C:2001:598, paragraph 42). |
OPINION OF ADVOCATE GENERAL
CRUZ VILLALÓN
delivered on 23 April 2015 ( )
Case C‑110/14
Horațiu Ovidiu Costea
v
SC Volksbank România SA
(Request for a preliminary ruling from the Judecătoria Oradea (Romania))
‛Consumer protection — Definition of consumer within the meaning of Article 2(b) of Directive 93/13/EEC — Credit agreement concluded by a natural person who practises as a lawyer — Loan secured on a building owned by the borrower’s law firm — Effect of knowledge and profession on the status of consumer — Determination of the purpose of the loan — Dual purpose contracts within the meaning of recital 17 in the preamble to Directive 2011/83/EU — Effect of an ancillary contract on the principal contract’
1.
The present request for a preliminary ruling from the Judecătoria Oradea (Romania) provides the Court with the opportunity to rule on the definition of consumer within the meaning of Article 2(b) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (‘the Directive’), ( ) pursuant to which a ‘consumer’ is any natural person who, in contracts covered by the Directive, is acting for purposes which are outside his trade, business or profession.
2.
Although judicial interpretations of the term ‘consumer’ have been provided in a number of areas of EU law, the concept has so far not been developed exhaustively in the case-law relating to the specific area of the Directive, ( ) the interpretation of which is sought in the present case. In particular, the unusual feature of this case is that it questions whether a legal professional may be regarded as a consumer when he concludes a credit agreement secured on immovable property owned by his law firm. The question thus arises, on the one hand, of the effect of the particular skills and knowledge of a person on his status as a consumer and, on the other hand, of the effect of that person’s role in an ancillary security agreement on his status as a consumer in a principal credit agreement.
I – Legislative framework
A – EU law
3.
The fifth, tenth and sixteenth recitals in the preamble to the Directive are worded as follows:
‘(5)
Whereas, generally speaking, consumers do not know the rules of law which, in Member States other than their own, govern contracts for the sale of goods or services; whereas this lack of awareness may deter them from direct transactions for the purchase of goods or services in another Member State;
…
(10)
Whereas more effective protection of the consumer can be achieved by adopting uniform rules of law in the matter of unfair terms; whereas those rules should apply to all contracts concluded between sellers or suppliers and consumers; whereas as a result inter alia contracts relating to employment, contracts relating to succession rights, contracts relating to rights under family law and contracts relating to the incorporation and organization of companies or partnership agreements must be excluded from this Directive;
…
(16)
Whereas the assessment, according to the general criteria chosen, of the unfair character of terms, in particular in sale or supply activities of a public nature providing collective services which take account of solidarity among users, must be supplemented by a means of making an overall evaluation of the different interests involved; whereas this constitutes the requirement of good faith; whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or supplier where he deals fairly and equitably with the other party whose legitimate interests he has to take into account’.
4.
Article 1(1) of Directive 93/13 provides that the purpose of the Directive is ‘to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer’.
5.
Article 2 of the Directive defines the terms ‘consumer’ and ‘seller or supplier’. According to that provision, ‘[f]or the purposes of this Directive:
…
(b)
“consumer” means any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession;
(c)
“seller or supplier” means any natural or legal person who, in contracts covered by this Directive, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned’.
B – Romanian law
6.
Article 2 of Law No 193/2000 on unfair terms in contracts concluded between consumers and traders (Legea privind clauzele abuzive din contractele încheiate între comercianţi şi consumatori), in the version in force on the date when the credit agreement at issue in the main proceedings was concluded, reads as follows:
‘1. “Consumer” means any natural person (or group of natural persons forming an association) who, on the basis of a contract covered by this law, is acting for purposes that are outside his trade, business, industry or profession.
2. “Trader” means any natural person or duly authorised legal person who, on the basis of a contract covered by this law, is acting for purposes that relate to his trade, business, industry or profession, as well as any other person acting for those purposes for and on behalf of that person.’
II – Main proceedings and question referred for a preliminary ruling
7.
The present reference for a preliminary ruling arises in the context of civil proceedings between Mr Costea, the applicant, and SC Volksbank România SA (‘Volksbank’), the defendant, in which a declaratory judgment is sought from the Judecătoria Oradea (Romania), a civil court of first instance.
8.
The applicant, Mr Costea, is a lawyer practising in the field of commercial law. In 2008, Mr Costea entered into a credit agreement with Volksbank (‘the disputed agreement’). According to the order for reference, that agreement was also signed by the law firm ‘Costea Ovidiu’ in its capacity as mortgage guarantor. On the same date as the credit agreement, an agreement was also concluded pursuant to which the law firm ‘Costea Ovidiu’, as the owner of the building, agreed with Volksbank the security for repayment of the loan referred to above (‘the security agreement’). The law firm ‘Costea Ovidiu’ was represented for those purposes by Mr Costea. It is that fact which drew the attention of the defendant bank to the borrower’s profession.
9.
On 24 May 2013, Mr Costea lodged the application in the main proceedings against Volksbank, seeking a declaration that the term relating to the ‘risk charge’, set out in paragraph 5(a) of the credit agreement, is unfair, ( ) and also seeking reimbursement of the amounts received by the bank in respect of that charge. Mr Costea bases his claims on his status as a consumer, relying on the provisions of Law No 193/2000 which transposes the Directive into Romanian law. In particular, Mr Costea submits that the ‘risk charge’ term was not negotiated and was instead imposed unilaterally by the bank. The applicant concludes from this that the term is unfair and further submits that the mortgage guarantee attached to the loan eliminated that risk. The order for reference does not discuss the subject-matter of the term or its possible unfairness. ( )
10.
The Judecătoria Oradea took the view that an interpretation of Article 2(b) of the Directive is necessary in order to dispose of the main proceedings and it therefore referred the following question to the Court for a preliminary ruling:
‘Must Article 2(b) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts be interpreted as including in, or as excluding from, the definition of “consumer” a natural person who practises as a lawyer and concludes a credit agreement with a bank, in which the purpose of the credit concerned is not specified, when in that agreement that natural person’s law firm is stated to be the guarantor for the mortgage?’
11.
Written observations were lodged in the proceedings before the Court by SC Volksbank România, the Romanian Government, the Italian Government, the Netherlands Government and the European Commission. At the hearing, held on 28 January 2015, the parties were invited to concentrate in their submissions on the effect of the ancillary security agreement on the status of consumer and on the usefulness, in the context of the present case, of the information about dual purpose contracts contained in recital 17 in the preamble to Directive 2011/83/EU. ( ) Oral argument was presented by Mr Costea, the Romanian Government and the European Commission.
III – Preliminary remarks
12.
As a preliminary point, it should be noted that, whereas in the order for reference the national court states that the purpose of the loan is not indicated anywhere in the wording of the agreement, both the Romanian Government and the Commission state in their written observations that the disputed agreement includes a term identifying the purpose of the agreement, which states that the loan was granted to ‘cover personal current expenditure’. That fact is not disputed by Volksbank, and it was confirmed at the hearing by Mr Costea.
13.
In that regard, notwithstanding the fact that the national court refers in its question to a situation where the purpose of the credit is not specified, I believe that the discrepancy between the order for reference and the observations submitted to the Court cannot preclude the Court from providing a useful reply to the question referred for a preliminary ruling.
14.
According to settled case-law, questions on the interpretation of EU law referred by a national court in the factual and legislative context which that court is responsible for defining, and the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ( )
15.
In addition, as regards, specifically, the alleged omissions and factual errors in the order for reference, it is settled case-law that it is not for the Court of Justice but for the national court to ascertain the facts which have given rise to the dispute and to establish the consequences which they have for the judgment which it is required to deliver. ( )
16.
In the present case, the question has been referred for a preliminary ruling in the context of a specific dispute the outcome of which depends on the interpretation of the term ‘consumer’ in the Directive. In addition, the order for reference contains sufficient material to enable the Court to provide the national court with a useful answer.
IV – Analysis
17.
Bearing in mind the relevant factors which will enable a useful answer to be provided to the question referred for a preliminary ruling by the national court, on which the observations of the participants have also focused, my analysis will entail an examination of the concept of consumer in the Directive and also of the effect of other factors on that concept, such as the reference to dual purpose contracts in Directive 2011/83 and the relationship between the principal agreement (the credit agreement) and the security agreement.
A – The concept of consumer in Directive 93/13
18.
The concept of consumer appears across many fields of EU law, beyond the specific instruments on the approximation of laws on consumer protection; examples are the fields of competition law, ( ) judicial cooperation in civil matters, ( ) the common agricultural and fisheries policies, ( ) and other fields where measures to approximate laws exist. ( ) In that regard, the many instruments of secondary law aimed at consumer protection do not provide an unambiguous conception of the term ‘consumer’ either. ( ) It is, therefore, a notion which is present in many areas of the European Union’s legislative activity but one which has not been specifically defined in primary law, ( ) and its application as a category for identifying certain persons is not monolithic but is altered by each of the relevant instruments of secondary law. Thus, the notion of consumer is not defined uniformly in all instruments, which belong to different spheres and have different objectives: it is a working, dynamic notion, which is defined by reference to the subject-matter of the legislative act concerned. ( )
19.
In the present case, the Court is required to interpret the term ‘consumer’ in the context of Directive 93/13. It is clear that the starting point for carrying out that task must be the wording of Article 2(b) of the Directive, which sets out the definition of consumer.
20.
It is apparent from that provision that, for the purposes of the definition of consumer and the definition of seller or supplier, the sphere in which the individual concerned acts is relevant. Thus, Article 2(b) of the Directive provides that a consumer is ‘any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession’. By contrast, according to Article 2(c), a seller or supplier is ‘any natural or legal person who, in contracts covered by this Directive, is acting for purposes relating to his trade, business or profession …’
21.
In that connection, the case-law of the Court has made clear that the contrast between the concepts of seller or supplier and consumer does not operate in completely symmetrical terms (not everyone who cannot be regarded as a seller or supplier is a consumer), since, in particular, a legal person cannot be regarded as a consumer within the meaning of Article 2 of the Directive. ( ) In the present case, there is no doubt that Mr Costea concluded the credit agreement in his capacity as a natural person and not as the representative of his law firm.
22.
The uncertainty surrounding Mr Costea’s status as a consumer, which is the reason for the question referred for a preliminary ruling, stems from the fact that Mr Costea is a lawyer by profession. All the participants who submitted written observations and presented oral argument, with the exception of Volksbank, take the view that the profession practised by a natural person has no bearing when it comes to assessing whether a person may be regarded as a consumer within the meaning of Article 2(b) of the Directive. However, Volksbank states that, in order to be able to regard a person as a consumer, in addition to finding that an objective criterion is satisfied — resulting from the wording of Article 2(b) of the Directive — a subjective criterion must also be satisfied, relating to the spirit of the Directive, which is to protect the consumer as the weaker party who is generally not aware of the statutory provisions. Thus, according to Volksbank, the presumption that a consumer is in a position of inequality may be rebutted if that consumer is found to have the experience and information necessary to protect himself on his own.
23.
Taking into account the wording of the definition in Article 2(b) of the Directive, interpreted systematically in conjunction with the other provisions of the Directive, and in the light of the judicial interpretation of the concept of consumer in other instruments of EU law, I believe that Volksbank’s reasoning cannot be accepted.
24.
The central element of the notion of consumer, as defined in the Directive, is an element which can be clearly circumscribed: the position held by the contracting party in the legal transaction in question. In that connection, as pointed out in Asbeek Brusse and de Man Garabito, it is necessary to take into consideration the fact that ‘[i]t is … by reference to the capacity of the contracting parties, according to whether or not they are acting for purposes relating to their trade, business or profession, that the directive defines the contracts to which it applies.’ ( )
25.
The emphasis on the sphere of activity in which the transaction concerned takes place as a factor determining the status of consumer is also confirmed by the case-law of the Court on other instruments relating to consumer protection, which contain definitions of the term ‘consumer’ similar to that in Article 2(b) of the Directive. Thus, in Di Pinto, ( ) with regard to the interpretation of the concept of consumer in the context of Directive 85/577/EEC, ( ) the Court pointed out that the criterion for the application of protection lay in the connection between the transactions which were the subject of the canvassing of traders — aimed at inducing the conclusion of an advertising contract concerning the sale of a business — and the professional activity of the trader concerned, so that the latter could claim that the directive was applicable only if the transaction in respect of which he was canvassed lay outside his trade or profession. ( )
26.
Thus, the wording of the Directive and the case-law interpreting that instrument and Directive 85/577 appear to opt for a concept of consumer which is both objective and functional; therefore, as regards a specific person, it is not an inherent, unalterable category, ( ) but is, on the contrary, a quality which may be assessed by reference to a person’s status in relation to a particular legal transaction or operation, among the many which he may carry out in his daily life. As Advocate General Mischo observed in Di Pinto, as regards the concept of consumer in the context of Article 2 of Directive 85/577, the persons referred to in that provision ‘are not defined in abstracto, but rather according to what they do in concreto’, so that the same person, in different circumstances may be sometimes a consumer and sometimes a seller or supplier. ( )
27.
That conception of a consumer as an actor in a specific legal transaction, which entails both objective and functional elements as the case may be, is also confirmed in the context of the Brussels Convention, a context in which the Court has also interpreted the term ‘consumer’; however, as I shall point out below, the analogy must be qualified when interpreting the Directive, taking account of the different objectives of the two measures. Thus, in Benincasa, ( ) the Court held that, in order to determine whether a person has the capacity of a consumer, ‘reference must be made to the position of the person concerned in a particular contract, having regard to the nature and aim of that contract, and not to the subjective situation of the person concerned. … [T]he self-same person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others.’ ( )
28.
In short, this is an objective and functional definition which is satisfied on the basis of a single criterion: the legal transaction in particular must form part of activities which are outside a person’s trade, business or profession. As the Romanian Government has observed, the Directive does not lay down any additional criteria for establishing the status of consumer. It is, moreover, a concept which is defined from a situational perspective, in other words, in relation to a specific legal transaction. ( ) Accordingly, no one can be deprived of the possibility of being treated as a consumer in relation to a contract which is outside his trade, business or profession by reason of his general knowledge or his occupation, and instead regard must be had exclusively to his position vis-à-vis a specific legal transaction.
29.
That conclusion is not called into question by Volksbank’s submissions based on the spirit of the Directive, referring, in particular, to a number of recitals in the preamble to the Directive. ( ) Taking a systematic approach to the Directive, the idea that the consumer is vulnerable and in a weak position as regards both his bargaining power and his level of knowledge is the rationale for the Directive, since it is based on a situation in which a consumer agrees to terms drawn up in advance by the seller or supplier without being able to influence the content of those terms. ( ) However, those notions of vulnerability and weakness, which generally underlie EU consumer protection law as a whole, ( ) were not given concrete form in the legislative expression of the concept of consumer as necessary conditions through its definition in positive law. Thus, neither the definition of consumer nor any other provisions of the Directive make the existence of the status of consumer in a particular situation subject to a lack of knowledge, a lack of information or a genuine position of weakness.
30.
It would undermine the practical effect of the Directive if it were possible to call into question the status of consumer in each individual case, based on factors related to the experience, education, occupation and even the intelligence of the consumer. In particular, lawyers (or those with a law degree, and other professionals) would be deprived of protection in many aspects of their private affairs. As the Romanian Government points out, even where the level of knowledge of the person in question may be comparable to that of the lender, that does not alter the fact that his bargaining power is the same as that of any other natural person vis-à-vis a seller or supplier.
31.
The Court held in Šiba ( ) that ‘[l]awyers display a high level of technical knowledge which consumers may not have’. ( ) However, those considerations referred to a situation in which the lawyer in question ‘provides a legal service for a fee, in the course of his professional activities, to a natural person acting for private purposes’ and is, therefore, a seller or supplier within the meaning of Article 2(c) of the Directive. ( )
32.
Further, an interpretation of the kind proposed by Volksbank would result in all persons who had legal advice or professional advice of another kind when the contract was concluded being denied the status of consumer. ( )
33.
In addition, the effect of the knowledge or specific situation of the person concerned has been rejected by the Court in areas distinct from that of the Directive, when the objective requirement that the activity must be outside the trade, business or profession of the person concerned was not satisfied. That occurred in relation to Directive 85/577, with regard to which the judgment in Di Pinto shows that where a person acts in the context of his trade, business or profession a genuine lack of knowledge in the particular case does not detract from his status as a seller or supplier. ( )
34.
In conclusion, I believe that the concept of consumer, within the meaning of Article 2(b) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, must be interpreted as including a natural person who practises as a lawyer and concludes a credit agreement with a bank, where a building owned by his law firm is also covered by that agreement as mortgage security, when, in the light of the evidence available to the national court, it emerges that that person acted for purposes outside his trade, business or profession.
B – The concept of consumer in relation to dual purpose contracts
35.
In addition to the foregoing considerations, I believe that, in order to reply to the question referred for a preliminary ruling, it is helpful to discuss so-called ‘dual purpose contracts’, in particular in so far as that question refers expressly to a contract in which the purpose of the credit is not specified.
36.
In that connection, the Romanian Government and the Netherlands Government have pointed to the usefulness of the judgment in Gruber when it comes to determining whether Mr Costea is a consumer in the present case. ( ) For its part, the European Commission drew attention in its written observations and at the hearing to the relevance of recital 17 in the preamble to Directive 2011/83. That recital and the Gruber judgment both refer to dual purpose contracts in different contexts.
37.
The criteria for determining whether a contract comes within the private sphere or the trade or professional sphere are different in Gruber and Directive 2011/83. As I shall point out below, I believe that the criterion in Directive 2011/83 is the relevant criterion in the circumstances of the present case.
38.
In Gruber, ( ) the Court opted for a strict interpretation of the term ‘consumer’ in situations relating to dual purpose contracts. That interpretation makes paramount the criterion of marginality: a person may not rely on the special rules of jurisdiction relating to consumers laid down in the Brussels Convention ‘unless the trade or professional purpose is so limited as to be negligible in the overall context of the supply, the fact that the private element is predominant being irrelevant in that respect’. ( ) The Court also held in that context that the burden of proof rests with the person wishing to rely on Articles 13 to 15 of the Convention. ( )
39.
Recital 17 in the preamble to Directive 2011/83, which is worded quite differently, opts for a criterion based on the predominant purpose: ‘in the case of dual purpose contracts, where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is so limited as not to be predominant in the overall context of the contract, that person should also be considered as a consumer’.
40.
Thus, whereas, according to the criterion of marginality laid down in Gruber, use for a trade or professional purpose must be so limited that it may be regarded as negligible in order for a contract to fall within the private sphere, Directive 2011/83 opts for a more balanced solution, using the criterion of the predominant purpose in the overall context of the contract.
41.
As the European Commission stated at the hearing, the application of the Gruber case-law in connection with the interpretation of the Directive should be treated with caution. The case-law of the Court interpreting the concept of consumer in the context of Article 13 of the Brussels Convention and Article 15 of Regulation No 44/2001 emphasises a restrictive approach, which undoubtedly takes into consideration the fact that those provisions involve exceptions to the general criterion of jurisdiction based on the defendant’s domicile and, therefore, must be interpreted strictly. ( ) Thus, it does not appear that it is possible to transfer by analogy the restrictive application of the concept of consumer in dual purpose contracts to the context of special provisions aimed at the protection of consumers, such as the Directive. ( )
42.
In addition, the difference between the approach in recital 17 in the preamble to Directive 2011/83 and that taken in Gruber is no coincidence. During the negotiations on that directive, the European Parliament introduced an amendment which expressly proposed the alteration of the definition of consumer so as to widen it to ‘any natural person who … is acting for purposes which are primarily outside his trade, business, craft or profession. ( ) During the subsequent negotiations, the European Parliament agreed to retain the definition of consumer, removing the adverb primarily, on condition that in the recital clarifying the definition of consumer, which was originally based on the Gruber judgment, ( ) the word ‘limited’ was replaced by the word ‘predominant’. ( )
43.
In short, in the light of the different functions of the concept of consumer in the different legislative acts and of the finding which is clear from the preparatory documents, I believe that recital 17 in the preamble to Directive 2011/83 enshrines the criterion of the predominant purpose in the overall context of the contract.
44.
As far as the present case is concerned, I, like the Romanian Government and the Commission, incline to the view that recourse to the explanation provided in recital 17 in the preamble to Directive 2011/83 for the purpose of interpreting the concept of consumer is also required in the context of the Directive. That conclusion is justified in the light of the shared objective and the clear link between the two instruments. In that connection, Directive 2011/83 is a measure amending the Directive. ( ) Moreover, the wording of the definition of consumer in those two provisions is almost identical, the sole difference being that, whereas the Directive refers only to ‘trade, business or profession’, Directive 2011/83 refers to ‘trade, business, craft or profession’.
45.
Accordingly, in order to ascertain whether a person may be regarded as a consumer for the purposes of the Directive in circumstances in which there is evidence that the contract at issue pursues a dual purpose, so that it is not clear that that contract was concluded exclusively for either a private purpose or a trade or professional purpose, the criterion of the predominant purpose provides a tool for establishing, through an examination of the totality of the circumstances surrounding the contract at issue — beyond a purely quantitative criterion — ( ) and an assessment of the objective evidence available to the national court, the extent to which the trade or professional purpose or the private purpose is predominant in relation to a particular contract.
46.
Although the European Commission and Mr Costea stated at the hearing that the account of the facts provided by the national court does not reveal any evidence suggesting that the agreement at issue is a dual purpose contract, it is for the referring court to clarify the factual situation in relation to the purpose of the loan by means of the evidence available to it, which undoubtedly includes the terms contained in the agreement itself, the subject-matter of which may well underpin the presumption that the loan in question is intended for private purposes.
47.
In conclusion, I believe that if the national court takes the view that it is not clear that a contract was concluded exclusively with either a private purpose or a trade or professional purpose, the contracting party in question must be regarded as a consumer if the trade or professional purpose is not predominant in the overall context of the contract, having regard to the totality of the circumstances and an assessment of the objective evidence available to the national court, which it is for that court to evaluate.
C – The relationship between the principal agreement and the ancillary agreement
48.
Finally, it remains to be established whether the classification of Mr Costea’s status as that of consumer may be affected by the fact that the principal credit agreement was secured on a building which is used for the borrower’s professional activity.
49.
In that connection, the observations submitted by both the Romanian Government and the Commission contend that the security agreement does not affect the credit agreement. Those observations, and Mr Costea’s observations at the hearing, pointed out that the law firm ‘Costea Ovidiu’ has the status of third party in relation to the credit agreement, observing that the mere fact that a building owned by the firm constitutes security for the credit agreement does not mean that that firm becomes a party to the credit agreement.
50.
Taking the same view as that put forward in the observations submitted to the Court, I believe that there are two distinct legal relationships: on the one hand, the relationship between Mr Costea, as a natural person — in his capacity as borrower — and the bank, and, on the other hand, the relationship between the law firm ‘Costea Ovidiu’ — as mortgage guarantor — and the bank. The two legal relationships must be considered separately, so that the latter — which, moreover, is ancillary in nature — does not affect the nature of the former.
51.
In that regard, the case-law of the Court offers some guidance on the relationship between contracts which may be regarded as ancillary and the respective principal contracts, in the context of both Directive 85/577 and Regulation No 44/2001. Thus, as regards Directive 85/577, the Court held in Dietzinger ( ) that, in view of the ancillary nature of contracts of guarantee, ‘on a proper construction of the first indent of Article 2 of Directive 85/577 [which contains the definition of consumer], a contract of guarantee concluded by a natural person who is not acting in the course of his trade or profession does not come within the scope of the directive where it guarantees repayment of a debt contracted by another person who, for his part, is acting within the course of his trade or profession’. ( ) The Court took the same view when interpreting Article 15(1) of Regulation No 44/2001, holding in Česká spořitelna ( ) that that provision ‘must be interpreted as meaning that a natural person with close professional links to a company, such as its managing director or majority shareholder, cannot be considered to be a consumer within the meaning of that provision when he gives an aval on a promissory note issued in order to guarantee the obligations of that company under a contract for the grant of credit.’ ( )
52.
However, the case before the Court involves the opposite situation. Any professional aspect applies only to the ancillary agreement, in so far as Mr Costea signed the security agreement as the legal representative of his law firm. Accordingly, unlike in Dietzinger and Česká spořitelna, this case does not involve the application of the maxim accessorium sequitur principale, in the sense that the effects of the ancillary agreement must suffer the same fate as those of the principal agreement, but rather it is necessary to take into account the individual nature of each of these legal relationships in order to be able to identify the different functions which the same person performs in them. The decisive point for the purposes of the present case is not to establish Mr Costea’s status as legal representative in the security agreement, which is the ancillary agreement, but rather to ascertain what his position is in the credit agreement, which is the principal agreement.
53.
Thus, the fact that Mr Costea signed the security agreement as the representative of the law firm does not adversely affect Mr Costea’s status as a consumer in relation to the principal credit agreement. On the contrary, based on the case-law cited, it could even be argued that the ancillary security agreement comes under the influence of the principal agreement. ( )
54.
For the reasons set out above, I believe that the role of a natural person, in his capacity as the legal representative of his law firm, in the conclusion of an ancillary security agreement does not affect his status as a consumer in relation to a principal credit agreement.
V – Conclusion
55.
In the light of the foregoing considerations, I propose that the Court reply as follows to the question referred for a preliminary ruling by the Judecătoria Oradea:
‘The concept of consumer, within the meaning of Article 2(b) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, must be interpreted as including a natural person who practises as a lawyer and concludes a credit agreement with a bank, where a building owned by his own law firm is also covered by that agreement as mortgage security, when, in the light of the evidence available to the national court, it emerges that that person acted for purposes outside his trade, business or profession.
If the national court takes the view that it is not clear that a contract was concluded exclusively with either a private purpose or a trade or professional purpose, the contracting party in question must be regarded as a consumer if the trade or professional purpose is not predominant in the overall context of the contract, having regard to the totality of the circumstances and an assessment of the objective evidence available to the national court, which it is for that court to evaluate.
The role of a natural person, in his capacity as the legal representative of his own law firm, in the conclusion of an ancillary security agreement does not affect his status as a consumer in relation to a principal credit agreement.’
( ) Original language: Spanish.
( ) OJ 1993 L 95, p. 29.
( ) The Court interpreted that concept in relation to Directive 93/13/EEC in Cape and Idealservice MN RE (C‑541/99 and C‑542/99, EU:C:2001:625).
( ) It is apparent from the documents in the case-file that the term in question is included in the ‘special conditions’ section of the agreement and is headed ‘risk charge’; that charge amounts to 0.22% of the balance of the loan and must be paid monthly on the instalment dates throughout the term of the agreement.
( ) Volksbank’s practice of including ‘risk charge’ terms in credit agreements has led to a number of cases before the Court of Justice. In SC Volksbank România (C‑602/10, EU:C:2012:443), the Court held that Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/12/EEC (OJ 2008 L 133, p. 66) must be interpreted as not precluding a national measure (in that case, Government Emergency Order 50/2010, Monitorul Oficial al României, Part I, No 389, of 11 June 2010) designed to transpose that directive into domestic law from including in its material scope credit agreements concerning the grant of credit secured by immovable property, even though such agreements are expressly excluded from the material scope of the directive. The Romanian courts have sought preliminary rulings in five other cases which were, however, subsequently removed from the register after the withdrawal of the requests for a preliminary ruling (orders in SC Volksbank România (C‑47/11, EU:C:2012:572); in SC Volksbank România (C‑571/11, EU:C:2012:726); in SC Volksbank România (C‑108/12, EU:C:2013:658); in SC Volksbank România (C‑123/12, EU:C:2013:460); and in SC Volksbank România (C‑236/12, EU:C:2014:241). In Matei (C‑143/13, EU:C:2015:127), the Court had the opportunity to interpret Article 4(2) of Directive 93/13 in relation to certain terms included in credit agreements concluded between a seller or supplier and consumers, which provide for a ‘risk charge’.
( ) Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/CE of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (OJ 2011 L 304, p. 64).
( ) See, inter alia, Melki and Abdeli (C‑188/10 and C‑189/10, EU:C:2010:363, paragraph 27 and the case-law cited).
( ) See, for example, Traum (C‑492/13, EU:C:2014:2267, paragraph 19), and PreussenElektra (C‑379/98, EU:C:2001:160, paragraph 40).
( ) Articles 102(b) TFEU and 107(2)(a) TFEU.
( ) Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (OJ 1972 L 299, p. 32), Article 13, and Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L 12, p. 1), Article 15.
( ) Articles 39(1)(c) TFEU and 40(2) TFEU.
( ) For example, see Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) (OJ 2000 L 178, p. 1).
( ) However, the term ‘consumer’ was defined similarly, but not identically, in certain instruments, such as Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31) and Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (OJ 1997 L 144, p. 19) — both of which were repealed by Directive 2011/83 — and also in Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (OJ 1990 L 158, p. 59) and Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (OJ 2005 L 149, p. 22). Moreover, the latter takes as a benchmark the concept of the ‘average consumer’, who, in line with the interpretation of the Court of Justice, ‘is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors …’ (recital 18). For a comparison of the concept of consumer in the different instruments, see M. Ebers, ‘The notion of “consumer”’, Consumer Law Compendium, www.eu-consumer-law.org.
( ) On the different functions of the notion of consumer, see K. Mortelmans and S. Watson, ‘The Notion of Consumer in Community Law: A Lottery?’, in J. Lonbay (ed.), Enhancing the Legal Position of the European Consumer, BIICL, 1996, pp. 36 to 57.
( ) M. Tenreiro, ‘Un code de la consommation ou un code autour du consommateur? Quelques réflexions critiques sur la codification et la notion du consommateur’, in L. Krämer, H.-W. Micklitz y K. Tonner (eds.), Law and diffuse Interests in the European Legal Order. Liber amicorum Norbert Reich, p. 349.
( ) Cape and Idealservice MN RE (C‑541/99 and C‑542/99, EU:C:2001:625, paragraph 16).
( ) C‑488/11, EU:C:2013:341, paragraph 30.
( ) C‑361/89, EU:C:1991:118.
( ) Directive repealed by Directive 2011/83/EU, Article 2 of which defined ‘consumer’ as ‘a natural person who, in transactions covered by this Directive, is acting for purposes which can be regarded as outside his trade or profession’.
( ) Di Pinto (C‑361/89, EU:C:1991:118, paragraph 15).
( ) In the words of Advocate General Jacobs, ‘[t]here is no personal status of consumer or non-consumer; what counts is the capacity in which the customer was acting in entering into the particular contract’. Opinion in Gruber (C‑464/01, EU:C:2004:529, point 34).
( ) Opinion of Advocate General Mischo in Di Pinto (C‑361/89, EU:C:1990:462, point 19). In that case, the Advocate General proposed that a trader who is canvassed in connection with the sale of his business should have the status of consumer. The Court did not follow that guidance.
( ) C‑269/95, EU:C:1997:337.
( ) Ibid., paragraph 16. In conclusion, the Court declared that ‘a plaintiff who has concluded a contract with a view to pursuing a trade or profession, not at the present time but in the future, may not be regarded as a consumer’ (paragraph 19). The Advocate General took the same view, stating that ‘[i]t is precisely the activity in question — and not, I emphasize, the existing personal circumstances of the party to the agreement — which was the factor taken into account when special rules of jurisdiction in relation to certain contracts were laid down in Article 13 of the Convention.’ Opinion of Advocate General Ruiz-Jarabo Colomer, point 49.
( ) F. Denkinger, Der Verbraucherbegriff, De Gruyter Recht, Berlin, 2007, p. 287 et seq.
( ) Inter alia, recitals 4 to 6, 8 to 10, 12, 16 and 24.
( ) Asbeek Brusse and de Man Garabito (C‑488/11, EU:C:2013:341, paragraph 31), and Banco Español de Crédito (C‑618/10, EU:C:2012:349, paragraph 39, and the case-law cited).
( ) See, in that connection, the ‘Preliminary programme of the European Economic Community for a consumer protection and information policy’, 1975 (OJ 1975 C 92, p. 1), and the Council Resolution of 19 May 1981 on a second programme of the European Economic Community for a consumer protection and information policy (OJ 1981 C 133, p. 1).
( ) C‑537/13, EU:C:2015:14.
( ) Ibid., paragraph 23.
( ) Ibid., paragraph 24.
( ) In that regard, it should be recalled that the Court held in Rampion and Godard (C‑429/05, EU:C:2007:575, paragraph 65), that the fact that a person was represented by a lawyer does not affect the interpretation of Article 11(2) of Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit (OJ 1987 L 42, p. 48), according to which that provision may be applied by the national court of its own motion.
( ) Thus, the Court held that ‘[t]here is every reason to believe that a normally well-informed trader is aware of the value of his business and that of every measure required by its sale, with the result that, if he enters into an undertaking, it cannot be through lack of forethought and solely under the influence of surprise’, Di Pinto (C‑361/89, EU:C:1991:118, paragraph 18).
( ) Gruber (C‑464/01, EU:C:2005:32) was a case concerning the purchase of tiles and the tiling of a farm building in which Mr Gruber also had his family home.
( ) C‑464/01, EU:C:2005:32.
( ) Gruber (C‑464/01, EU:C:2005:32, paragraph 54). Emphasis added.
( ) Ibid., paragraph 46.
( ) See, for example, Shearson Lehman Hutton (C‑89/91, EU:C:1993:15, paragraph 18), and Gabriel (C‑96/00, EU:C:2002:436, paragraph 39).
( ) On that discussion, see N. Reich, H.-W. Micklitz, P. Rott and K. Tonner, European Consumer Law, 2nd ed. Intersentia, 2014, p. 53.
( ) Report on the proposal for a Directive of the European Parliament and of the Council on consumer rights, Internal Market and Consumer Protection Committee, 22 February 2011, A7-0038/2011, p. 36, amendment no 5. Emphasis added.
( ) Council Document 10481/11 of 20 May 2011, p. 3.
( ) Council Document 11218/11 of 8 June 2011, p. 5.
( ) Directive 2011/83 replaces Directive 85/577/EEC and Directive 9/7/EC, and amends Directive 93/13/EEC and Directive 1999/44/EC. In relation to Directive 93/13, although the Commission’s Proposal (COM(2008) 614 final) envisaged the complete repeal of the Directive and its incorporation into the new directive, in the end Directive 2011/83 merely inserted into Directive 93/13, by means of Article 32, a new Article 8a relating to the introduction of more stringent consumer protection provisions by Member States.
( ) It is indisputable that there is some complexity involved in the practical application of the criterion of the predominant purpose. On that debate, see L. D. Loacker, ‘Verbraucherverträge mit gemischter Zwecksetzung’, Juristenzeitung 68, 2013, p. 234 to 242.
( ) C‑45/96, EU:C:1998:111.
( ) Ibid., paragraph 23. However, application of the maxim accessorium sequitur principale was not considered to be sufficient for a finding that a contract of guarantee concluded to secure the repayment of a loan fell within the scope of Directive 87/102, even though neither the guarantor nor the recipient of the loan had acted in the course of their trade or profession. See, in that connection, Berliner Kindl Brauerei (C‑208/98, EU:C:2000:152).
( ) C‑419/11, EU:C:2013:165.
( ) Ibid., paragraph 40.
( ) However, there are limits to the criterion of the ancillary nature of a contract as a factor for determining whether EU law is applicable. See, in that respect, the Opinion of Advocate General Léger in Berliner Kindl Brauerei (C‑208/98, EU:C:1999:537, point 65). |
JUDGMENT OF THE COURT (Sixth Chamber)
15 October 2015 ( * )
‛Reference for a preliminary ruling — Regulation (EC) No 1346/2000 — Articles 4 and 13 — Insolvency proceedings — Detrimental legal acts — Action for restitution of payments made before the date on which insolvency proceedings were opened — Law of the Member State in which insolvency proceedings were opened — Law of the Member State governing the legal act at issue — Law not allowing ‘any means of challenging that act in the relevant case’ — Burden of proof’
In Case C‑310/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Helsingin hovioikeus (Court of appeal, Helsinki) (Finland), made by decision of 26 June 2014, received at the Court on 30 June 2014, in the proceedings
Nike European Operations Netherlands BV
v
Sportland Oy, in liquidation,
THE COURT (Sixth Chamber),
composed of F. Biltgen, President of the Tenth Chamber, acting as President of the Sixth Chamber, M. Berger (Rapporteur) and S. Rodin, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Nike European Operations Netherlands BV, by A. Saarikivi, asianajaja,
—
the Finnish Government, by H. Leppo, acting as Agent,
—
the Belgian Government, by M. Jacobs, acting as Agent,
—
the German Government, by T. Henze and J. Kemper, acting as Agents,
—
the Spanish Government, by L. Banciella Rodríguez-Miñón, acting as Agent,
—
the European Commission, by E. Paasivirta and M. Wilderspin, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 4(2)(m) and 13 of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (OJ 2000 L 160, p. 1).
The request has been made in proceedings between Nike European Operations Netherlands BV (‘Nike’) and Sportland Oy, in liquidation (‘Sportland’), concerning an action to have certain transactions declared void by virtue of insolvency.
Legal context
EU law
Recital 24 in the preamble to Regulation No 1346/2000 states:
‘Automatic recognition of insolvency proceedings to which the law of the opening State normally applies may interfere with the rules under which transactions are carried out in other Member States. To protect legitimate expectations and the certainty of transactions in Member States other than that in which proceedings are opened, provisions should be made for a number of exceptions to the general rule.’
Article 4 of that regulation provides:
‘1. Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened, hereafter referred to as the “State of the opening of proceedings”.
2. The law of the State of the opening of proceedings shall determine the conditions for the opening of those proceedings, their conduct and their closure. It shall determine in particular:
...
(m)
the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors.’
Article 13 of that regulation provides:
‘Article 4(2)(m) shall not apply where the person who benefited from an act detrimental to all the creditors provides proof that:
—
the said act is subject to the law of a Member State other than that of the State of the opening of proceedings,
and
—
that law does not allow any means of challenging that act in the relevant case.’
Finnish law
Paragraph 10 of the Law on recovery of assets (takaisinsaannista konkurssipesään annettu laki) provides that the payment of a debt within three months of the prescribed date may be challenged if it is paid with an unusual means of payment, is paid prematurely, or in an amount which, in view of the amount of the debtor’s estate, may be regarded as significant.
Netherlands law
According to Article 47 of the Law on insolvency (Faillissementswet), the payment of an outstanding debt may be challenged only if it is proven that when the recipient received the payment he was aware that the application for insolvency proceedings had already been lodged or that the payment was agreed between the creditor and the debtor in order to give priority to that creditor to the detriment of the other creditors.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Sportland, established in Helsinki (Finland), was a retailer of goods supplied by Nike, established in Hilversum (the Netherlands), under a franchising agreement. Under that contract, governed by Netherlands law, Sportland paid Nike outstanding debts arising from the purchase of stocks set out in the agreement in ten separate instalments made between 10 February 2009 and 20 May 2009, totalling EUR 195108.15.
Following an application brought on 5 May 2009, the Helsingin käräjäoikeus (District Court, Helsinki) opened insolvency proceedings in respect of Sportland on 26 May 2009. Sportland brought an action before the Helsingin käräjäoikeus seeking an order that the payments referred to in paragraph 8 above be annulled and that Nike be required to make restitution of the amounts paid plus interest, in accordance with Paragraph 10 of the Law on recovery of assets.
Nike sought an order that the action be dismissed. It relied, inter alia, on Article 13 of Regulation No 1346/2000 and claimed that the payments at issue were governed by Netherlands law. On the basis of Article 47 of the Law on insolvency, those payments were not able to be annulled.
The Helsingin käräjäoikeus (District Court, Helsinki) granted Sportland’s action. It ruled, inter alia, that the expert who appeared before the court did not address the issue of the possibility under Netherlands law, in the light of all the circumstances of the case in the main proceedings, of recovering the payments for the general body of assets available to creditors. The court therefore found that Nike had not demonstrated that, for the purposes of Article 13 of Regulation No 1346/2000, the payments could not be challenged.
Nike, which considered that it had adduced sufficient evidence on the content of the Netherlands legislation, appealed against that decision before the Helsingin hovioikeus (Court of Appeal, Helsinki). Sportland claimed that the appeal should be dismissed on the ground, inter alia, that Nike had not adduced evidence as to the content of provisions of Netherlands law other than those in the insolvency legislation, or any general principles of Netherlands law.
In its order for reference, the Helsingin hovioikeus recalls that, according to Article 4(1) of Regulation No 1346/2000, the law applicable to insolvency proceedings and their effects is that of the State of the opening of proceedings. Article 4(2)(m) of the regulation provides that that law determines, inter alia, the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors. However, under Article 13 of the regulation, Article 4(2)(m) would not apply where the person who benefited from an act detrimental to all the creditors provides proof that the act is governed by the law of a Member State other than that of the State of the opening of proceedings and that that law does not allow any means of challenging that act in the relevant case.
The referring court observes that the parties in the main proceedings are at odds as to, first, the interpretation to be given to the expression ‘does not allow any means of challenging that act in the relevant case’, second, the scope of Nike’s obligation to adduce evidence regarding the content of Netherlands law and, third, the party which is to bear the burden of proof.
In those circumstances, the Helsingin hovioikeus (Court of appeal, Helsinki) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Is Article 13 of Regulation No 1346/2000 to be interpreted to the effect that “the act in the relevant case” means that the act cannot be challenged after taking account of all the circumstances of the case?
(2)
If the answer to question 1 is affirmative and if the party affected by the application to challenge the act has relied on a provision of the law within the meaning of the first indent of Article 13, according to which the payment of an outstanding debt may be challenged only in the circumstances provided for therein, which are not mentioned in the action based on the law of the State in which the insolvency proceedings have been opened,
(a)
are there reasons prohibiting an interpretation of Article 13 to the effect that the party seeking to challenge the act must, after becoming aware of that legal provision, plead those circumstances if, in accordance with the national law of the State of the opening of insolvency proceedings, that party has to plead all the circumstances founding the action to challenge the act, or
(b)
must the party affected by action to challenge the act prove that those circumstances did not exist and that therefore it is not possible to challenge the act under the provision in question, and the party seeking to challenge it does not need to rely specifically on those circumstances?
(3)
Regardless of the answer to question 2(a), is Article 13 to be interpreted as meaning that
(a)
the party affected by the action to challenge the act has the burden of proving that the circumstances provided for in the provision do not exist in the specific case, or
(b)
may the burden of proof as to the existence of those circumstances be determined in accordance with the law of a Member State other than the State in which the insolvency proceedings were opened that is applicable to the act and which provides that the party challenging the act has the burden of proof, or
(c)
may Article 13 also be interpreted in such a way that the issue of the burden of proof is determined in accordance with the national law of the State of the court seised?
(4)
Is Article 13 to be interpreted as meaning that the expression “that law does not allow any means of challenging that act in the relevant case” includes the general provisions and principles of the law applicable to the act in addition to the insolvency rules of the law applicable to that act?
(5)
If the answer to question 4 is affirmative,
(a)
is Article 13 to be interpreted as meaning that the party affected by the action to challenge the act must prove that the law within the meaning of Article 13 does not contain any general or other provisions or principles on the basis of which it would be possible to challenge the act in the light of the facts presented, and
(b)
under Article 13, may the court, if it considers that this party has adduced sufficient evidence, rule that the other party must establish the existence of a provision or principle of the insolvency law or general law of a Member State other than the State of the opening of insolvency proceedings within the meaning of Article 13 which is applicable to the act and on the basis of which that act may indeed be challenged?’
Consideration of the questions referred
The first question
By its first question, the referring court asks, in essence, whether Article 13 of Regulation No 1346/2000 must be interpreted as meaning that its application is subject to the condition that the act at issue cannot be challenged on the basis of the law governing the act (‘lex causae’), after taking account of all the circumstances of the case.
In that regard, the Court notes that the wording of Article 13 of the regulation differs slightly in the Finnish language version from that of the other language versions, in so far as the former does not appear to include the words ‘in the relevant case’ or a similar expression. According to settled case-law of the Court, the need for a uniform interpretation of a provision of EU law means that, where there is divergence between the various language versions of the provision, the latter must be interpreted by reference to the context and purpose of the rules of which it forms part (see judgment in Christie’s France, C‑41/14, EU:C:2015:119, paragraph 26 and the case-law cited).
As for the context and purpose of Article 13 of Regulation No 1346/2000, it must, first, be recalled that that article provides, in Article 4(1), for an exception to the general rule that the law applicable to insolvency proceedings and their effects is the law of the State of the opening of proceedings (‘lex fori concursus’). Second, that exception, which, as stated in recital 24 in the preamble to the regulation, aims to protect legitimate expectations and the certainty of transactions in Member States other than that in which proceedings are opened, must be interpreted strictly, and its scope cannot go beyond what is necessary to achieve that objective (see judgment in Lutz, C‑557/13, EU:C:2015:227, paragraph 34).
Thus, Article 13 of Regulation No 1346/2000 aims to protect the legitimate expectations of a person who has benefited from an act detrimental to all the creditors by providing that the act will continue to be governed, even after insolvency proceedings have been opened, by the law that was applicable at the date on which it was concluded, namely the lex causae.
It is clear from that objective that the application of Article 13 of Regulation No 1346/2000 requires that all the circumstances of the case be taken into account. There cannot be legitimate expectations where, after insolvency proceedings have been opened, the validity of an act is to be assessed without regard being had to those circumstances whereas, where such proceedings are not opened, such circumstances would need to be taken into account.
Moreover, the obligation to interpret strictly the exception laid down in Article 13 of the regulation precludes a broad interpretation of the scope of that article which would allow a person who has benefited from an act detrimental to all the creditors to avoid the application of the lex fori concursus by relying solely, in a purely abstract manner, on the unchallengeable character of the act at issue on the basis of a provision of the lex causae.
In those circumstances, the answer to the first question is that Article 13 of Regulation No 1346/2000 must be interpreted as meaning that its application is subject to the condition that, after taking account of all the circumstances of the case, the act at issue cannot be challenged on the basis of the law governing the act (‘lex causae’).
The second and third questions
By its second and third questions, which it is appropriate to examine together, the referring court asks, in essence, for the purposes of the application of Article 13 of Regulation No 1346/2000 and in the event that the defendant in an action relating to the voidness, voidability or unenforceability of an act relies on a provision of the lex causae under which the act can be challenged only in the circumstances provided for in that provision, which party is required to plead that those circumstances do not exist and to bear the burden of proof in that regard.
It should be recalled that, under Article 13 of the Regulation No 1346, Article 4(2)(m) of the regulation can be disapplied only where the person who has benefited from an act detrimental to all the creditors provides proof that the act is governed by the law of a Member State other than that in which insolvency proceedings were opened and that that law does not allow any means of challenging the act.
It is therefore apparent from the wording of Article 13 of Regulation No 1346/2000 that it is for the defendant in an action relating to the voidness, voidability or unenforceability of an act to provide proof, on the basis of the lex causae, that the act cannot be challenged. Furthermore, by providing that the defendant must provide proof that an act cannot be challenged by ‘any means’ and, as follows from paragraph 22 above, after taking account of all the circumstances of the case, Article 13 of the regulation also, at least implicitly, places the burden on the defendant to prove both the facts from which the conclusion can be drawn that the act is unchallengeable and the absence of any evidence that would militate against that conclusion.
Since Article 13 of Regulation No 1346/2000 therefore expressly places the burden of proof on the defendant relying on that article, where an action is founded on the relevant provisions of the lex fori concursus, the applicant cannot be required to claim, or even prove, that the conditions for the application of a provision of the lex causae which, in principle, would enable the act at issue to be challenged, such as Article 47 of the Law on insolvency at issue in the main proceedings, are satisfied.
Nevertheless, although Article 13 of the regulation expressly governs where the burden of proof lies, it does not contain any provisions on more specific procedural aspects. For instance, that article does not set out, inter alia, the ways in which evidence is to be elicited, what evidence is to be admissible before the appropriate national court, or the principles governing that court’s assessment of the probative value of the evidence adduced before it.
According to settled case-law, in the absence of harmonisation of such rules under EU law, it is for the national legal order of each Member State to establish them in accordance with the principle of procedural autonomy provided, however, that those rules are not less favourable than those governing similar domestic situations (principle of equivalence) and that they do not make it excessively difficult or impossible in practice to exercise the rights conferred by EU law (principle of effectiveness) (see, to that effect, judgment in Kušionová, C‑34/13, EU:C:2014:2189, paragraph 50 and the case-law cited).
In particular, in so far as the principle of effectiveness mentioned in paragraph 28 above is concerned, that principle precludes, first, the application of national rules of procedure that would make reliance on Article 13 of Regulation No 1346/2000 impossible or excessively difficult by providing for rules which are too onerous, especially in connection with proof of the negative, namely that certain circumstances did not exist. Second, that principle precludes national rules of evidence that are not sufficiently rigorous, the application of which would, in fact, have the effect of shifting the burden of proof laid down in Article 13 of the regulation.
However, the mere difficulty of proving that circumstances exist in which the lex causae prevents the act at issue from being challenged or, where relevant, that circumstances laid down in the lex causae do not exist in which the act can be challenged, does not in itself impinge upon the principle of effectiveness but rather reflects the need to interpret that article strictly, as stated in paragraph 18 above.
In those circumstances, the answer to the second and third questions is that, for the purposes of the application of Article 13 of Regulation No 1346/2000 and in the event that the defendant in an action relating to the voidness, voidability or unenforceability of an act relies on a provision of the lex causae under which that act can be challenged only in the circumstances provided for in that provision, it is for that defendant to plead that those circumstances do not exist and to bear the burden of proof in that regard.
The fourth question
By its fourth question, the referring court asks, in essence, whether Article 13 of Regulation No 1346/2000 is to be interpreted as meaning that the expression ‘does not allow any means of challenging that act …’ applies, in addition to the insolvency rules of the lex causae, to the general provisions and principles of that law, taken as a whole.
In that regard, as is apparent from paragraph 19 above, Article 13 of the regulation aims to protect the legitimate expectations of a person who has benefited from an act detrimental to all the creditors, by providing that even after insolvency proceedings have been opened the act will continue to the governed by the lex causae. Moreover, as is apparent from paragraph 22 above, the application of Article 13 in favour of such a person benefiting from a detrimental act requires that all the circumstances of the case be taken into account.
The aim of protecting legitimate expectations and the need for all the circumstances of the case to be taken into account require Article 13 of the regulation to be interpreted as meaning that a person benefiting from a detrimental act must prove that the act at issue cannot be challenged either on the basis of the insolvency provisions of the lex causae or on the basis of the lex causae, taken as a whole.
First, the wording of Article 13 of Regulation No 1346/2000 clearly supports such an interpretation, since it requires a person benefiting from a detrimental act to bear the burden of proving that the act cannot be challenged ‘[by] any means’. Second, there cannot be legitimate expectations in the fact that an act, which may be challenged on the basis of a provision or general principle of the lex causae, is to be assessed, after insolvency proceedings have been opened, solely in the light of the insolvency provisions of the lex causae.
In those circumstances, the answer to the fourth question is that Article 13 of Regulation No 1346/2000 must be interpreted as meaning that the expression ‘does not allow any means of challenging that act …’ applies, in addition to the insolvency rules of the lex causae, to the general provisions and principles of that law, taken as a whole.
The fifth question
By its fifth question, the referring court asks, in essence, whether Article 13 of Regulation No 1346/2000 is to be interpreted as meaning that the defendant in an action relating to the voidness, voidability or unenforceability of an act must show that the lex causae, taken as a whole, does not allow for that act to be challenged. Furthermore, the national court asks, in essence, whether a national court before which such an action is brought may, where it considers that the defendant has adduced sufficient evidence, consider that it is for the applicant to furnish evidence that a provision or principle of the lex causae exists on the basis of which that act may be challenged.
In the first place, as for the question whether, for the purposes of the application of Article 13 of the regulation, the defendant in an action relating to the voidness, voidability or unenforceability of an act must show that the lex causae, taken as a whole, does not allow for the act at issue to be challenged, the Court points out, as is apparent from paragraph 31 above, that it is for the defendant to plead that circumstances enabling the act to be challenged on the basis of the lex causae do not exist and to bear the burden of proof in that regard.
Article 13 of Regulation No 1346/2000 does not distinguish insolvency provisions of the lex causae from the provisions and principles of the lex causae applicable to other areas of law, but provides that it is for the defendant to prove that the act at issue cannot be challenged by ‘any means’. It is thus clear from its wording that that article must be interpreted as meaning that the defendant must show that the lex causae, taken as a whole, does not enable that act to be challenged.
That conclusion is also consistent with the principle, noted in paragraph 18 above, that Article 13 of Regulation No 1346/2000 must be interpreted strictly. To hold otherwise, to the effect that the burden of proof relating to the absence of any provision or principle of the lex causae enabling an act to be challenged lies with the party challenging the act, would facilitate excessively reliance on that provision and would broaden its scope considerably.
Moreover, that is the only conclusion which is consistent with the aim of Article 13 of the regulation, stated in paragraph 19 above, to protect the legitimate expectations of a person who has benefited from an act detrimental to all the creditors by providing that that act will continue to be governed by the law that was applicable at the date on which it was concluded. At that date, the act was governed by the lex causae, taken as a whole, as applicable in the absence of insolvency proceedings since, according to the case-law of the Court, Article 13 of the regulation is not, in principle, applicable to acts which take place after the opening of insolvency proceedings (see judgment in Lutz, C‑557/13, EU:C:2015:227, paragraph 36).
In the second place, as for the question whether the national court before which an action relating to the voidness, voidability or unenforceability of an act is brought may, where it considers that the defendant has adduced sufficient evidence, take the view that the applicant is required to establish the existence of a provision or principle of the lex causae on the basis of which the act can be challenged, it is clear from paragraph 25 above that it is for the defendant to prove that the act cannot be challenged.
Furthermore, as is apparent from paragraphs 27 to 29 above, since Article 13 of Regulation No 1346/2000 does not set out, inter alia, the ways in which evidence is to be elicited, what evidence is admissible before the appropriate national court, or the principles governing that court’s assessment of the probative value of the evidence adduced before it, it is for the national legal order of each Member State to establish such details in accordance with the principle of procedural autonomy provided, however, that the principles of equivalence and effectiveness are respected. National rules of evidence that are not sufficiently rigorous, the application of which would, in practice, shift the burden of proof, would not be consistent with the principle of effectiveness.
It follows that the national court with jurisdiction can rule that it is for the applicant in an action relating to the voidness, voidability or unenforceability of an act to establish the existence of a provision or principle of the lex causae on the basis of which that act can be challenged only where that court considers that the defendant has first proven, in accordance with the rules generally applicable under national rules of procedure, that the act at issue cannot be challenged on the basis of the lex causae. Nevertheless, the issue of determining the criteria for ascertaining whether the applicant has in fact proven that the act can be challenged falls within the procedural autonomy of the relevant Member State, regard being had to the principles of effectiveness and equivalence.
In those circumstances, the answer to the fifth question is that Article 13 of Regulation No 1346/2000 must be interpreted as meaning that the defendant in an action relating to the voidness, voidability or unenforceability of an act must show that the lex causae, taken as a whole, does not allow for that act to be challenged. The national court before which such an action is brought may rule that it is for the applicant to establish the existence of a provision or principle of the lex causae on the basis of which that act can be challenged only where that court considers that the defendant has first proven, in accordance with the rules generally applicable under its national rules of procedure, that the act at issue cannot be challenged on the basis of the lex causae.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Sixth Chamber) hereby rules:
1.
Article 13 of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings must be interpreted as meaning that, after taking account of all the circumstances of the case, the article applies provided that the act at issue cannot be challenged on the basis of the law governing that act (lex causae).
2.
For the purposes of the application of Article 13 of Regulation No 1346/2000 and in the event that the defendant in an action relating to the voidness, voidability or unenforceability of an act relies on a provision of the law governing that act (lex causae) under which that act can be challenged only in the circumstances provided for in that provision, it is for the defendant to plead that those circumstances do not exist and to bear the burden of proof in that regard.
3.
Article 13 of Regulation No 1346/2000 must be interpreted as meaning that the expression ‘does not allow any means of challenging that act …’ applies, in addition to the insolvency rules of the law governing that act (lex causae), to the general provisions and principles of that law, taken as a whole.
4.
Article 13 of Regulation No 1346/2000 must be interpreted as meaning that the defendant in an action relating to the voidness, voidability or unenforceability of an act must show that the law governing that act (lex causae), taken as a whole, does not allow for that act to be challenged. The national court before which such an action is brought may rule that it is for the applicant to establish the existence of a provision or principle of the lex causae on the basis of which that act can be challenged only where that court considers that the defendant has first proven, in accordance with the rules generally applicable under its national rules of procedure, that the act at issue cannot be challenged on the basis of the lex causae.
[Signatures]
( * ) Language of the case: Finnish. |
JUDGMENT OF THE COURT (Second Chamber)
28 January 2016 ( *1 )
‛Failure of a Member State to fulfil obligations — Directive 91/271/EEC — Urban waste water treatment — Article 4 — Secondary treatment or equivalent — Annex I, Sections B and D’
In Case C‑398/14,
ACTION under Article 258 TFEU for failure to fulfil obligations, brought on 20 August 2014,
European Commission, represented by P. Guerra e Andrade and E. Manhaeve, acting as Agents,
applicant,
v
Portuguese Republic, represented by L. Inez Fernandes, J. Reis Silva and J. Brito e Silva, acting as Agents,
defendant,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the First Chamber, acting as President of the Second Chamber, J.L. da Cruz Vilaça, A. Arabadjiev, C. Lycourgos (Rapporteur) and J.-C. Bonichot, Judges,
Advocate General: P. Cruz Villalón,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 17 June 2015,
after hearing the Opinion of the Advocate General at the sitting on 22 September 2015,
gives the following
Judgment
By its application, the European Commission asks the Court to declare that, by not ensuring an adequate level of treatment of urban waste water in 52 agglomerations, the Portuguese Republic has failed to fulfil its obligations under Article 4 of Council Directive 91/271/EEC of 21 May 1991 concerning urban waste water treatment (OJ 1991 L 135, p. 40), as amended by Regulation (EC) No 1137/2008 of the European Parliament and of the Council of 22 October 2008 (OJ 2008 L 311, p. 1; ‘Directive 91/271’).
Legal context
The first, third, fourth and eighth recitals of Directive 91/271 state:
‘Whereas the Council Resolution of 28 June 1988 on the protection of the North Sea and of other waters in the Community [OJ 1988 C 209, p. 3] invited the Commission to submit proposals for measures required at Community level for the treatment of urban waste water;
…
Whereas to prevent the environment from being adversely affected by the disposal of insufficiently-treated urban waste water, there is a general need for secondary treatment of urban waste water;
Whereas it is necessary in sensitive areas to require more stringent treatment; whereas in some less sensitive areas a primary treatment could be considered appropriate;
…
Whereas it is necessary to monitor treatment plants, receiving waters and the disposal of sludge to ensure that the environment is protected from the adverse effects of the discharge of waste waters;
…’
According to Article 1 of that directive:
‘This Directive concerns the collection, treatment and discharge of urban waste water and the treatment and discharge of waste water from certain industrial sectors.
The objective of the Directive is to protect the environment from the adverse effects of the abovementioned waste water discharges.’
Article 2 of the directive provides:
‘For the purpose of this Directive:
1.
“urban waste water” means domestic waste water or the mixture of domestic waste water with industrial waste water and/or run-off rain water;
…
5.
“collecting system” means a system of conduits which collects and conducts urban waste water;
6.
“1 p.e. (population equivalent)” means the organic biodegradable load having a five-day biochemical oxygen demand (BOD5) of 60g of oxygen per day;
…
8.
“secondary treatment” means treatment of urban waste water by a process generally involving biological treatment with a secondary settlement or other process in which the requirements established in Table 1 of Annex I are respected;
…’
Article 3(1) of that directive provides:
‘Member States shall ensure that all agglomerations are provided with collecting systems for urban waste water,
—
at the latest by 31 December 2000 for those with a population equivalent (p.e.) of more than 15000,
and
—
at the latest by 31 December 2005 for those with a p.e. of between 2000 and 15000.
…’
Article 4 of the directive provides:
‘1. Member States shall ensure that urban waste water entering collecting systems shall before discharge be subject to secondary treatment or an equivalent treatment as follows:
—
at the latest by 31 December 2000 for all discharges from agglomerations of more than 15000 p.e.,
—
at the latest by 31 December 2005 for all discharges from agglomerations of between 10000 and 15000 p.e.,
—
at the latest by 31 December 2005 for discharges to fresh-water and estuaries from agglomerations of between 2000 and 10000 p.e.
…
3. Discharges from urban waste water treatment plants described in paragraphs 1 and 2 shall satisfy the relevant requirements of section B of Annex I. …
…’
According to Article 8(1) of that directive:
‘Member States may, in exceptional cases due to technical problems and for geographically defined population groups, submit a special request to the Commission for a longer period for complying with Article 4.’
Article 15(1), first indent, and (4) of the same directive provides:
‘1. Competent authorities or appropriate bodies shall monitor:
—
discharges from urban waste water treatment plants to verify compliance with the requirements of Annex I.B in accordance with the control procedures laid down in Annex I.D,
…
4. Information collected by competent authorities or appropriate bodies in complying with paragraphs 1, 2 and 3 shall be retained in the Member State and made available to the Commission within six months of receipt of a request.’
Section B of Annex I to the directive, entitled ‘Discharge from urban waste water treatment plants to receiving waters’, provides:
‘1.
Waste water treatment plants shall be designed or modified so that representative samples of the incoming waste water and of treated effluent can be obtained before discharge to receiving waters.
2.
Discharges from urban waste water treatment plants subject to treatment in accordance with Articles 4 and 5 shall meet the requirements shown in Table 1.
…’
Section D of Annex I to Directive 91/271, concerning reference methods for monitoring and evaluation of results, is worded as follows:
‘1.
Member States shall ensure that a monitoring method is applied which corresponds at least with the level of requirements described below.
Alternative methods to those mentioned in paragraphs 2, 3 and 4 may be used provided that it can be demonstrated that equivalent results are obtained.
Member States shall provide the Commission with all relevant information concerning the applied method. If the Commission considers that the conditions set out in paragraphs 2, 3 and 4 are not met, it will submit an appropriate proposal to the Council.
2.
Flow-proportional or time-based 24-hour samples shall be collected at the same well-defined point in the outlet and if necessary in the inlet of the treatment plant in order to monitor compliance with the requirements for discharged waste water laid down in this Directive.
Good international laboratory practices aiming at minimising the degradation of samples between collection and analysis shall be applied.
The minimum annual number of samples shall be determined according to the size of the treatment plant and be collected at regular intervals during the year:
‐ 2000 to 9999 p. e.:
12 samples during the first year.
four samples in subsequent years, if it can be shown that the water during the first year complies with the provisions of the Directive;
if one sample of the four fails, 12 samples must be taken in the year that follows.
‐ 10000 to 49999 p. e.:
12 samples;
…
4.
The treated waste water shall be assumed to conform to the relevant parameters if, for each relevant parameter considered individually, samples of the water show that it complies with the relevant parametric value in the following way:
(a)
for the parameters specified in Table 1 and Article 2(7), a maximum number of samples which are allowed to fail the requirements, expressed in concentrations and/or percentage reductions in Table 1 and Article 2(7), is specified in Table 3;
(b)
for the parameters of Table 1 expressed in concentrations, the failing samples taken under normal operating conditions must not deviate from the parametric values by more than 100%. For the parametric values in concentration relating to total suspended solids deviations of up to 150% may be accepted;
…
5.
Extreme values for the water quality in question shall not be taken into consideration when they are the result of unusual situations such as those due to heavy rain.’
Table 1 of Annex I to the directive contains the requirements for discharges from urban waste water treatment plants subject to Articles 4 and 5 of the directive. It appears as follows:
Parameters
Concentration
Minimum percentage of reduction [in relation to the load of the influent]
Reference method of measurement
Biochemical oxygen demand (BOD5 at 20 °C) without nitrification …
25 mg/l O2
70-90
…
…
Chemical oxygen demand (COD)
125 mg/l O2
…
Total suspended solids
35 mg/l …
35 under Article 4(2) (more than 10 000 p.e.)
60 under Article 4(2) (2 000-10 000 p.e.)
90 …
90 under Article 4(2) (more than 10 000 p.e.)
70 under Article 4(2) (2 000-10 000 p.e.)
…
Table 3 of Annex I to Directive 91/271 provides inter alia that, where the number of samples taken in any year is between four and seven, the maximum permitted number of samples which fail to conform is set at one. Where the number of samples taken in any year is between eight and sixteen, the maximum permitted number of samples which fail to conform is set at two.
The pre-litigation procedure
On 23 November 2009 the Commission sent a letter of formal notice to the Portuguese Republic informing it that it had failed to fulfil the obligations laid down in Articles 3, 4 and 10 of Directive 91/271 in relation to 186 agglomerations located in the territory of that Member State and inviting it, consequently, to submit its observations.
On 19 February 2010 the Portuguese Republic responded to that letter of formal notice by providing information concerning the 186 agglomerations in question and updated its response by a letter of 12 January 2012.
On 22 June 2012 the Commission sent the Portuguese Republic a reasoned opinion in which it indicated that, based on the information received, certain agglomerations regarded as being in breach of Article 3 of Directive 91/271 were, as at that date, in compliance with EU law requirements, but that the Portuguese Republic continued to be in breach of its obligations under Article 4 of Directive 91/271 with regard to 77 agglomerations whose p.e. was between 2000 and 15000. The Commission noted that those 77 agglomerations were discharging urban waste water into fresh-water or estuaries, both in normal areas and in sensitive areas, without guaranteeing an adequate level of treatment or reducing the biochemical oxygen demand (BOD) and chemical oxygen demand (COD), in accordance with the values listed in Annex I to Directive 91/271. The Commission requested the Portuguese Republic to take the necessary measures in order to comply with that reasoned opinion within two months of receipt of the opinion.
By a letter of 3 August 2012, the Portuguese Republic responded to the reasoned opinion, asserting that 17 of those 77 agglomerations were, as at that date, in compliance with Directive 91/271 and that more than half of the 77 agglomerations referred to in the reasoned opinion would, in the short term, comply with the provisions of that directive. It also undertook to keep the Commission regularly informed of changes in the situation.
As it had not received any information from the Portuguese Republic, the Commission, by letter of 23 October 2013, asked it about the extent to which its obligations had been fulfilled. The Portuguese Republic responded by a letter of 26 November 2013, indicating that 53 agglomerations were still not meeting the requirements of Directive 91/271.
The Portuguese Republic, by letters of 10 June and 4 July 2014, stated that 40 agglomerations referred to in the reasoned opinion now met the requirements of Directive 91/271 and that, with regard to the 37 agglomerations in which the infringement persisted, the situation in 15 of them would be resolved by the end of 2015, the other 22 agglomerations, however, remaining in a situation of non-compliance.
As it was not satisfied with the responses provided by the Portuguese Republic, the Commission decided to bring the present action.
The action
Arguments of the parties
By its application, the Commission claims that the Portuguese Republic has failed to fulfil its obligations under Article 4 of Directive 91/271 in relation to the treatment of urban waste waters in the following 52 agglomerations: Alvalade, Odemira, Loriga, Pereira do Campo, Vila Verde (PTAGL 420), Mação, Paço, Pontével, Vila Nova de São Bento, Castro Daire, Arraiolos, Cercal, Vale de Santarém, Castro Verde, Almodôvar, Ferreira do Alentejo, Vidigueira, Amares/Ferreiras, Alcácer do Sal, Amareleja, Gonsundeira, Salvaterra de Magos, Mogadouro, Melides, Vila Verde (PTAGL 421), Santiago do Cacém, Serpa, São Bartolomeu de Messines, Monchique, Montemor-o-Novo, Grândola, Estremoz, Maceira, Vendas Novas, Lousada, Felgueiras, Riachos, Tolosa, Meda, Alter do Chão, Tábua, Portel, Viana do Alentejo, Cinfães, Vila de Prado, Ponte de Reguengo, Canas de Senhorim, Repeses, Mangualde, Nelas, Vila Viçosa and Santa Comba Dão.
The Commission submits that, under Article 4 of Directive 91/271, the Portuguese Republic had to guarantee, from 1 January 2006, secondary treatment or an equivalent treatment for discharges of urban waste waters originating from those agglomerations, complying with the values set out in Table 1 of Annex I to Directive 91/271. In that regard, the Commission argues that, in order to satisfy the requirements of Article 4 of that directive, the Portuguese Republic should have provided it with the results of monitoring measures proving, pursuant to paragraph 3 of Annex I.D, that the water, collected at regular intervals in the outlet of treatment plants during the first year of operation, met the requirements of that directive.
The Commission thus considers that the infringement, which is general and persistent in many small agglomerations, is likely to cause irreparable damage to the environment. It also argues that the financial difficulties relied on by the Portuguese Republic during the pre-litigation procedure are not such as to justify the existence of the alleged infringement.
In its statement of defence, the Portuguese Republic states that, in its application, the Commission acknowledged that the failure to fulfil obligations under Article 4 of Directive 91/271 cannot be verified for 26 of the 52 agglomerations referred to in the application initiating proceedings, namely: Loriga, Paço, Vila Nova de São Bento, Cercal, Vale de Santarém, Castro Verde, Almodôvar, Amares/Ferreiras, Gonsundeira, Salvaterra de Magos, Mogadouro, Melides, Vila Verde-Minho, Santiago do Cacém, Serpa, São Bartolomeu de Messines, Vendas Novas, Lousada, Felgueiras, Riachos, Meda, Alter do Chão, Tábua, Vila de Prado, Mangualde and Nelas.
Moreover, the Portuguese Republic argues that, so far as concerns the agglomerations of Alvalade, Odemira, Pereira do Campo, Vila Verde — Sintra, Mação, Arraiolos, Ferreira do Alentejo, Vidigueira, Alcácer do Sal, Amareleja, Montemor-o-Novo, Grândola, Estremoz, Maceira, Portel, Cinfães, Canas de Senhorim, Repeses, Vila Viçosa and Santa Comba Dão, the works necessary to ensure that the urban waste water plants comply with the requirements of Directive 91/271 were under way as at the date on which it lodged its statement of defence and will, in any event, be completed before the end of 2015.
With regard to the agglomerations of Pontével, Castro Daire, Monchique, Tolosa, Viana do Alentejo and Ponte de Reguengo, the Portuguese Republic submits that the research and measures necessary in order to comply with the requirements of Article 4 of Directive 91/271 were, as at the date on which it lodged its statement of defence, at an advanced stage of implementation.
The Portuguese Republic explains that countless meetings have been held and that a large number of steps have been taken so as to ensure the setting of reasonable time-frames and the observance of the time-frames mentioned in the preceding paragraphs of the present judgment and indicates that, in order to ensure the implementation of projects in municipalities which were encountering financial difficulties, an extraordinary opinion of the Territorial Enhancement Operational Programme (TEOP) was published, guaranteeing the financing of 85% of the works at issue.
In its reply, the Commission maintains its action in respect of the 52 agglomerations referred to in the application and states, in particular, that, for the 26 agglomerations mentioned in paragraph 23 of the present judgment, the Portuguese Republic has attached no evidence to its statement of defence in support of its assertions. Thus, without information on the samples collected and on the methods of monitoring and evaluation regarding the agglomerations at issue, the Commission takes the view that the Portuguese Republic has failed to comply with the provisions of Directive 91/271. In that regard, the Commission states that the last information sent to it by the Portuguese Republic dates from 4 July 2014 and concerns the situation as at 30 June 2014.
In its rejoinder, the Portuguese Republic contends that the Commission received, on 22 December 2014, an additional reply to the reasoned opinion, in which it was provided with an update on the situation concerning the agglomerations at issue.
Using as a basis the new data transmitted to the Commission, the Portuguese Republic submits that the agglomerations of Loriga, Paço, Vila Nova de São Bento, Vale de Santarém, Gonsundeira, Salvaterra de Magos, Mogadouro, Serpa, São Bartolomeu de Messines, Riachos, Meda, Alter do Chão, Tábua and Mangualde have complied with the provisions of Directive 91/271.
So far as concerns the other agglomerations concerned by the present action, the Portuguese Republic contends that they are in a position to comply with the provisions of Directive 91/271 and that the monthly analytical data are in the course of being obtained or that compliance is, generally speaking, under way.
Findings of the Court
As a preliminary point, it must be noted that, at the hearing before the Court, the Commission limited the subject matter of its action to 44 agglomerations, indicating that the action no longer concerned the agglomerations of Paço, Gonsundeira, Salvaterra de Magos, São Bartolomeu de Messines, Lousada, Felgueiras, Riachos or Meda.
It must also be borne in mind that it is common ground that all the agglomerations in respect of which the Commission is maintaining its action have a p.e. of between 2200 and 13400.
According to the Commission, the obligations of Member States under Article 4 of Directive 91/271 entail performing the controls provided for in Annex I.D to that directive, for which it is necessary to collect, over a period of one year, a minimum number of samples, varying according to the size of the relevant treatment plant, particularly during its first year of operation. As far as the Portuguese Republic is concerned, it argued, at the hearing, that the obligations arising under Article 4 of Directive 91/271 must be regarded as fulfilled as soon as a sample of the discharges of a treatment plant in operation reveals values falling within the parameters set out in that directive.
Article 4(1) of Directive 91/271 provides that ‘Member States shall ensure that urban waste water entering collecting systems shall before discharge be subject to secondary treatment or an equivalent treatment’ and stipulates that that treatment must be introduced, depending on the p.e. and discharge area of those waters, by 31 December 2000 or by 31 December 2005. Article 4(3) of that directive provides that discharges from the urban waste water treatment plants described in paragraph 1 of that article ‘shall satisfy the relevant requirements of section B of Annex I’ to the directive.
According to paragraph 1 of Annex I.B to Directive 91/271, ‘waste water treatment plants shall be designed or modified so that representative samples of the incoming waste water and of treated effluent can be obtained before discharge to receiving waters’. Meanwhile, paragraph 2 of section B provides that ‘discharges from urban waste water treatment plants subject to treatment in accordance with Articles 4 and 5 [of that directive] shall meet the requirements shown in Table 1’.
The Court notes that Article 4 of Directive 91/271 makes no reference to Annex I.D thereto, which sets out the ‘reference methods for monitoring and evaluation of results’. Annex I.D addresses the need indicated in the eighth recital of the directive, according to which ‘it is necessary to monitor treatment plants, receiving waters and the disposal of sludge to ensure that the environment is protected from the adverse effects of the discharge of waste waters’ and forms part of the framework of the ongoing monitoring of discharges. In that regard, paragraph 3 of Annex I.D to Directive 91/271 determines the minimum number of samples to be collected each year and provides that, in certain cases, the results of one year affect the samples of the following year.
As the Advocate General observes in point 43 of his Opinion, Annex I.D refers to a continuing obligation aimed at ensuring that discharges satisfy ‘over time’ the quality requirements which they must have satisfied since the entry into operation of the treatment plant.
Therefore, although Article 4 of Directive 91/271 contains an obligation as to the result to be achieved with regard to the compliance of discharges from urban waste water treatment plants with the requirements of Annex I.B to that directive, it does not, however, require, for the purpose of proving such compliance, that samples be collected over a full year.
Accordingly, where a Member State is able to submit a sample meeting the requirements set out in Annex I.B to Directive 91/271, the obligations arising under Article 4 of that directive must be deemed to be satisfied.
In order to meet the objective of protecting the environment from the adverse effects of waste water discharges, as specified in Article 1 of Directive 91/271, the obligation in Article 4 thereof — according to which discharges of urban waste waters must be subject to treatment satisfying the requirements of Annex I.B — is secured over time through the monitoring of discharges from treatment plants, as provided for in the first indent of Article 15(1) of the directive, which makes express reference to Annex I.D thereto. In that respect, it must be borne in mind that the object of the present case is not to find that the Portuguese Republic has failed to fulfil its obligations under Article 15 of Directive 91/271.
In support of that interpretation, it must be stated that Articles 3 and 4 of Directive 91/271 impose on Member States the same deadlines for, as regards Article 3, providing agglomerations with a collecting system for urban waste water and, as regards Article 4, subjecting that water to secondary treatment or equivalent before discharge. Were the Commission’s interpretation of Article 4 of Directive 91/271 to be accepted, the deadlines laid down in that article would have to be at one year’s distance from those indicated in Article 3 of the directive, that one-year gap allowing Member States to carry out the collection of samples, in accordance with Annex I.D to the directive. However, no period additional to that granted in Article 3 of Directive 91/271 is provided to Member States for the purpose of complying with the requirements of Article 4 of the directive.
Moreover, although Article 8 of Directive 91/271 allows the time limit granted for complying with the requirements of Article 4 of the directive to be extended, such an extension may be granted only on the basis of a special request and, in any event, Article 4 makes no mention of an obligation to take into account a minimum number of samples to be collected by the Member State concerned during that additional period.
Nor can the Court accept the argument advanced by the Commission at the hearing that that year of sampling is justified by the ‘principle of scaling’, provided for in Article 10 of Directive 91/271, which requires seasonal variations of waste water discharges to be taken into account over a full year in order for it to be validly concluded that the requirements of Article 4 of Directive 91/271 have been satisfied.
Article 10 in fact provides that seasonal variations are to be taken into account in the design and construction of waste water treatment plants. Therefore, the ‘principle of scaling’ must be taken into account even before the entry into service of an urban waste water treatment plant.
Consequently, it must be held that Article 4 of Directive 91/271 requires Member States to ensure that, within the periods specified in that article, the agglomerations concerned subject urban waste water entering collecting systems provided to agglomerations in accordance with Article 3 of that directive to appropriate treatment and that such discharges satisfy the requirements of Annex I.B to the directive. That obligation does not mean that the collection of samples, provided for in Annex I.D to Directive 91/271, must span a full year in order for it to be established that the systems concerned are in compliance with the requirements of Annex I.B to the directive.
It is in the light of those considerations that it is appropriate to examine whether the present action for failure to fulfil obligations, in so far as it concerns the 44 agglomerations referred to in paragraph 31 of the present judgment, is well founded.
In that regard, it must be recalled that although, in proceedings brought under Article 258 TFEU for failure to fulfil obligations, it is for the Commission to prove the allegation that an obligation has not been fulfilled, by placing before the Court all the information required to enable the Court to establish that the obligation has not been fulfilled, without the Commission being entitled to rely on any presumption, account should be taken of the fact that, where it is a question of checking that the national provisions intended to ensure effective implementation of a directive are applied correctly in practice, the Commission, which does not have investigative powers of its own in this area, is largely reliant on the information provided by complainants or by the Member State concerned (see, to that effect, judgment in Commission v Portugal, C‑526/09, EU:C:2010:734, paragraph 21 and the case-law cited).
It follows, inter alia, that, where the Commission has adduced sufficient evidence to establish that the national provisions transposing a directive are not applied correctly in practice in the territory of the defendant Member State, it is for the latter to challenge in substance and in detail the information produced and the inferences drawn (see, to that effect, judgment in Commission v Portugal, C‑526/09, EU:C:2010:734, paragraph 22 and the case-law cited).
It should also be noted that the question whether a Member State has failed to fulfil obligations must be determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion and the Court cannot take account of any subsequent changes (see, inter alia, judgments in Commission v Greece, C‑440/06, EU:C:2007:642, paragraph 16, and Commission v Belgium, C‑395/13, EU:C:2014:2347, paragraph 39).
In the present case, the reasoned opinion, dated 22 June 2012, set the Portuguese Republic a period of two months from receipt of that opinion for complying with its obligations under Article 4 of Directive 91/271. The period granted for that compliance thus expired on 22 August 2012.
In respect of the agglomerations of Alvalade, Odemira, Pereira do Campo, Vila Verde (PTAGL 420), Mação, Pontével, Castro Daire, Arraiolos, Ferreira do Alentejo, Vidigueira, Alcácer do Sal, Amareleja, Monchique, Montemor-o-Novo, Grândola, Estremoz, Maceira, Portel, Viana do Alentejo, Cinfães, Ponte de Reguengo, Canas de Senhorim, Repeses, Vila Viçosa, Santa Comba Dão and Tolosa, the Portuguese Republic indicates, in its statement of defence, that, as at the date on which it lodged that defence, works on the treatment plants were under way or scheduled in order to comply with the obligations of Article 4 of Directive 91/271. It is therefore established that those agglomerations were not in compliance, at the end of the period set by the reasoned opinion, with the obligations under Article 4, since they did not have operational waste water treatment plants.
So far as concerns the agglomerations of Loriga, Cercal, Vale de Santarém, Castro Verde, Almodôvar, Amares/Ferreiras, Mogadouro, Melides, Vila Verde (PTAGL 421), Serpa, Vendas Novas, Vila de Prado and Nelas, it is apparent from the documents submitted to the Court, in particular from two tables originating from the Portuguese authorities and reporting on the compliance with Article 4 of Directive 91/271 of the agglomerations as at 30 June 2014 and as at 10 December of the same year, that the works necessary for meeting the requirements under that article either were completed in 2013 or 2014 or would be completed in 2014 or 2015. It is therefore settled that those agglomerations were likewise not in compliance with the obligations arising under Article 4 of Directive 91/271 on the expiry of the period granted to the Portuguese Republic for complying with the requirements of that article.
In relation to the agglomerations of Vila Nova de São Bento, Santiago do Cacém, Alter do Chão, Tábua and Mangualde, it is apparent from the tables mentioned in the previous paragraph that those agglomerations had, from 2012 — or even from before 2012 — operable waste water treatment plants. On the assumption that those works were completed in the course of 2012 or even earlier, the results of an initial sample could in fact have been transmitted by the Portuguese Republic to the Commission before the expiry of the period prescribed in the reasoned opinion, namely 22 August 2012. However, the Portuguese Republic did not produce, before the Court, any relevant data in that regard. In those circumstances, the Commission must be regarded as demonstrating the merits of its complaint in relation to those five agglomerations.
In those circumstances, it must be held that, by not ensuring that discharges from urban waste water treatment plants were subject to an adequate level of treatment, meeting the relevant requirements of Annex I.B to Directive 91/271, in the agglomerations of Alvalade, Odemira, Pereira do Campo, Vila Verde (PTAGL 420), Mação, Pontével, Castro Daire, Arraiolos, Ferreira do Alentejo, Vidigueira, Alcácer do Sal, Amareleja, Monchique, Montemor-o-Novo, Grândola, Estremoz, Maceira, Portel, Viana do Alentejo, Cinfães, Ponte de Reguengo, Canas de Senhorim, Repeses, Vila Viçosa, Santa Comba Dão, Tolosa, Loriga, Cercal, Vale de Santarém, Castro Verde, Almodôvar, Amares/Ferreiras, Mogadouro, Melides, Vila Verde (PTAGL 421), Serpa, Vendas Novas, Vila de Prado, Nelas, Vila Nova de São Bento, Santiago do Cacém, Alter do Chão, Tábua and Mangualde, the Portuguese Republic has failed to fulfil its obligations under Article 4 of that directive.
Costs
Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party must be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Commission has applied for costs and the Portuguese Republic has been unsuccessful, the latter must be ordered to pay the costs.
On those grounds, the Court (Second Chamber) hereby:
1.
Declares that, by not ensuring that discharges from urban waste water treatment plants were subject to an adequate level of treatment, meeting the relevant requirements of Annex I.B to Council Directive 91/271/EEC of 21 May 1991 concerning urban waste water treatment, as amended by Regulation (EC) No 1137/2008 of the European Parliament and of the Council of 22 October 2008, in the agglomerations of Alvalade, Odemira, Pereira do Campo, Vila Verde (PTAGL 420), Mação, Pontével, Castro Daire, Arraiolos, Ferreira do Alentejo, Vidigueira, Alcácer do Sal, Amareleja, Monchique, Montemor-o-Novo, Grândola, Estremoz, Maceira, Portel, Viana do Alentejo, Cinfães, Ponte de Reguengo, Canas de Senhorim, Repeses, Vila Viçosa, Santa Comba Dão, Tolosa, Loriga, Cercal, Vale de Santarém, Castro Verde, Almodôvar, Amares/Ferreiras, Mogadouro, Melides, Vila Verde (PTAGL 421), Serpa, Vendas Novas, Vila de Prado, Nelas, Vila Nova de São Bento, Santiago do Cacém, Alter do Chão, Tábua and Mangualde, the Portuguese Republic has failed to fulfil its obligations under Article 4 of that directive;
2.
Orders the Portuguese Republic to pay the costs.
[Signatures]
( *1 ) Language of the case: Portuguese. |
JUDGMENT OF THE COURT (Third Chamber)
17 December 2015 ( * )
‛References for a preliminary ruling — Free movement of goods — Tax provisions — Internal taxation — Customs duties of a fiscal nature — Charges having equivalent effect — Formalities connected with the crossing of frontiers — Article 30 TFEU — Article 110 TFEU — Directive 92/12/EEC — Article 3(3) — Directive 2008/118/EC — Article 1(3) — Not implemented in domestic law — Direct effect — Levying of a tax on motor vehicles at the time of their import into the territory of a Member State — Tax linked to registration and potential putting into circulation of the vehicle — Refusal to refund the tax where the vehicle is not registered’
In Case C‑402/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Dioikitiko Efeteio Athinon (Administrative Court of Appeal, Athens, Greece), made by decision of 26 March 2014, received at the Court on 22 August 2014, in the proceedings
Viamar — Elliniki Aftokiniton kai Genikon Epicheiriseon AE
v
Elliniko Dimosio,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Second Chamber, acting President of the Third Chamber, C. Toader, E. Jarašiūnas (Rapporteur), C.G. Fernlund and K. Jürimäe, Judges,
Advocate General: M. Wathelet,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 16 September 2015,
after considering the observations submitted on behalf of:
—
Viamar — Elliniki Aftokiniton kai Genikon Epicheiriseon AE, by D. Christodoulou, S. Panagopoulou, and K. Christodoulou, dikigoroi,
—
the Greek Government, by G. Skiani and V. Stroumpouli and by A. Spyropoulos, acting as Agents,
—
the European Commission, by D. Triantafyllou and M. Wasmeier, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 30 TFEU and 110 TFEU, and of Article 1(3) of Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC (OJ 2008 L 9, p. 12).
The reference has been made in the course of proceedings between Viamar — Elliniki Aftokiniton kai Genikon Epicheiriseon AE (‘Viamar’) and the Elliniko Dimosio (Greek State), represented by the Director of the Athens Customs Office (Telonio Athinon, ‘the customs office’) concerning the refusal to refund Viamar the registration taxes paid by it following the import of passenger vehicles into Greek territory.
Legal context
EU law
Under Article 3 of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such goods (OJ 1992 L 76, p. 1):
‘1. This Directive shall apply at Community level to the following products as defined in the relevant Directives:
—
mineral oils,
—
alcohol and alcoholic beverages,
—
manufactured tobacco.
...
3. Member States shall retain the right to introduce or maintain taxes which are levied on products other than those listed in paragraph 1 provided, however, that those taxes do not give rise to border-crossing formalities in trade between Member States.
...’
Directive 92/12 was repealed, with effect from 1 April 2010, by Directive 2008/118.
Recital 5 in the preamble to Directive 2008/118 states:
Article 1(3) of Directive 2008/118 reads as follows:
‘Member States may levy taxes on:
(a)
products other than excise goods;
(b)
the supply of services, including those relating to excise goods, which cannot be characterised as turnover taxes.
However, the levying of such taxes may not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’
Greek law
Article 32(1) of Law No 2960/2001 on the National Customs Code (FEK A’ 265, ‘the National Customs Code’), which, by virtue of Article 131 thereof, is applicable by analogy to the charges levied on Community vehicles, provides:
‘Sums wrongly collected by the customs offices shall be refunded without interest to the person entitled if the latter submits, within the strict time-limit of three (3) years from the date of assessment thereof, a relevant application to the competent customs authority, also enclosing the required supporting documentation.’
Article 121(1) of the National Customs Code is worded as follows:
‘Passenger vehicles classified under tariff heading 87.03 of the Combined Nomenclature [Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1)] shall be subject to a registration tax levied on the taxable value determined pursuant to Article 126 hereof and Article 4 of Law 1573/1985 (FEK A’ 201), …, as in force.’
Article 128 of the National Customs Code provides:
‘1. The obligation to pay the registration tax arises:
for Community vehicles and those coming from a third country, upon their entry into Greece;
for vehicles manufactured in Greece, upon completion of their manufacture;
...
2. The registration tax shall become chargeable and shall be paid before the vehicles are put into circulation, and as regards the vehicles referred to in Articles 121, 122 ... of this Code: in the case of those transported or shipped from other Member States of the European Union (EU), not later than the 15th day of the month following the one on which the obligation to pay the tax arose ...’
Article 130 of the National Customs Code provides:
‘...
2. For the purposes of establishing and collecting the registration tax, ... a special declaration must be submitted to the competent customs authority before the date on which the tax is chargeable and, in any event, before the issuance of the circulation permit.
...
5. After collection of the registration tax and other charges ... the competent customs authority shall issue proof of collection and a certificate of registration or clearance of the vehicle.
...’
Article 141(1) of the National Customs Code provides:
‘Where the applicable provisions and the administrative acts adopted on the basis thereof refer to an excise duty on vehicles or a single additional special duty, this shall henceforth be understood as the registration tax.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
As is apparent from the order for reference, in the period from 2009 to 2012 Viamar imported into Greece 85 new passenger vehicles which had been manufactured in the Czech Republic.
Following the arrival of those vehicles in the port of Piraeus (Greece) and their being stored in a tax warehouse until completion of the customs clearance process, Viamar prepared and submitted to the competent customs authority the declaration provided for in Article 130 of the National Customs Code and then paid the registration tax that corresponded to each of those 85 vehicles, amounting to a total of EUR 141498.89.
The vehicles were never sold in Greece and were re-exported to Belgium, where they were finally sold and put into circulation after payment of the registration tax in Belgium. Thereafter, Viamar filed a request with the customs office seeking a refund of the registration tax paid in Greece, on the ground that the vehicles in question had never been registered or received registration plates in Greece.
By decision of 25 July 2012, the customs office, taking the view that the tax had been duly collected and that therefore it was impossible to apply Article 32 of the National Customs Code in order to grant the refund, dismissed the request. On 26 October 2012, Viamar instituted proceedings against that decision before the Dioikitiko Efeteio Athinon (Administrative Court of Appeal, Athens).
Viamar argues before that court that the registration tax at issue constitutes a charge having an equivalent effect to a customs duty, contrary to Article 30 TFEU. In its submission, should the Court find that that tax constitutes internal taxation within the meaning of Article 110 TFEU, it should, in order to comply with that article, apply equally to domestic and imported goods at the same stage of marketing by virtue of the same chargeable event. Viamar submits, however, that the collection of that tax, as a condition of completion of the import of a motor vehicle, constitutes a border-crossing formality and, therefore, an unlawful restriction on the free movement of goods. The obligation to pay the tax, which arises on the date on which a motor vehicle enters Greece, is therefore contrary to EU law.
The referring court considers that the registration tax at issue is a tax of a fiscal nature and must, accordingly, be examined either in the light of Article 30 TFEU as a charge having equivalent effect to a customs duty or in the light of Article 110 TFEU as a form of internal taxation.
It observes, however, that Article 30 TFEU applies only to taxes which are levied on goods due to the crossing of a border. It states in that regard that the chargeable event for the purposes of the registration tax at issue in the main proceedings is not the vehicles’ crossing of the Greek border but rather their first registration in Greece for the purpose of their being used on the roads there, that the tax is charged pursuant to objective criteria and that it comes within the general scheme of internal taxation. It is therefore not a customs duty charged on imports or a charge having equivalent effect within the meaning of Article 30 TFEU.
The referring court observes that, according to the Court’s settled case-law, registration taxes are regarded as forms of internal taxation within the meaning of Article 110 TFEU. However, the registration tax at issue here, which is levied on new motor vehicles, is not caught by the prohibitions laid down in Article 110 TFEU, since it does not have discriminatory or protective effect because, at the times of the facts in the main proceedings, no motor vehicles were manufactured in Greece.
The referring court adds that Article 1(3) of Directive 2008/118 has not been implemented in Greek law. Its question therefore concerns the issue whether that provision has direct effect and whether an individual may rely directly on the obligation it imposes on Member States not to levy a tax entailing formalities connected with the crossing of frontiers.
The referring court further queries whether the provisions of national law, under which the customs clearance certificate for EU motor vehicles imported into Greek territory is issued after collection of the registration tax, the payment obligation for which arises at the time those vehicles enter Greek territory, are compatible with the principle of the free movement of goods.
In those circumstances, the le Dioikitiko Efeteio Athinon (Administrative Court of Appeal, Athens) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Is Article 1(3) of [Directive 2008/118] legally sufficient in itself and complete/unconditional and sufficiently clear so that, although that particular provision of the directive has not been transposed into the national law of the Member State/the Greek State, it has direct effect and can be relied on by an individual who derives rights from it before the national courts, and the latter are required to take that provision into account?
(2)
In any event, is Article 130(5) of the National Customs Code, in conjunction with Article 128(1) thereof — which provide that the customs clearance certificate for [EU motor] vehicles imported into the country is issued after collection of the registration tax, the obligation to pay which arises upon their entry into the country — compatible with Article 3(c) of the EEC Treaty, providing for the abolition of obstacles to the free movement of goods between Member States?’
Consideration of the questions referred
The first question
By its first question, the referring court asks, in essence, whether Article 1(3) of Directive 2008/118 must be interpreted as fulfilling the conditions for producing direct effect allowing an individual to rely on it before a national court in a dispute between that individual and a Member State.
As a preliminary point, it should be borne in mind that the period during which the motor vehicles at issue in the main proceedings were imported was the years 2009 to 2012. Directive 92/12 was thus applicable to part of those imports, as it was repealed by Directive 2008/118 only with effect from 1 April 2010. As the wording of Article 3(3) of Directive 92/12 is, in essence, identical to that of Article 1(3) of Directive 2008/118, the considerations set out below also hold true for Article 3(3) of Directive 92/12.
According to settled case-law of the Court, whenever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, they may be relied on before the national courts by individuals against the Member State where the State has failed to transpose the directive into national law within the time-limit or has transposed it incorrectly (see judgment in Stichting Natuur en Milieu and Others, C‑165/09 to C‑167/09, EU:C:2011:348, paragraph 93 and the case-law cited).
In the present case, it is apparent from the order for reference, first, that Article 1(3) of Directive 2008/118 has not been implemented in Greek law. Nor is there anything in the case file submitted to the Court indicating that Article 3(3) of Directive 92/12 has been implemented.
Second, Article 1(3) of Directive 2008/118 is unconditional and sufficiently clear in that, without providing for any condition or making it necessary to adopt any further measures, it unequivocally obliges Member States to ensure that, when they levy taxes on goods other than excise goods and on supplies of services, it does not entail formalities connected with the crossing of frontiers in trade between Member States.
In the light of the foregoing, the answer to the first question is that Article 1(3) of Directive 2008/118 must be interpreted as fulfilling the conditions for producing direct effect allowing individuals to rely on it before a national court in a dispute between them and a Member State.
The second question
As a preliminary point, it should be noted that, in the context of the procedure established by Article 267 TFEU providing for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the case before it. To that end, the Court may have to reformulate the questions referred to it (judgment in Brasserie Bouquet, C‑285/14, EU:C:2015:353, paragraph 15 and the case-law cited).
In the present case, it is apparent from the grounds set out in the request for a preliminary ruling that the referring court’s questions concern the interpretation of Directive 2008/118. However, as observed above in paragraph 24, given that the imports of the vehicles at issue in the main proceedings took place between 2009 and 2012, in other words both before and after that directive entered into force on 1 April 2010, Directive 92/12 is also applicable ratione temporis for the purposes of the dispute in the main proceedings.
It is also apparent from the request that the dispute in the main proceedings concerns the refusal by the competent national authorities to refund the registration tax paid by Viamar for the motor vehicles it imported into Greece but re-exported to another Member State without having either registered them or put them into circulation in Greece. The question thus arises, in order to resolve the dispute, as to whether EU law precludes such a practice by national authorities.
In those circumstances, the questions posed by the referring court must be regarded as asking, in essence, whether Articles 30 TFEU and 110 TFEU, as well as Articles 3(3) of Directive 92/12 and 1(3) of Directive 2008/118 must be interpreted as precluding a practice by a Member State, such as that at issue in the main proceedings, by which the registration tax collected upon import of motor vehicles originating from other Member States is not refunded when the vehicles concerned were never registered in that Member State and were re-exported to another Member State.
It should be remembered in that regard that, according to the Court’s settled case-law, a tax levied by a Member State on the registration of motor vehicles for the purpose of being put into circulation in its territory is neither a customs duty nor a charge having equivalent effect to a customs duty within the meaning of Articles 28 TFEU and 30 TFEU. Such a tax is an internal tax and must therefore be examined in the light of Article 110 TFEU (judgment in Tatu, C‑402/09, EU:C:2011:219, paragraph 32 and the case-law cited).
In the present case, the referring court states that the registration tax at issue in the main proceedings, provided for by Articles 121(1) and 128 of the National Customs Code, is levied on account of the first registration of motor vehicles in Greece for the purpose of being put into circulation in Greek territory, not on account of crossing the border into Greece.
In those circumstances, as rightly observed by the referring court, taxation such as the registration tax at issue in the main proceedings must be regarded as being internal taxation within the meaning of Article 110 TFEU and does not per se constitute a charge having equivalent effect to a customs duty within the meaning of Article 30 TFEU. The mere fact that such a tax must be paid before the vehicle can be registered in the Member State concerned is of no import in that regard (see, by analogy, judgment in Brzeziński, C‑313/05, EU:C:2007:33, paragraphs 23 and 24).
The Court has held that Article 110 TFEU may not be relied on against internal taxation imposed on imported products where there is no similar or competing domestic production. In particular, it does not provide a basis for censuring the excessiveness of the level of taxation which the Member States might adopt for particular products, in the absence of any discriminatory or protective effect (judgments in Commission v Denmark, C‑47/88, EU:C:1990:449, paragraph 10, and De Danske Bilimportører, C‑383/01, EU:C:2003:352, paragraph 38).
In the present case, the referring court indicates that there is no domestic production of motor vehicles in Greece and that the provisions of the National Customs Code on registration tax do not distinguish between motor vehicles according to their origin or the nationality of their owners. Nor is there anything in the case file submitted to the Court indicating that the amount of the registration tax at issue in the main proceedings is such as to reduce the number of new motor vehicles imported and registered in Greece, thereby affecting the free movement of goods between Greece and other Member States through its protective effect.
Consequently, inasmuch as a tax such as the registration tax at issue in the main proceedings is charged by reason of the first registration of motor vehicles in Greece for the purpose of being put into circulation in Greek territory, Article 110 TFEU must be interpreted as not precluding such a tax.
As regards Directives 92/12 and 2008/118, motor vehicles are not included in the categories of excise goods in all Member States under Articles 3(1) of Directive 92/12 and 1(1) of Directive 2008/118 and therefore are not covered by the harmonised excise duty arrangements. Although Member States may introduce or maintain taxes on those goods, they must exercise their competence in that field in a manner consistent with EU law (see, to that effect, judgment in Fendt Italiana, C‑145/06 and C‑146/06, EU:C:2007:411, paragraphs 41 and 43 and the case-law cited).
Specifically, Member States must comply not only with the provisions of the FEU Treaty, in particular Articles 30 and 110, but also with Articles 3(3) of Directive 92/12 and 1(3) of Directive 2008/118, since the latter provisions, as observed in paragraph 27 above, prohibit the levying of a tax from entailing formalities connected with the crossing of frontiers in trade between Member States (see, to that effect, judgment in Fendt Italiana, C‑145/06 and C‑146/06, EU:C:2007:411, paragraphs 42 and 44).
In the present case it is apparent from the order for reference that the referring court is uncertain whether the provisions of the National Customs Code, under which the customs clearance certificate for vehicles imported into the Member State concerned is issued after the collection of the registration tax the payment obligation of which arises at the time those vehicles enter Greek territory, entail such formalities.
The Greek Government states in its written observations that all formalities relating to the charging and collection of the registration tax provided for by the National Customs Code are linked to the application of the provisions introducing that tax and are aimed, through the issuance of a customs clearance certificate after collection of the tax, at ensuring payment of the amount corresponding to that tax and at facilitating checks that the tax has actually been paid in the event of a subsequent inspection. The same holds true for the obligation to file a special declaration under Article 130(2) of the National Customs Code, which concerns subsequent determination of the amount of the registration tax and is aimed at ensuring that customs authorities are informed of the entry of vehicles onto Greek territory.
That being so, the dispute in the main proceedings concerns a Member State’s practice under which a registration tax collected upon import of motor vehicles originating from other Member States is not refunded even though the vehicles concerned were never registered into that Member State and were re-exported to another Member State.
It is appropriate to bear in mind in that regard the Court’s case-law, according to which any pecuniary charge, whatever its designation and mode of application, which is imposed unilaterally on goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect within the meaning of Articles 28 TFEU and 30 TFEU (see judgments in Nádasdi and Németh, C‑290/05 and C‑333/05, EU:C:2006:652, paragraphs 38 and 39, and Brzeziński, C‑313/05, EU:C:2007:33, paragraph 22 and the case-law cited).
Although a registration tax such as that provided for under the national rules at issue in the main proceedings has, in principle, as its chargeable event the registration of motor vehicles in a Member State and is, accordingly, internal taxation within the meaning of Article 110 TFEU, that ceases to be the case if it is collected and not refunded when vehicles imported from other Member States have never been registered in that Member State. In such a scenario, it is in reality collected solely by virtue of the crossing of a frontier of a Member State, thereby causing it to constitute a charge having equivalent effect to a customs duty, which is prohibited by Article 30 TFEU.
In the light of all the foregoing, the answer to the second question is that Article 30 TFEU must be interpreted as precluding a practice by a Member State, such as that at issue in the main proceedings, by which the registration tax collected upon import of motor vehicles originating from other Member States is not refunded when the vehicles concerned were never registered in that Member State and were re-exported to another Member State.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
1.
Article 1(3) of Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC must be interpreted as fulfilling the conditions for producing direct effect allowing individuals to rely on it before a national court in a dispute between them and a Member State.
2.
Article 30 TFEU must be interpreted as precluding a practice by a Member State, such as that at issue in the main proceedings, by which the registration tax collected upon import of motor vehicles originating from other Member States is not refunded when the vehicles concerned were never registered in that Member State and were re-exported to another Member State.
[Signatures]
( * ) Language of the case: Greek. |
EU:T:2017:26700011155T
JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
6 April 2017 ( *1 )
‛State aid — Maritime transport — Public service compensation — Capital increase — Decision declaring aid incompatible with the internal market and ordering that it be recovered — Bankruptcy of the applicant — Capacity to be a party to legal proceedings — Continued interest in bringing proceedings — Failure to find that there was no need to adjudicate — Concept of aid — Service of general economic interest — Private investor test — Manifest error of assessment — Error of law — Plea of illegality — Obligation to state reasons — Rights of the defence — Decision 2011/21/EU — Guidelines on State aid for rescuing and restructuring firms in difficulty — Union framework applicable to State aid in the form of public service compensation — Altmark judgment’
In Case T‑220/14,
Saremar — Sardegna Regionale Marittima SpA, established in Cagliari (Italy), represented by G.M. Roberti, G. Bellitti and I. Perego, lawyers,
applicant,
v
European Commission, represented by G. Conte, D. Grespan, and A. Bouchagiar, acting as Agents,
defendant,
supported by
Compagnia Italiana di Navigazione SpA, established in Naples (Italy), represented initially by F. Sciaudone, R. Sciaudone, D. Fioretti and A. Neri, and subsequently by M. Merola, B. Carnevale and M. Toniolo, lawyers,
intervener,
APPLICATION under Article 263 TFEU for annulment of Commission Decision C(2013) 9101 final of 22 January 2014 concerning aid measures SA.32014 (2011/C), SA.32015 (2011/C), SA.32016 (2011/C) granted by the Autonomous Region of Sardinia (Italy) to Saremar in the form of public service compensation and a capital increase, in so far as that decision found those measures to be State aid incompatible with the internal market and ordered that it be recovered,
THE GENERAL COURT (Eighth Chamber),
composed of D. Gratsias (Rapporteur), President, M. Kancheva and N. Półtorak, Judges,
Registrar: J. Palacio González, Principal Administrator,
having regard to the written part of the procedure and further to the hearing on 20 July 2016,
gives the following
Judgment ( )
[omissis]
Law
1. Saremar’s capacity to be a party to legal proceedings
As a preliminary point, it is apparent from the explanations and documents provided by the parties to the Court on 11 and 29 July 2016 that, given the impossibility of repaying that part of the aid in dispute that had already been paid out, Saremar requested to be admitted to a procedure for an arrangement with creditors with a view to its liquidation, which request was homologated by the Tribunale di Cagliari (Cagliari Court, Italy) on 22 July 2015. Saremar ceased all activity on 31 March 2016 and is at an advanced stage of the liquidation phase, inasmuch as all privileged creditors have had their claims satisfied and the plan is to proceed in the coming months with an initial substantial distribution amongst the unsecured creditors.
Under the applicable national law and procedural rules, a company placed under liquidation may lose its capacity to be a party to legal proceedings, at least in its own name. Moreover, the applicant itself states that that may be the case under Italian law. At the hearing and in its correspondence of 29 July 2016, the Commission submitted only that the applicant’s bankruptcy calls its interest in bringing proceedings into question, but not that that liquidation calls into question its capacity to be a party to legal proceedings. However, since the applicant’s loss of capacity to be a party to legal proceedings would make the question of its interest in bringing proceedings pointless, it must be ascertained whether it has retained that capacity in the course of the present proceedings.
In that regard, although, as the Court of Justice has held, the concept of ‘legal person’ in the fourth paragraph of Article 263 TFEU does not necessarily coincide with the corresponding concepts specific to the different legal orders of the Member States, it nevertheless follows from the case-law that the concept implies, in principle, the existence of a legal personality constituted under the law of a Member State or third country and capacity to be a party to legal proceedings recognised under that law (see, to that effect, judgments of 20 March 1959, Nold v High Authority, 18/57, EU:C:1959:6; 28 October 1982, Groupement des Agences de voyages v Commission, 135/81, EU:C:1982:371, paragraph 10; 18 January 2007, PKK and KNK v Council, C‑229/05 P, EU:C:2007:32, paragraph 114; and order of 24 November 2009, Landtag Schleswig-Holstein v Commission, C‑281/08 P, not published, EU:C:2009:728, paragraph 22). Thus, it is only in exceptional circumstances, including when imperatives of ensuring effective judicial protection so require, that the admissibility of an action brought by an entity that does not have capacity to be a party to legal proceedings may be allowed (see, to that effect, judgment of 18 January 2007, PKK and KNK v Council, C‑229/05 P, EU:C:2007:32, paragraphs 109 to 114). That capacity to be a party to legal proceedings must be retained throughout the proceedings (see, to that effect, judgments of 20 September 2007, Salvat père & fils and Others v Commission, T‑136/05, EU:T:2007:295, paragraphs 25 to 27, and 21 March 2012, Marine Harvest Norway and Alsaker Fjordbruk v Council, T‑113/06, not published, EU:T:2012:135, paragraphs 27 to 29). The existence of legal personality and the capacity to be a party to legal proceedings must be examined in the light of relevant national law (judgment of 27 November 1984, Bensider and Others v Commission, 50/84, EU:C:1984:365, paragraph 7, and order of 3 April 2008, Landtag Schleswig-Holstein v Commission, T‑236/06, EU:T:2008:91, paragraph 22).
In the present case, it is apparent from Saremar’s correspondence of 29 July 2016 that, in accordance with the case-law of the Corte suprema di cassazione (Court of Cassation, Italy), a company that is the subject of an arrangement with creditors retains the right to bring legal proceedings in its own name and to be a party to legal proceedings in order to protect its assets. Moreover, the applicant attached to that correspondence a letter from its judicial liquidators dated 26 July 2016 confirming that the terms of reference in the present proceedings remain valid. Consequently, the conclusion is that, despite being placed under liquidation, Saremar has not lost its capacity to be a party to legal proceedings in the course of the present proceedings.
2. The Commission’s plea that there is no need to adjudicate
The Commission submits that, due to Saremar’s ongoing liquidation, it has lost its interest in bringing proceedings in the course of the present proceedings. It observes that Saremar’s bankruptcy proceedings are at an advanced stage and could be completed before judgment is given in the present proceedings. Moreover, as the applicant itself recognises, it can longer engage in economic activity, even if the contested decision were to be annulled, thereby exempting it from the obligation to restore the aid. Lastly, the interest of Saremar’s creditors in seeing the amount of the disputed aid being excluded from its liabilities is distinct from the interest in pursuing its economic activity. The Commission states by way of conclusion that such a lack of interest in bringing proceedings should lead the Court to rule that there is no need to adjudicate in the present case.
In response to those arguments, Saremar submits that the annulment of the contested decision will produce legal effects for it, in that it will reduce its liabilities in the arrangement with creditors by over EUR 11 million, thereby enabling full satisfaction of all creditors’ claims.
In accordance with established case-law, an interest in bringing proceedings is an essential and fundamental prerequisite for any legal proceedings (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 58 and the case-law cited).
In that regard, it follows from Article 263 TFEU that there is a clear distinction between the right to bring an action for annulment as recognised for EU institutions and the Member States, referred to in the second paragraph of that article, and that of natural and legal persons, referred to in the fourth paragraph thereof. Thus, according to settled case-law, in order to exercise their right to bring proceedings, the EU institutions and the Member States need not demonstrate that they have locus standi or an interest in bringing proceedings (see, to that effect, judgment of 24 March 2011, Freistaat Sachsen and Land Sachsen-Anhalt v Commission, T‑443/08 and T‑455/08, EU:T:2011:117, paragraph 64, and order of 19 February 2013, Provincie Groningen and Others v Commission, T‑15/12 and T‑16/12, not published, EU:T:2013:74, paragraphs 42 and 44 and the case-law cited).
By contrast, the admissibility of an action brought by natural and legal persons as referred to in the fourth paragraph of Article 263 TFEU is subject, firstly, to the condition that they have locus standi, that is to say, in accordance with the wording of that provision, that their action is directed at an act which is addressed to them or an act which is of direct and individual concern to them, or a regulatory act not entailing implementing measures if that act is of direct concern to them. Secondly, that interest in bringing proceedings must exist at the stage of lodging the action, which is a distinct condition of admissibility from locus standi. Like the purpose of the action, the interest in bringing proceedings must continue until the final decision, failing which there will be no need to adjudicate (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraphs 57 and 59 to 62 and the case-law cited).
The lack of legal interest in bringing proceedings constitutes an absolute bar to proceedings which it is for the Court to examine of its own motion either at the time the action is lodged in order to determine whether the action is admissible in the first place, or during the course of the proceedings in order to ascertain whether there is still a need to adjudicate on the action (see, to that effect, order of 24 March 2011, Internationaler Hilfsfonds v Commission, T‑36/10, EU:T:2011:124, paragraph 46 and the case-law cited).
Such an interest requires that the annulment of that act must be capable, in itself, of having legal consequences and that the action may therefore, through its outcome, procure an advantage to the party which brought it (judgments of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraph 42, and 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 55). An applicant’s interest in bringing proceedings must be vested and current and may not concern a future and hypothetical situation (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 56 and the case-law cited).
As a preliminary point, the present action meets the admissibility conditions referred to in paragraphs 51 to 53 above both in terms of the applicant’s locus standi and its having an interest in bringing proceedings at the time the action is lodged, a point not disputed by the Commission.
Regarding, in particular, the interest in bringing proceedings, it should be noted that, on the date the action was lodged, the contested decision adversely affected the applicant, in that the Commission declared incompatible and unlawful the aid the applicant had received and ordered that it be recovered. By that fact alone, the contested decision brought about a change in the legal position of the company which, as from the time of adoption of that decision, was no longer entitled to receive that aid and had to expect, in principle, to have to repay that aid (see judgment of 21 December 2011, ACEA v Commission, C‑319/09 P, not published, EU:C:2011:857, paragraphs 68 and 69 and the case-law cited).
It is clear that, notwithstanding Saremar’s being placed under liquidation, it has not lost its interest in bringing proceedings as defined in paragraph 55 above.
First of all, the contested decision has not been repealed or withdrawn, so that the present action retains its purpose (see, to that effect, judgment of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraph 48).
Next, the legal effects of the contested decision have not become obsolete solely due to Saremar’s bankruptcy.
First of all, because of the contested decision, the RAS is still not allowed to disburse to Saremar that part of the disputed capital increase which it had not paid because of being notified of that operation by the Commission, as indicated in the minutes of the shareholders’ meeting of Saremar dated 11 July 2012, annexed to the application. There is nothing in the case file ruling out the possibility that, should the contested decision be annulled, that part of the disputed capital increase, which Saremar would then be entitled to receive, might be integrated into its assets.
Secondly, regarding the part of the disputed aid already paid by the RAS to Saremar, according to settled case-law, the mere fact that the undertaking has been placed in bankruptcy proceedings, inter alia when those proceedings lead to the undertaking’s being liquidated, does not affect the principle that aid is to be recovered. In such a scenario, the re-establishment of the previous situation and the elimination of the distortion of competition resulting from the unlawfully paid aid may, in principle, be achieved by entry of the liability relating to the repayment of the aid in question in the schedule of liabilities (see judgment of 1 July 2009, KG Holding and Others v Commission, T‑81/07 to T‑83/07, EU:T:2009:237, paragraphs 192 and 193 and the case-law cited). Consequently, because of the contested decision, the disputed aid must, at the very least, remain in Saremar’s liabilities, so that, even if it cannot be repaid to the RAS, it is no longer included in the applicant’s assets.
Consequently, it should be noted that Saremar’s bankruptcy does not affect the finding in paragraph 55 above, to the effect that annulment of the contested decision would be liable to procure an advantage for the applicant, as it would necessarily bring about a change to its legal position in regards to the disputed aid. Annulment would also have the effect of improving significantly its economic situation, as the disputed aid could once again be integrated into its assets. Furthermore, that analysis is confirmed by the judgment of 13 September 2010, Greece and Others v Commission (T‑415/05, T‑416/05 and T‑423/05, EU:T:2010:386), in which the Court held that companies in liquidation that had repaid the aid at issue therein retained an interest in bringing proceedings since, in the event of annulment, the Hellenic Republic would be liable to return to them the amounts repaid, which would then be entered in the assets of their respective liquidation balance sheets (judgment of 13 September 2010, Greece and Others v Commission, T‑415/05, T‑416/05 and T‑423/05, EU:T:2010:386, paragraph 62).
Nor has the Court been informed to date that the process of liquidating Saremar has been completed.
It follows from all the foregoing that Saremar retains an interest in bringing the present proceedings and, therefore, that there is a need to adjudicate in the present case.
[omissis]
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby:
1.
Dismisses the action;
2.
Orders Saremar — Sardegna Regionale Marittima SpA to bear its own costs and to pay those incurred by the European Commission and Compagnia Italiana di Navigazione SpA.
Gratsias
Kancheva
Półtorak
Delivered in open court in Luxembourg on 6 April 2017.
[Signatures]
( *1 ) Language of the case: Italian.
( ) Only the paragraphs of this judgment which the Court considers it appropriate to publish are reproduced here. |
JUDGMENT OF THE GENERAL COURT (Third Chamber, Extended Composition)
15 November 2018 ( *1 )
(Common foreign and security policy — Restrictive measures imposed on the PKK with a view to combating terrorism — Freezing of funds — Powers of the Council — Whether an authority of a third State can be classified as a competent authority within the meaning of Common Position 2001/931/CFSP — Factual basis of the decisions to freeze funds — Reference to terrorist acts — Judicial review — Obligation to state reasons — Plea of illegality)
In Case T‑316/14,
Kurdistan Workers’ Party (PKK), represented by A. van Eik, T. Buruma and M. Wijngaarden, lawyers,
applicant,
v
Council of the European Union, represented initially by F. Naert and G. Étienne, and subsequently by F. Naert and H. Marcos Fraile, acting as Agents,
defendant,
supported by
United Kingdom of Great Britain and Northern Ireland, represented initially by C. Brodie and V. Kaye, subsequently by C. Brodie and S. Brandon, subsequently by C. Brodie, C. Crane and R. Fadoju, subsequently by C. Brodie, R. Fadoju and P. Nevill, and then by R. Fadoju, acting as Agents,
and by
European Commission, represented initially by F. Castillo de la Torre and D. Gauci, subsequently by D. Gauci, J. Norris-Usher and T. Ramopoulos, and then by J. Norris-Usher, T. Ramopoulos and R. Tricot, acting as Agents,
interveners,
APPLICATION pursuant to Article 263 TFEU seeking, initially, the annulment of Council Implementing Regulation (EU) No 125/2014 of 10 February 2014 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation (EU) No 714/2013 (OJ 2014 L 40, p. 9), in so far as that act concerns the applicant, and, subsequently, the annulment of other consequential acts, in so far as they concern the applicant,
THE GENERAL COURT (Third Chamber, Extended Composition),
composed of S. Frimodt Nielsen, President, V. Kreuschitz, I.S. Forrester (Rapporteur), N. Półtorak and E. Perillo, Judges,
Registrar: K. Guzdek, Administrator,
having regard to the written part of the procedure and further to the hearing on 16 April 2018,
gives the following
Judgment
Background to the dispute
On 28 September 2001 the United Nations Security Council adopted Resolution 1373 (2001) laying out wide-ranging strategies to combat terrorism, and in particular the financing of terrorism.
On 27 December 2001 the Council of the European Union considered that action by the European Union was necessary in order to implement Resolution 1373 (2001) of the United Nations Security Council and adopted Common Position 2001/931/CFSP on the application of specific measures to combat terrorism (OJ 2001 L 344, p. 93). In particular, Article 2 of Common Position 2001/931 prescribes the freezing of funds and other financial assets or economic resources of persons, groups and entities listed in the annex to that common position.
On the same date, in order to implement at EU level the measures described in Common Position 2001/931, the Council adopted Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism (OJ 2001 L 344, p. 70) and Decision 2001/927/EC establishing the list provided for in Article 2(3) of Regulation No 2580/2001 (OJ 2001 L 344, p. 83). The applicant was not named in that initial list.
On 2 May 2002 the Council adopted Common Position 2002/340/CFSP updating Common Position 2001/931 (OJ 2002 L 116, p. 75). The Annex to Common Position 2002/340 updates the list of persons, groups and entities to whom the restrictive measures laid down by Common Position 2001/931 apply and, in particular, inserts the name of the Kurdistan Workers’ Party (PKK), the applicant, identified as follows: ‘Kurdistan Workers’ Party (PKK)’.
On the same date, the Council also adopted Decision 2002/334/EC implementing Article 2(3) of Regulation No 2580/2001 and repealing Decision 2001/927/EC (OJ 2002 L 116, p. 33). That decision named the applicant in the list provided for in Article 2(3) of Regulation No 2580/2001, in the same terms as those used in the Annex to Common Position 2002/340.
Those instruments have since been regularly updated in accordance with Article 1(6) of Common Position 2001/931 and Article 2(3) of Regulation No 2580/2001. The PKK has always been named in the lists — of groups and entities subject to the restrictive measures imposed by the abovementioned instruments — annexed to those instruments (‘the lists at issue’). Since 2 April 2004, the entity named on the lists at issue is the ‘Kurdistan Workers’ Party (“PKK”) (also known as “KADEK”, also known as “KONGRA-GEL”)’.
The Council adopted in particular, on 10 February 2014, Implementing Regulation (EU) No 125/2014 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation No 714/2013 (OJ 2014 L 40, p. 9), whereby the restrictive measures imposed on the applicant were maintained. The statement of reasons accompanying Regulation No 125/2014 was based on, inter alia, an order of the Home Secretary of the United Kingdom dated 29 March 2001 proscribing the PKK under the Terrorism Act 2000 (United Kingdom) (‘the order of the United Kingdom Home Secretary’), as supplemented by an order of 14 July 2006, which entered into force on 14 August 2006, stating that ‘KADEK’ and ‘Kongra Gel Kurdistan’ were to be treated as other names for the PKK (‘the order of 14 July 2006’); a decision of the United States Government designating the PKK as a Foreign Terrorist Organisation under Section 219 of the United States Immigration and Nationality Act, as amended (‘the FTO designation’), and a decision of the United States Government designating the PKK as a Specially Designated Global Terrorist under Executive Order No 13224 (‘the SDGT designation’). That statement of reasons also referred to a list of many incidents, committed between November 2003 and October 2011, that were classified as acts of terrorism and were alleged to have been committed by the PKK, as well as a number of judgments of the State Security Courts of the Republic of Turkey. Regulation No 125/2014 was the initial subject matter of the present action.
Procedure and developments during the proceedings
By application lodged at the Registry of the General Court on 1 May 2014, the applicant brought the present action, seeking annulment of Implementing Regulation No 125/2014, in so far as that regulation concerned it, and a declaration that Regulation No 2580/2001 did not apply to it.
In the written part of the procedure, by document lodged on 15 September 2014, the Council lodged a Statement of Defence, to which the Council annexed, inter alia, the order of the United Kingdom Home Secretary, the order of 14 July 2006, the FTO designation, the SDGT designation, a number of annual reports of the Office of the United States Coordinator for Counterterrorism of the United States Department of State and a number of press releases. By document dated 31 March 2015, the Council subsequently lodged a rejoinder, to which it annexed, inter alia, extracts of a judgment of 23 April 2013 of the cour d’appel de Paris (Paris Court of Appeal, France) and of a judgment of 21 May 2014 of the Cour de cassation (Court of Cassation, France).
By document lodged at the Court’s Registry on 8 September 2014, the European Commission sought leave to intervene in the present proceedings in support of the Council. By order of 7 January 2015, under Article 116(1) of the Rules of Procedure of the General Court of 2 May 1991, the President of the Third Chamber of the Court granted leave to intervene. By document lodged at the Court’s Registry on 19 March 2015, the Commission lodged its statement in intervention. Both the applicant and the Council submitted their observations within the prescribed period.
By document lodged at the Court’s Registry on 29 June 2015, the United Kingdom of Great Britain and Northern Ireland sought leave to intervene in the present case in support of the form of order sought by the Council. By decision of 12 August 2015, under Article 144(4) of the Court’s Rules of Procedure, the President of the Third Chamber of the Court granted leave to intervene, the rights of the United Kingdom being restricted however to those under Article 116(6) of the Rules of Procedure of 2 May 1991.
By decision of 16 May 2016, under Article 70(1) of the Rules of Procedure, the President of the Third Chamber of the Court stayed the proceedings pending the delivery of the judgments in the cases A and Others (C‑158/14), Council v LTTE (C‑599/14 P) and Council v Hamas (C‑79/15 P). Following the delivery of the judgments of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202); of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583); and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584), the proceedings automatically resumed.
By decision of 5 September 2017, adopted as a measure of organisation of procedure under Article 89(3)(c) of the Rules of Procedure, the Court (Third Chamber) requested the parties to submit their observations on the judgments of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202); of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583); and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584).
By document lodged at the Court’s Registry on 29 September 2017, the applicant submitted its comments on the judgments of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202); of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583); and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584). First, the applicant submits that the judgment of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202) does not definitively answer the questions of law raised in its first and second pleas in law. Second, according to the applicant, it is apparent from the judgments of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583), and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584), that a list of incidents that are categorised as terrorist acts, such as that used in this case, cannot be regarded as a decision of a competent national authority; that the Council is obliged to provide, in the statement of reasons relating to decisions of authorities of a third State, evidence that the Council has ensured that the applicant’s rights of defence and its right to effective judicial protection are respected, as the Council failed to do in this case, and that the fact that a significant period of time has elapsed since the adoption of the national decisions that served as the basis for the initial designation of the applicant on the lists at issue may impose on the Council the obligation to produce additional arguments to justify the retention of the applicant’s name on the lists at issue. The applicant also produces a judgment of the cour d’appel de Bruxelles (Brussels Court of Appeal, Belgium) of 14 September 2017 (‘the judgment of the Brussels Court of Appeal’) which, according to the applicant, held that the applicant cannot be regarded as a terrorist organisation and that acts attributed to the Kurdistan Freedom Hawks (TAK) are not attributable to the PKK.
By documents lodged at the Court’s Registry on 5 October 2017, the Council and the Commission lodged their observations on the judgments of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202); of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583); and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584). They contend that the first and second pleas in law relied on by the applicant have to be rejected in the light of the judgment of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202). What is more, the judgment of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583) confirms that the Council’s decision to keep the applicant on the lists at issue can be based on decisions of third-State authorities and on evidence other than a decision of competent national authorities.
By means of Implementing Regulation (EU) No 790/2014 of 22 July 2014 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation No 125/2014 (OJ 2014 L 217, p. 1), the restrictive measures imposed on the applicant were maintained, the grounds for the applicant’s continued listing not being altered.
By letter lodged at the Court’s Registry on 20 August 2014, the applicant sought leave to modify its form of order so that its pleas in law and claims would apply mutatis mutandis to Regulation No 790/2014 and to the statement of reasons accompanying it. By letter lodged at the Court’s Registry on 15 September 2014, the Council raised no objections to the applicant’s request and referred mutatis mutandis to its defence.
By Council Implementing Regulation (EU) 2015/513 of 26 March 2015 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation No 790/2014 (OJ 2015 L 82, p. 1), and by Council Decision (CFSP) 2015/521 of the same date updating and amending the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931 and repealing Decision 2014/483/CFSP (OJ 2015 L 82, p. 107), the restrictive measures imposed on the applicant were maintained.
By letter of 27 March 2015, notified to the applicant on 1 April 2015, the Council sent to the latter the statement of reasons for its being kept on the lists at issue. In its letter of 27 March 2015, the Council stated, in response to the arguments put forward by the applicant, that the fact that there are some Kurdish groups among those fighting against the group known as ISIL did not affect its assessment that the PKK met the criteria for designation under Common Position 2001/931. In the statement of reasons annexed to that letter, the Council relied on three sets of national decisions: (i) the order of the United Kingdom Home Secretary, as supplemented by the order of 14 July 2006; (ii) the FTO designation and the SDGT designation, and (iii) a judgment of 2 November 2011 of the tribunal de grande instance de Paris (Paris Regional Court, France), whereby the centre culturel kurde Ahmet Kaya (Ahmet Kaya Kurdish Cultural Centre) was convicted of participation in a criminal association in order to prepare an act of terrorism and of financing a terrorist undertaking, that judgment being upheld on appeal by a judgment of 23 April 2013 of the cour d’appel de Paris (Paris Court of Appeal) and, on further appeal, by a judgment of 21 May 2014 of the Cour de cassation (Court of Cassation) (together, ‘the French judicial decisions’). The Council held that each of those national decisions constituted a decision of a competent authority within the meaning of Article 1(4) of Common Position 2001/931 and that those decisions still remained in force. The Council then stated that it had assessed whether there was anything in its possession that supported the delisting of the PKK from the lists at issue and that it had found nothing. The Council also stated its view that the grounds for the inclusion of the PKK in the lists at issue remained valid and concluded the PKK should continue to be named on the lists at issue.
Further, annexed to the statement of reasons was a description of each national decision, consisting of a presentation of how the concept of terrorism was defined under national law, a description of the applicable national administrative and judicial procedures, a summary of the procedural history and the aftermath of the national decision concerned, a summary of the conclusions reached by the competent authorities with regard to the applicant, a narration of the acts on which those competent authorities had based their decision and the finding that those acts constituted terrorist acts within the meaning of Article 1(3) of Common Position 2001/931. However, that statement of reasons no longer contained any reference to the judgments of the State Security Courts of the Republic of Turkey or to the list of incidents categorised as terrorist acts and allegedly committed by the applicant that were mentioned in the earlier statements of reasons.
By letter lodged at the Court’s Registry on 26 May 2015, the applicant sought leave to modify its form of order so that its pleas in law and claims would apply mutatis mutandis to Implementing Regulation 2015/513, to Decision 2015/521 and to the statement of reasons accompanying them. In its statement of modification, the applicant claims, inter alia, that the Council took no account of developments regarding the involvement of the PKK in fighting against ISIL. As regards the order of the United Kingdom Home Secretary, the applicant disputes the relevance of the fact that that order was confirmed in December 2014 following a re-examination, since the request for re-examination was not made by it. The applicant also claims that the description, in the statement of reasons, of incidents that occurred in 2014 and on which the United Kingdom Home Secretary relied is too vague to permit the conclusion that those incidents constitute terrorist acts attributable to the PKK. The applicant also denies responsibility for those incidents, which it says were committed by a group that is independent of the PKK, and does not accept that those incidents can be categorised as terrorist acts. Likewise, as regards the FTO designation and the SDGT designation, the applicant claims that the description of the incidents attributed to it is again too vague to permit the conclusion that those incidents constitute terrorist acts attributable to the PKK. As regards the French judicial decisions, the applicant claims that those should be disregarded since they concern an entity other than the PKK and are based on information that was not verified.
By letter lodged at the Court’s Registry on 12 June 2015, the Council submitted its observations on the applicant’s request to modify its form of order. The Council challenged, inter alia, whether the applicant had complied with Article 44(1) of the Rules of Procedure of 2 May 1991 and referred mutatis mutandis to its Defence. The Council did not, however, raise any objection to the substantive extension of the action sought by the applicant.
Thereafter, the applicant’s name was retained on the lists at issue at each half‑yearly review. Consequently, the applicant requested that it be permitted to modify its forms of order in such a way that its pleas in law and forms or order should be directed mutatis mutandis against new acts adopted by the Council.
Thus, by Council Implementing Regulation (EU) 2015/1325 of 31 July 2015 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation 2015/513 (OJ 2015 L 206, p. 12), and by Council Decision (CFSP) 2015/1334 of the same date updating the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931, and repealing Decision 2015/521 (OJ 2015 L 206, p. 61), the restrictive measures imposed on the applicant were maintained, the grounds for the applicant’s continued listing not being altered.
By statement of modification lodged at the Court’s Registry on 15 September 2015, in accordance with Article 86(2) to (4) of the Rules of Procedure, the applicant modified the application, so that the application should also seek the annulment of Regulation 2015/1325 and Decision 2015/1334, in so far as those acts concern it. In its observations lodged at the Court’s Registry on 8 October 2015, the Council took note of that modification.
By means of Council Implementing Regulation (EU) 2015/2425 of 21 December 2015 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation 2015/1325 (OJ 2015 L 334, p. 1), the restrictive measures imposed on the applicant were maintained, the grounds for the applicant’s continued listing not being altered.
By statement of modification lodged at the Court’s Registry on 18 February 2016, the applicant modified the application, so that the application should also seek the annulment of Regulation 2015/2425, in so far as that act concerns it. In its observations lodged at the Court’s Registry on 15 March 2016, the Council took note of that modification.
By means of Council Implementing Regulation (EU) 2016/1127 of 12 July 2016 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation 2015/2425 (OJ 2016 L 188, p. 1), the restrictive measures imposed on the applicant were maintained, the grounds for the applicant’s continued listing not being altered.
By statement of modification lodged at the Court’s Registry on 9 September 2016, the applicant modified the application, so that the application should also seek the annulment of Regulation 2016/1127, in so far as that act concerns it.
By means of Council Implementing Regulation (EU) 2017/150 of 27 January 2017 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation 2016/1127 (OJ 2017 L 23, p. 3), the restrictive measures imposed on the applicant were maintained, the grounds for the applicant’s continued listing not being altered.
By statement of modification lodged at the Court’s Registry on 23 March 2017, the applicant modified the application, so that the application should also seek the annulment of Regulation 2017/150, in so far as that act concerns it. In its observations lodged at the Court’s Registry on 17 August 2017, the Council took note of that modification. However, it referred to the judgments of 14 March 2017, A and Others (C‑158/14, EU:C:2017:202); of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583); and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584) in support of its argument that the application should be dismissed.
By means of Council Implementing Regulation (EU) 2017/1420 of 4 August 2017 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation 2017/150 (OJ 2017 L 204, p. 3), and by means of Council Decision (CFSP) 2017/1426, of the same date, updating the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931 and repealing Decision (CFSP) 2017/154 (OJ 2017 L 204, p. 95), the restrictive measures imposed on the applicant were maintained, the grounds for the applicant’s continued listing not being altered.
By statement of modification lodged at the Court’s Registry on 29 September 2017, the applicant modified the application, so that the application should also seek the annulment of Regulation 2017/1420 and of Decision 2017/1426, in so far as those acts concern it. In its observations lodged at the Court’s Registry on 27 October 2017, the Council took note of that modification. In addition, with respect to the judgment of the Brussels Court of Appeal produced by the applicant, the Council contends that it does not call into question the designation of the applicant as a terrorist organisation. First, the judgment concerned acknowledges that the fact that the PKK is not classified as a terrorist organisation is due to specific features of Belgian criminal law. Second, the judgment of the Brussels Court of Appeal emphasised that acts of violence have been committed in the context of the conflict between the applicant and the Turkish authorities since the end of the ceasefire in 2015. Third, in its judgment, the cour d’appel de Bruxelles (Brussels Court of Appeal) held that it was not possible to conclude with certainty that the acts committed by the TAK could be attributed to the PKK on the basis of the documents in the case file, but the judgment referred to a German court decision that came to the opposite conclusion.
On a proposal from the Third Chamber, the Court decided, pursuant to Article 28 of the Rules of Procedure, to assign the case to a Chamber sitting in extended composition.
On a proposal from the Judge-Rapporteur, the Court decided to open the oral part of the procedure.
At the hearing on 16 April 2018, the parties presented oral argument and replied to oral questions put by the Court. On that occasion, while restating its position on the relevance of international humanitarian law to the interpretation of the concept of a terrorist act, the applicant informed the Court that it had decided to withdraw its first plea in law, that being duly recorded in the minutes of the hearing. Following the hearing, the oral procedure was closed and the case entered the deliberation stage.
Forms of order sought
Following the modifications to its forms of order, the applicant claims that the General Court should:
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annul, in so far as they concern it, Implementing Regulations No 125/2014, No 790/2014, 2015/513, 2015/1325, 2015/2425, 2016/1127, 2017/150 and 2017/1420, and Decisions 2015/521, 2015/1334 and 2017/1426, and the statements of reasons accompanying them (‘the contested acts’);
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order the Council to pay the costs.
The Council, supported by the Commission and the United Kingdom, contends that the Court should:
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dismiss the action in its entirety;
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order the applicant to pay the costs.
Substance
In support of its claims for annulment of the contested acts, the applicant relies, in essence, on eight pleas in law. The first plea in law, which the applicant withdrew at the hearing, concerns an infringement of the international law of armed conflict. In particular, the applicant claims that Common Position 2001/931 is contrary to international humanitarian law in that it concerns acts which, in the context of an armed conflict that is not of an international character, do not constitute war crimes and are legitimate under the law of armed conflict. The second plea alleges infringement of Article 1(3) of Common Position 2001/931 in so far as the PKK is classified as a terrorist group. The third plea alleges infringement of Article 1(4) of Common Position 2001/931, since the contested acts are not based on a decision of a competent national authority. One reason why the contested acts should be annulled is that they are partly based on decisions of third States. The fourth plea alleges infringement of Article 51 of the Charter of Fundamental Rights of the European Union in that the contested acts are in part based on information obtained through torture or ill-treatment. The fifth plea alleges infringement of Article 1(6) of Common Position 2001/931, in that the Council did not conduct any proper review of the inclusion of the PKK’s name on the lists at issue. The sixth plea alleges infringement of the principles of proportionality and subsidiarity. The seventh plea alleges infringement of the obligation to state reasons laid down in Article 296 TFEU. The eighth plea alleges infringement of the rights of the defence and of the right to effective judicial protection.
The Court considers it appropriate to begin by examining the seventh plea in law.
The seventh plea in law: infringement of the obligation to state reasons
By its seventh plea in law, the applicant claims, in essence, that the Council was in breach of its obligation to state reasons by not providing the actual and specific reasons why it decided, after review, to maintain the listing of the PKK on the lists at issue. In particular, the applicant claims that the Council has not explained why the national decisions on which it based the maintenance of the PKK’s listing on the lists at issue constituted decisions of a competent authority within the meaning of Article 1(4) of Common Position 2001/931; that the Council failed to state the reasons for those decisions; that the Council failed to examine whether the incidents on which the national authorities relied could be categorised as terrorist acts within the meaning of Common Position 2001/931, and failed to state the reasons why those decisions were sufficient ground to maintain the imposition of restrictive measures on the PKK. Further, as regards the FTO designation and the SDGT designation, the Council failed to examine whether there were effective procedural safeguards in the United States.
The Council does not accept those arguments and considers that the statement of reasons accompanying the contested acts, read in conjunction with those acts, satisfies its obligation to state reasons. In particular, the reasons that led to the initial inclusion of the applicant on the lists at issue remain valid. As regards the order of the United Kingdom Home Secretary, the Council relies on the judgment of 23 October 2008, People’s Mojahedin Organization of Iran v Council (T‑256/07, EU:T:2008:461), which concerned the same order, and in which the Court held that the Council had fulfilled its obligation to state reasons by referring to that order and to a list of incidents categorised as terrorist acts. As regards the FTO and SDGT designations, the Council contends, inter alia, that the information contained in the statement of reasons was precise enough to enable the applicant to bring proceedings before the competent national authorities and that the evidence provided satisfies its obligation to state reasons as laid down in the judgments of 26 July 2017, Council v LTTE (C‑599/14 P, EU:C:2017:583), and of 26 July 2017, Council v Hamas (C‑79/15 P, EU:C:2017:584).
In that regard, it must be recalled that the purpose of the obligation to state reasons for an act that adversely affects a person, as laid down in the second paragraph of Article 296 TFEU and enshrined in Article 41(2)(c) of the Charter of Fundamental Rights, that obligation being a corollary of the principle of respect for the rights of the defence, is, first, to provide the person concerned with sufficient information to make it possible to determine whether the act is well founded or whether it is vitiated by an error which may permit its validity to be contested before the Courts of the European Union and, second, to enable the latter to review the lawfulness of that act (see judgments of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 29 and the case-law cited, and of 28 May 2013, Trabelsi and Others v Council, T‑187/11, EU:T:2013:273, paragraph 66 and the case-law cited).
The statement of reasons for such an act must therefore, in any event, set out the facts and the legal considerations that have decisive importance in the context of that act (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 30 and the case-law cited).
Accordingly, in accordance with settled case-law, the statement of reasons for an initial decision to freeze funds and the statement of reasons for subsequent decisions must refer not only to the legal conditions for the application of Common Position 2001/931 and of Regulation No 2580/2001, but also to the actual and specific reasons why the Council considers, in the exercise of its discretion, that the person concerned must be made the subject of a measure freezing funds (see, to that effect, judgments of 15 November 2012, Council v Bamba, C‑417/11 P, EU:C:2012:718, paragraph 52; of 16 October 2014, LTTE v Council, T‑208/11 and T‑508/11, EU:T:2014:885, paragraph 162; and of 25 March 2015, Central Bank of Iran v Council, T‑563/12, EU:T:2015:187, paragraph 55).
Consequently, unless there are compelling reasons touching on the security of the European Union or of its Member States or the conduct of their international relations which prevent the disclosure of certain information, the Council is required to inform a person or entity affected by restrictive measures of the actual and specific reasons why it considers that those measures had to be adopted. The Council must thus state the matters of fact and law which constitute the legal basis of the measures concerned and the considerations which led it to adopt them (judgment of 9 July 2009, Melli Bank v Council, T‑246/08 and T‑332/08, EU:T:2009:266, paragraph 144).
Moreover, the statement of reasons must be appropriate to the measure at issue and to the context in which it was adopted. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations (judgment of 12 December 2006, Organisation des Modjahedines du peuple d’Iran v Council, T‑228/02, EU:T:2006:384, paragraph 141; see, also, judgment of 16 October 2014, LTTE v Council, T‑208/11 and T‑508/11, EU:T:2014:885, paragraph 159 and the case-law cited). It is not necessary for the statement of reasons to specify all the relevant matters of fact and law, since the question whether the statement of reasons is adequate must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In particular, the reasons given for a decision adversely affecting a person are sufficient if it was adopted in circumstances known to the party concerned which enable him to understand the scope of the measure affecting him (judgment of 16 November 2011, Bank Melli Iran v Council, C‑548/09 P, EU:C:2011:735, paragraph 82).
The obligation to state reasons thus laid down constitutes an essential principle of EU law which may be derogated from only for compelling reasons. The statement of reasons must therefore in principle be notified to the person concerned at the same time as the act adversely affecting him and a failure to state the reasons cannot be remedied by the fact that the person concerned learns the reasons for the act during the proceedings before the Courts of the European Union (judgment of 7 December 2011, HTTS v Council, T‑562/10, EU:T:2011:716, paragraph 32).
Consequently, with respect to decisions to maintain the imposition of restrictive measures on a person or entity, the Courts of the European Union are required to determine, in particular, first, whether the obligation to state reasons laid down in Article 296 TFEU has been complied with and, therefore, whether the reasons relied on are sufficiently detailed and specific, and, second, whether those reasons are substantiated (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 70 and the case-law cited).
In that context, it must be made clear that the person or entity concerned may, in the action challenging their continued listing on the list at issue, dispute all the material relied on by the Council to demonstrate that the risk of their involvement in terrorist activities is ongoing, irrespective of whether that material is derived from a national decision adopted by a competent authority or from other sources. In the event of challenge, it is for the Council to establish that the facts alleged are well founded and for the Courts of the European Union to determine whether they are made out (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 71 and the case-law cited).
It must be borne in mind that Article 1 of Common Position 2001/931 draws a distinction between the initial inclusion of a person or entity on the list at issue, the subject of Article 1(4), and the retention on that list of a person or entity already listed, the subject of Article 1(6) (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 58).
Further, according to the case-law, the essential question when reviewing whether to continue to include a person or entity on the list at issue is whether, since the inclusion of that person or that entity on that list or since the previous review, the factual situation has changed in such a way that it is no longer possible to draw the same conclusion in relation to the involvement of that person or entity concerned in terrorist activities (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 46). It follows from that case-law that, in the context of a review pursuant to Article 1(6) of Common Position 2001/931, the Council may maintain the listing of the person or entity concerned on the list at issue if it concludes that there is an ongoing risk of that person or entity being involved in the terrorist activities which justified their initial listing. The continued listing of a person or entity on the list at issue is, therefore, in essence, an extension of the original listing (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 51).
Further, if, in view of the passage of time and in the light of changes in the circumstances of the case, the mere fact that the national decision that served as the basis for the original listing remains in force no longer supports the conclusion that there is an ongoing risk of the person or entity concerned being involved in terrorist activities, the Council is obliged to base the continued listing of that person or that entity on the list on an up-to-date assessment of the situation, and to take into account more recent facts which demonstrate that that risk still exists (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 54).
Those principles must guide the Court in examining the sufficiency of the reasons stated for the contested acts.
In this case, it must be noted that the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 differs, in terms of structure and content, from that for Regulations 2015/513, 2015/1325, 2015/2425, 2016/1127, 2017/150 and 2017/1420 and from that for Decisions No 2015/521, 2015/1334 and 2017/1426. Given those differences, those two sets of contested acts must be examined separately.
Implementing Regulations No 125/2014 and No 790/2014
It must first be noted that Implementing Regulations No 125/2014 and No 790/2014 are accompanied by an identical statement of reasons, structured as follows.
First, the Council summarises the history of the activities of the PKK since its formation in 1978. In particular, according to the Council, the PKK has committed many acts of terrorism since 1984 and those attacks have continued, despite the ceasefires declared unilaterally by the PKK since 2009. The Council then lists 69 incidents, occurring between 14 November 2003 and 19 October 2011, which it attributes to the PKK and which it categorises as terrorist acts within the meaning of Article 1(3) of Common Position 2001/931.
Second, the Council states that the PKK is the subject of the order of the United Kingdom Home Secretary, adopted on 29 March 2001, proscribing the PKK under the Terrorism Act 2000 (United Kingdom), and the Council classifies that order as a decision of a competent authority within the meaning of Article 1(4) of Common Position 2001/931. The Council also states that that order has been regularly reviewed by an administrative commission and that it remains in force.
Third, the Council states that the PKK is the subject of an FTO designation, under Section 219 of the Immigration and Nationality Act (United States), and of an SDGT designation, under Executive Order No 13224, by the United States authorities, and classifies those designations as decisions of competent authorities within the meaning of Article 1(4) of Common Position 2001/931. The Council also states that those designations may be challenged by legal proceedings in the United States and that they remain in force.
Last, the Council states that the PKK was the subject of a number of judgments of the State Security courts of the Republic of Turkey.
It is apparent from the foregoing that the Council based its decision to maintain the applicant’s name in the lists at issue, first, on the fact that decisions that were classified as decisions of competent authorities within the meaning of Article 1(4) of Common Position 2001/93 remained in force, and, second, on the Council’s own assessments of a series of incidents attributed to the PKK and categorised as terrorist acts within the meaning of Article 1(3) of Common Position 2001/931.
It is appropriate, first, to examine the adequacy of the reasons stated in relation to the assessment of the nature of the decisions on which the Council relied, and then to examine whether the Council adequately set out the actual and specific reasons why it considered that the applicant’s name should be retained in the lists at issue.
– The existence of decisions of competent authorities within the meaning of Article 1(4) of Common Position 2001/931
In that regard, in the first place, it is clear that the Council expressly admits in its Defence that neither the list of incidents categorised as terrorist acts nor the judgments of the State Security Courts of the Republic of Turkey constitute decisions of a competent authority within the meaning of Article 1(4) of Common Position 2001/931 (Defence, paragraphs 56 and 119).
In the second place, as regards the FTO designation and the SDGT designation, contrary to what is claimed by the applicant, it is apparent from the case-law that the concept of a ‘competent authority’, within the meaning of Article 1(4) of Common Position 2001/931, is not confined to the authorities of Member States but is capable, in principle, of also including the authorities of third States (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 22).
However, it is also apparent from the case-law that the Council must, before acting on the basis of a decision of an authority of a third State, verify whether that decision was adopted in accordance with the rights of the defence and the right to effective judicial protection (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 24). The Council is, therefore, required to provide, in the statements of reasons relating to those decisions, the particulars from which it may be concluded that it has ascertained that those rights were respected (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 31). It is sufficient, for that purpose, that the Council briefly refer in the statement of reasons relating to a decision to freeze funds to the reasons why it considers the decision of the third State on which it intends to rely to have been adopted in accordance with the rights of the defence and the right to effective judicial protection (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 33).
It is however clear that the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 provides not the slightest indication that the Council actually verified that the FTO and SDGT designations had been adopted with due regard for the rights of the defence and the right to effective judicial protection. The Council cannot, as in this case, do no more than state that, as a matter of theory, with no further detail on the conduct of the procedures concerned, the FTO designation is subject to judicial procedures for obtaining legal redress under United States law while the SDGT designation is subject to administrative and judicial procedures for obtaining legal redress under United States law. The statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 is such that it is therefore impossible to ascertain whether the Council fulfilled its obligation of verification in that regard.
Further, nor does the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 contain any indication of the reasons why the Council considered that the FTO and SDGT designations constituted decisions of a competent authority within the meaning of Article 1(4) of Common Position 2001/931. The statement of reasons does not explain in what way the FTO and SDGT designations may be considered to be an ‘instigation of investigations or prosecution for a terrorist act, an attempt to perpetrate, participate in or facilitate such an act, based on serious and credible evidence, or condemnation for such deeds’ within the meaning of Common Position 2001/931. Nor does the statement of reasons contain the slightest indication that the Council actually examined whether the specific facts on which the United States authorities relied fell within the scope of the concept of ‘terrorist act’, within the meaning of Article 1(3) of Common Position 2001/931. The statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 is such that it is therefore impossible to ascertain whether the Council fulfilled its obligation of verification in that regard.
In the third place, as regards the order of the United Kingdom Home Secretary, it is clear that the Council fails to state the reasons why it considered that that order constituted a decision of a competent authority within the meaning of Article 1(4) of Common Position 2001/931. In particular, the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 contains no description of the reasons underlying the order of the United Kingdom Home Secretary, nor any indication that the Council actually examined whether the specific facts on which the United Kingdom Home Secretary relied fell within the scope of the concept of ‘terrorist act’, within the meaning of Article 1(3) of Common Position 2001/931. In that regard, the judgment of 23 October 2008, People’s Mojahedin Organization of Iran v Council (T‑256/07, EU:T:2008:461), cited by the Council in its Defence, is of no relevance to the present case, since, in that case, the applicant had not challenged the classification of the order of the United Kingdom Home Secretary as a decision of a competent national authority within the meaning of Article 1(4) of Common Position 2001/931.
– The actual and specific reasons for retaining the applicant’s name on the lists at issue
In any event, even if the view were taken that the Council had fulfilled its obligation to state reasons as regards the existence of at least one decision of a competent national authority within the meaning of Article 1(4) of Common Position 2001/931, it must be recalled that if, in view of the passage of time and in the light of changes in the circumstances of the case, the mere fact that the national decision that served as the basis for the original listing remains in force no longer supports the conclusion that there is an ongoing risk of the person or entity concerned being involved in terrorist activities, the Council is obliged to base the retention of that person or entity on the list on an up-to-date assessment of the situation, and to take into account more recent facts which demonstrate that that risk still exists (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 54 and the case-law cited).
In this case, it is clear that a significant period of time elapsed between the adoption of the decisions which served as the basis for the initial inclusion of the applicant’s name in the lists at issue and the adoption of Implementing Regulations No 125/2014 and No 790/2014, and between the initial inclusion of the applicant’s name in the lists at issue and the adoption of those acts. The order of the United Kingdom Home Secretary dates from 2001, the FTO designation of the PKK dates from 1997, the SDGT designation of the PKK dates from 2001 and the initial inclusion of the PKK in the lists dates from 2002, whereas Implementing Regulations No 125/2014 and No 790/2014 were adopted in 2014. The fact that such a period of time, more than 10 years, elapsed is in itself a factor which justifies a conclusion that the findings made in the order of the United Kingdom Home Secretary and the FTO and SDGT designations were no longer sufficient for the purposes of determining whether the risk of applicant’s involvement in terrorist activities persisted at the time when those acts were adopted.
Moreover, as mentioned by the Council in the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014, the applicant has unilaterally declared a number of cease-fires since 2009. In addition, although the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 makes no mention of it, the applicant correctly states that peace negotiations between the PKK and the Turkish Government took place in 2012 and 2013. In particular, on 21 March 2013 Mr Abdullah Öcalan called for the laying down of arms. In a press release dated 21 March 2013, the High Representative of the Union for Foreign Affairs and Security Policy, Mrs Catherine Ashton, and the Commissioner for Enlargement and European Neighbourhood Policy, Mr Štefan Füle, issued a joint statement in which they welcomed Mr Öcalan’s calling on the PKK to lay down arms and to withdraw beyond the Turkish borders, encouraged all parties to work unremittingly to bring peace and prosperity for all the citizens of the Republic of Turkey, and gave full support to the peace process.
The Council was therefore obliged to base the retention of the PKK on the lists at issue on more recent material demonstrating that there was still a risk that the applicant was involved in terrorist activities. Consequently, it has to be concluded that the order of the United Kingdom Home Secretary and the FTO and SDGT designations, even if they remained in force, did not constitute, in themselves, a sufficient basis for Implementing Regulations No 125/2014 and No 790/2014, in so far as those acts concern the applicant.
Admittedly, in the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014, the Council also relies, first, on the fact that groups associated with the PKK perpetrated terrorist attacks despite the unilateral ceasefires mentioned in paragraph 71 above and, second, on a list of 69 incidents, categorised as terrorist acts and attributed to the PKK, which occurred after the adoption of the order of the United Kingdom Home Secretary and the FTO and SDGT designations. It is not apparent from the file that those incidents were derived from decisions of competent authorities of Member States.
In that regard, first, it is clear from the case-law that, although Article 1(6) of Common Position 2001/931 requires the Council to carry out at least once every six months a ‘review’, to ensure that there continue to be grounds for ‘keeping’ on that list a person or entity already listed on the basis of a national decision taken by a competent authority, it does not require any new material on which the Council may rely in order to justify the continued listing of the person or entity concerned on the list at issue to have been the subject of a national decision taken by a competent authority after the decision on which the initial listing was based (judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 62).
Second, it is also clear from the case-law that the person or entity concerned may, in an action challenging their retention on the list at issue, dispute all the material relied on by the Council to demonstrate that the risk of their involvement in terrorist activities is ongoing, irrespective of whether that material is derived from a national decision adopted by a competent authority or from other sources. In the event of challenge, it is for the Council to establish that the facts alleged are well founded and for the Courts of the European Union to determine whether they are made out (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 71 and the case-law cited).
In this case, contrary to what is claimed by the applicant, there was therefore nothing to prevent the Council from relying on information that was not derived from decisions of a competent authority, within the meaning of Article 1(4) of Common Position 2001/931, in order to attribute to the applicant responsibility for incidents and to categorise them as terrorist acts in order to justify the retention of the applicant’s name on the lists at issue.
However, since the applicant disputes, within the present action, that some of those incidents actually occurred, and whether others can be attributed to the PKK or in what circumstances they were committed, the Council is obliged to establish that the facts alleged are well founded and the Court must determine whether they are made out, pursuant to the case-law cited in paragraph 75 above.
The brevity of the information contained in the statement of reasons does not allow the Court to exercise its power of judicial review with respect to the incidents that are disputed by the applicant. The Court must concur with the applicant that the statement of reasons for Implementing Regulations No 125/2014 and No 790/2014 contains no indication of the material on which the Council relied in order to conclude that the incidents concerned have been established, are attributable to the applicant, and satisfy all the criteria set out in in Article 1(3) of Common Position 2001/931.
As regards the incidents where the applicant does not dispute that they actually occurred or whether they can be attributed to the PKK, it is clear that those incidents preceded the peace negotiations mentioned in paragraph 71 above and are not therefore sufficient to remedy the deficiency in the statement of reasons identified in paragraph 72 above.
– Conclusion
In the light of the foregoing, it must be concluded that the Council failed to state sufficient reasons, in the statement of reasons accompanying Implementing Regulations No 125/2014 and No 790/2014, for its finding that there existed one or more decisions of competent authorities within the meaning of Article 1(4) of Common Position 2001/931 and also failed to indicate sufficiently the actual and specific reasons for retaining the applicant’s name on the lists at issue. Consequently, it must be concluded that Implementing Regulations No 125/2014 and No 790/2014 are vitiated by a failure to state sufficient reasons.
Implementing Regulations 2015/513, 2015/1325, 2015/2425, 2016/1127, 2017/150 and 2017/1420, and Decisions 2015/521, 2015/1334 and 2017/1426
As a preliminary point, it must be noted that Implementing Regulations 2015/513, 2015/1325, 2015/2425, 2016/1127, 2017/150 and 2017/1420 and Decisions 2015/521, 2015/1334 and 2017/1426 are accompanied by a statement of reasons that is identical, structured as follows.
In the statement of reasons, the Council states, first, that it relied on the existence of decisions that it classifies as decisions of a competent authority within the meaning of Article 1(4) of Common Position 2001/931, namely the order of the United Kingdom Home Secretary, as supplemented by the order of 14 July 2006; the FTO designation and the SDGT designation, and the French judicial decisions. In that regard, the Council states that it had examined the factual information on which the decisions were based (‘the grounds’) and had taken the view that the grounds fell within the scope of the concepts of ‘terrorist acts’ and ‘groups and entities involved in terrorist acts’ within the meaning of Article 1(2) and (3) of Common Position 2001/931 (statement of reasons, paragraphs 1 to 7).
Next, the Council states that the abovementioned decisions of competent authorities remain in force. Further, the Council states that it had assessed whether there was any information in its possession to support the delisting of the PKK from the lists at issue and declares that it found nothing. The Council also considers that the reasons for the inclusion of the PKK on the lists at issue remain valid (statement of reasons, paragraphs 8 to 10).
On the basis of the foregoing, the Council concludes that the PKK should remain on the lists at issue (statement of reasons, paragraph 11).
Further, annexed to the statement of reasons is a description of each of the decisions of competent authorities referred to in paragraph 82 above, consisting of a presentation of how the concept of terrorism is defined under national law, a description of the applicable national administrative and judicial procedures, a summary of the procedural history and the aftermath of the national decision concerned, a summary of the conclusions reached by the competent authorities with regard to the applicant, a narration of the acts on which those competent authorities had based their decision and the finding that those acts constituted terrorist acts within the meaning of Article 1(3) of Common Position 2001/931.
Accordingly, in the first place, as regards Annex A to the statement of reasons, relating to the order of the United Kingdom Home Secretary, the Council states, inter alia, that that order was adopted in 2001 because the then United Kingdom Home Secretary had a reasonable belief that the PKK had committed and participated in terrorist acts within the meaning of Article 1(2) of Common Position 2001/931 (paragraphs 3, 4 and 16). In that regard, the Council states that the terrorist acts concerned consisted of terrorist attacks believed to have been committed by the PKK since 1984 and that the PKK had undertaken in the early 1990s a terrorist campaign aimed at Western interests and investments with a view to bringing increased pressure on the Turkish Government. The Council states that, even though the PKK appeared to have abandoned that campaign between 1995 and 1999, it had continued to threaten Turkish tourist resorts. The Council states that it considers that those acts fall within the scope of the aims set out in Article 1(3)(i) and (ii) of Common Position 2001/931 and the acts of violence set out in Article 1(3)(iii)(a),(c),(d),(f),(g) and (i) of Common Position 2001/931 (paragraph 16).
The Council also states that on 3 December 2014 the United Kingdom Home Secretary decided to reject an application for the removal of the proscription of the PKK and to maintain that proscription. In that regard, the Council states that, on the basis of the evidence available, the United Kingdom Home Secretary held a reasonable belief that the PKK continued to be involved in acts of terrorism, since the PKK had committed and participated in terrorist acts within the meaning of Article 1(2) of Common Position 2001/931. The Council accordingly states that the United Kingdom Home Secretary relied on, inter alia, the fact that the PKK carried out three separate attacks in May 2014, in one of which, on 13 May 2014, two soldiers were injured at the construction site of a military outpost in Tunceli (Turkey), and the fact that the PKK attacked in August 2014 a thermal energy plant and kidnapped three Chinese engineers (paragraph 17). The Council also states that in October 2014 the PKK issued a warning that, if the Republic of Turkey did not intervene against ISIL, the fragile peace process in which it was engaged would collapse (paragraph 18).
Last, the Council concludes that the matters set out in paragraphs 86 and 87 above correspond to the aims set out in Article 1(3)(i) and (ii) of Common Position 2001/931 and to the terrorist acts set out in Article 1(3)(iii)(a), (c), (d) and (f) to (i) of Common Position 2001/931 (paragraph 19).
In the second place, as regards Annex B to the statement of reasons, relating to the French judicial decisions, the Council states, inter alia, that the tribunal de grande instance de Paris (Paris Regional Court), in its judgment of 2 November 2011, convicted the Ahmet Kaya Kurdish Cultural Centre of participating in a criminal association in order to prepare an act of terrorism and of financing a terrorist undertaking. The Council adds, first, that that conviction was upheld on appeal by the cour d’appel de Paris (Paris Court of Appeal), in its judgment of 23 April 2013, and on further appeal by the Cour de cassation (Court of Cassation), in its judgment of 21 May 2014, and, second, that those three courts held in their respective judgments that the Ahmet Kaya Kurdish Cultural Centre was the ‘legal front’ of the PKK in France (paragraphs 11 to 14, 20 and 21). Moreover, the Council states that the tribunal de grande instance de Paris (Paris Regional Court) and the cour d’appel de Paris (Paris Court of Appeal) held that the PKK could be described as a ‘terrorist organisation’. In that regard, the Council states that the cour d’appel de Paris (Paris Court of Appeal) relied on, inter alia, a series of attacks committed in Turkey in 2005 and 2006 and directly attributable to the PKK or to the TAK, which ought to be regarded as the armed wing of the PKK, and a series of arson and petrol-bomb attacks in France and Germany in 2007 (paragraphs 15 to 19). The Council concludes that the terrorist acts attributed to the PKK by the French courts fall within the scope of Article 1(3)(i), Article 1(3)(ii), and Article 1(3)(iii)(a) and (b) of Common Position 2001/931 (paragraph 22).
In the third place, as regards Annex C to the statement of reasons, relating to the FTO and SDGT designations, the Council states, inter alia, that the FTO designation was adopted on 8 October 1997 and that the SDGT designation was adopted on 31 October 2001 (paragraphs 3 and 4).
The Council then states that the FTO designations are regularly reviewed every five years by the United States Secretary of State, if the designation has not in the meantime been the subject of a revocation request. The entity concerned may also itself request, every two years, that its designation be revoked by submitting evidence to show that the circumstances on which its FTO designation were based have significantly changed. The United States Secretary of State and the United States Congress may also at their own instance revoke an FTO designation. In addition, the entity concerned may seek judicial review of its FTO designation before the Circuit Court of Appeals for the District of Columbia. As regards the SDGT designations, the Council states that these are not subject to regular review, but that they can be challenged before the federal courts (paragraphs 8 to 11). Further, the Council states that the applicant’s FTO and SDGT designations have not been challenged before the United States courts and are not the subject of any ongoing judicial procedure (paragraphs 11 and 12). In the light of the review processes and the description of the legal remedies available, the Council considers that the relevant United States legislation ensures the protection of the rights of the defence and of the right to effective judicial protection (paragraph 13).
The Council also states that the United States authorities have relied on, inter alia, the fact that attacks have been carried out by the PKK as the basis for adoption of the FTO and SDGT designations. In that regard, the Council states that the 2013 Administrative Record on terrorism (of the United States Department of State) set out the specific reasons why the designation of the PKK as an FTO was adopted and maintained, namely an attack on a Turkish military convoy on 22 August 2012, when five soldiers were killed and seven others wounded; the kidnapping of three Turkish politicians in the summer of 2012; a bomb attack on 4 November 2012, carried out near a wedding celebration, when two children were killed, 26 people were injured, and a number of commercial buildings were damaged, and the fighting of 18 November 2012, when five soldiers were killed and one injured. The Council concludes that those incidents correspond to the aims set out in Article 1(3)(i), (ii) or (iii) of Common Position 2001/931 and to the terrorist acts set out in Article 1(3)(iii)(a) to (c) and (f) of Common Position 2001/931 (paragraphs 14 to 17).
It follows from the foregoing that the Council decided to maintain the listing of the applicant on the lists at issue on the basis of, first, the fact that decisions classified as decisions of competent authorities within the meaning of Article 1(4) of Common Position 2001/931 remained in force, and, second, the Council’s own assessment that there was nothing to support the delisting of the PKK from the lists at issue and that the grounds justifying the inclusion of the PKK in the lists at issue were still relevant.
The Court considers that it should, first, examine whether the statement of reasons, in relation to the actual and specific reasons why the Council considered that the applicant’s name should remain on the lists at issue, is sufficient.
In that regard, it must, first, be recalled that, if, in view of the passage of time and in the light of changes in the circumstances of the case, the mere fact that the national decision that served as the basis for the original listing remains in force no longer supports the conclusion that there is an ongoing risk of the person or entity concerned being involved in terrorist activities, the Council is obliged to base the retention of that person or entity on the list on an up-to-date assessment of the situation, and to take into account more recent facts which demonstrate that that risk still exists (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 54 and the case-law cited).
In this case, it is clear that a significant period of time elapsed between the adoption of the decisions which served as the basis for the initial inclusion of the applicant’s name in the lists at issue and the adoption of the contested acts specified in paragraph 81 above, and between the initial inclusion of the applicant’s name in the lists at issue and the adoption of the contested acts. The order of the United Kingdom Home Secretary dates from 2001. The FTO designation of the PKK dates from 1997 and the SDGT designation of the PKK dates from 2001. Last, the initial inclusion of the PKK on the lists at issue dates from 2002. However, the contested acts specified in paragraph 81 above were adopted between 26 March 2015 and 4 August 2017.
The fact that such a period of time, more than 10 years, elapsed is in itself a factor which justifies a conclusion that the findings made in the order of the United Kingdom Home Secretary and in the FTO and SDGT designations were no longer sufficient for the purposes of determining whether the risk of the applicant’s involvement in terrorist activities persisted at the time when the contested acts were adopted. The Council was therefore obliged to base the retention of the PKK on the lists at issue on more recent material, demonstrating that the risk of the PKK’s involvement in terrorist activities persisted. Consequently, it has to be concluded that the order of the United Kingdom Home Secretary and the FTO and SDGT designations, even if they remained in force, did not constitute, in themselves, a sufficient basis for the contested acts specified in paragraph 81 above, in so far as those acts concern the applicant.
Admittedly, in the statement of reasons for the contested acts specified in paragraph 81 above, it must be noted that the Council mentions other factors that are more recent. Thus, the Council mentions the adoption of the French judicial decisions. The Council also refers to a number of incidents attributed to the PKK on which the competent authorities relied in order to adopt or maintain the order of the United Kingdom Home Secretary, the FTO and SDGT designations and the French judicial decisions. The Council categorises those incidents as terrorist acts. Further, the Council also states that it had found nothing to support the delisting of the applicant from the lists at issue.
However, it is clear that the Council failed to state the reasons why it considered that that material made it possible to conclude, to the requisite legal standard, that the risk of the applicant’s involvement in terrorist activities persisted.
In the first place, as regards the French judicial decisions, it is clear that, although they were adopted between 2 November 2011 and 21 May 2014, those decisions are based on facts that are much older, occurring, to take the most recent, almost 8 to 10 years before the adoption of the contested acts specified in paragraph 81 above. The fact that such a period of time elapsed is in itself a factor which justifies a conclusion that the findings made in the French judicial decisions were no longer sufficient for the purposes of determining whether the risk of the applicant’s involvement in terrorist activities persisted at the time when those contested acts were adopted.
Moreover, the applicant was not a party in the judicial proceedings that led to the judgments of the tribunal de grande instance de Paris (Paris Regional Court), the cour d’appel de Paris (Paris Court of Appeal) and the Cour de cassation française (French Court of Cassation). Admittedly, the Council states in paragraphs 13, 14 and 21 of Annex B to the statement of reasons that the Ahmet Kaya Kurdish Cultural Centre constituted, according to those judicial decisions, the ‘legal front’ of the PKK in France. However, such a formulation is ambiguous, particularly in light of the fact that the Ahmet Kaya Kurdish Cultural Centre was convicted on the charge of financing a terrorist undertaking with respect to its role in supporting the PKK. By concluding that the Ahmet Kaya Kurdish Cultural Centre ‘knowingly provided, through its bodies or representatives, in this case through the de facto leaders identified above, acting on its behalf, effective logistical and financial support for a designated terrorist organisation’ the Cour de cassation française (French Court of Cassation) indirectly confirms that the Ahmet Kaya Kurdish Cultural Centre and the PKK have to be regarded as two distinct entities. Consequently, the Council has failed to state to the required legal standard the reasons why it considered that those French judicial decisions constituted decisions of a competent authority ‘in respect of the persons, groups and entities concerned’ within the meaning of Article 1(4) of Common Position 2001/931.
Accordingly, it must be concluded that the French judicial decisions, even if they remain in force, do not constitute, in themselves, a sufficient basis for the contested acts specified in paragraph 81 above, in so far as they concern the applicant, and are not therefore sufficient to remedy the deficiency in the statement of reasons identified in paragraph 97 above.
In the second place, as regards the incidents on which the United Kingdom Home Secretary relied in his decision, on 3 December 2014, to reject the request to end the proscription of the PKK, it is clear that, in its statement of modification of 26 May 2015, the applicant expressly disputes the attribution of responsibility for those incidents to the PKK and the adequacy of the information submitted in support of the conclusion that those incidents correspond to the aims set out in Article 1(3)(i) to (iii) of Common Position 2001/931 and to the acts of violence set out in Article 1(3)(iii)(a) to (k) of Common Position 2001/931.
In that regard, it is clear from the case-law that the person or entity concerned may, in the action challenging their continued listing on the list at issue, dispute all the material relied on by the Council to demonstrate that the risk of their involvement in terrorist activities is ongoing, irrespective of whether that material is derived from a national decision adopted by a competent authority or from other sources. In the event of challenge, it is for the Council to establish that the facts alleged are well founded and for the Courts of the European Union to determine whether they are made out (see judgment of 26 July 2017, Council v LTTE, C‑599/14 P, EU:C:2017:583, paragraph 71 and the case-law cited).
In this case, it is clear that the statement of reasons for the contested acts specified in paragraph 81 above provides not the slightest indication that the Council actually considered and attempted to establish whether the alleged facts were well founded. The Council has also, in the course of these proceedings, failed to produce anything to establish that those facts are well founded. In the light of the case-law cited above in paragraph 104, the Council cannot, as in this case, do no more than repeat the grounds for a decision of a competent authority while not itself considering whether those grounds are well founded. The statement of reasons for the contested acts specified in paragraph 81 above is such that it is impossible to know whether the Council fulfilled its obligation of verification in that regard and that the Court cannot exercise its power of review as to whether the facts alleged are made out.
Consequently, it must be concluded that the fact that the order of the United Kingdom Home Secretary was confirmed, in December 2014, on the basis of incidents alleged to have been committed by the PKK in May and August 2014, does not suffice to remedy the failure to state reasons identified in paragraph 97 above.
In the third place, as regards the incidents on which the United States authorities relied as the basis for adoption or continuation of the FTO and SDGT designations, it is clear that, in its statement of modification of 26 May 2015, the applicant expressly disputes the adequacy of the information submitted in support of the conclusion that those incidents correspond to the aims set out in Article 1(3)(i) to (iii) of Common Position 2001/931 and to the acts of violence set out in Article 1(3)(iii)(a) to (k) of Common Position 2001/931.
It again has to be stated that the statement of reasons for the contested acts specified in paragraph 81 above provides not the slightest indication that the Council actually considered and attempted to establish whether the alleged facts were well founded. The Council has also, in the course of these proceedings, failed to produce anything to establish that those facts are well founded. On the contrary, the Council is incapable of detailing with any certainty the actual and specific reasons on which the FTO and SDGT designations are based. In particular, as regards the annual reports on terrorism of the United States Department of State, the Council expressly states in its rejoinder, ‘while these reports may indeed reflect information on which the [United States] has based [an] FTO designation or decision to maintain a designation’, they ‘do not necessarily do so’ (rejoinder, paragraph 115).
In the light of the case-law cited in paragraph 104 above, the Council cannot, as in this case, do no more than repeat the grounds for a decision of a competent authority while not itself considering whether those grounds are well founded. That applies a fortiori when the decision in question was not taken by a competent authority of a Member State. The statement of reasons for the contested acts specified in paragraph 81 above is such that it is impossible to know whether the Council fulfilled its obligation of verification in that regard and that the Court cannot exercise its power of review as to whether the facts alleged are made out.
In the fourth place, as regards there being nothing to support the delisting of the applicant from the lists at issue, it has to be said that the applicant submitted to the Council some information which, in its opinion, could support the delisting of the PKK from the lists at issue, notably in its letter of 6 March 2015 in response to the Council’s letter informing the applicant of its intention to maintain the applicant’s listing in the lists at issue.
According to the case-law, when comments are made by the person concerned on the statement of reasons, the competent European Union authority is under an obligation to examine, carefully and impartially, whether the alleged reasons are well founded, in the light of those comments and any exculpatory evidence provided with those comments (judgment of 18 July 2013, Commission and Others v Kadi, C‑584/10 P, C‑593/10 P and C‑595/10 P, EU:C:2013:518, paragraph 114).
Without going so far as to require a detailed response to the comments made by the individual concerned, the obligation to state reasons laid down in Article 296 TFEU entails in all circumstances that the institution concerned must identify the individual, specific and concrete reasons why it is considered that the individual concerned must be subject to restrictive measures (judgment of 18 July 2013, Commission and Others v Kadi, C‑584/10 P, C‑593/10 P and C‑595/10 P, EU:C:2013:518, paragraph 116).
It is, however, clear that the statement of reasons for the contested acts specified in paragraph 81 above provides not the slightest indication that the Council actually considered the information submitted by the applicant. Admittedly, the statement of reasons for the contested acts contains an assertion that the Council examined whether there was anything in its possession to support the delisting of the PKK from the lists at issue and found nothing (paragraph 9). While such a generic formulation may perhaps suffice in the absence of any comments being made by the persons, groups or entities affected by the fund freezing measures, that does not apply when, as in this case, the applicant submits information which, in its opinion, is such as to justify the removal of its name from the lists at issue, irrespective of whether or not that information is well founded. In such circumstances, it is the duty of the Council to respond to that information, however succinctly, in the statement of reasons.
That failure to state reasons cannot be remedied by the indication, in the Council’s letter of 27 March 2015, cited in paragraph 19 above, that the fact that there are Kurdish groups among those fighting ISIL did not affect the Council’s assessment that the PKK satisfied the designation criteria laid down by Common Position 2001/931. It is clear that, first, that letter post-dates the adoption of Regulation 2015/513 and Decision 2015/521 and, second, the Council does not specify the actual material that led it to conclude that the risk of the applicant’s involvement in terrorist activities persisted.
In the light of the foregoing, it must be concluded that the Council failed to state to the requisite standard, in the statement of reasons accompanying the contested acts specified in paragraph 81 above, the actual and specific reasons for maintaining the listing of the applicant on the lists at issue. Consequently, it must be concluded that Implementing Regulations 2015/513, 2015/1325, 2015/2425, 2016/1127, 2017/150 and 2017/1420 and Decisions 2015/521, 2015/1334 and 2017/1426 are vitiated by a failure to state sufficient reasons.
Conclusion
In those circumstances, it must be held that the Council is in breach of the obligation to state reasons laid down in Article 296 TFEU. It follows that the seventh plea in law must be upheld and that finding justifies, in itself, the annulment of the contested acts in so far as they concern the applicant (see, to that effect, judgment of 7 December 2011, HTTS v Council, T‑562/10, EU:T:2011:716, paragraph 40).
In the light of all the foregoing, the contested acts must be annulled, there being no need to examine the other arguments and pleas in law relied on in support of the present action. As regards the applicant’s claim that the Court should declare Regulation No 2580/2001 not to be applicable to it, that claim must be rejected after the withdrawal of the first plea in law on which that claim was based.
The temporal effects of annulment of the contested acts
It must be noted that the contested acts were amended by Council Implementing Regulation (EU) 2018/468 of 21 March 2018 implementing Article 2(3) of Regulation No 2580/2001 and repealing Implementing Regulation 2017/1420 (OJ 2018 L 79, p. 7) and by Council Decision (CFSP) 2018/475, of the same date, updating the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931, and repealing Decision 2017/1426 (OJ 2018 L 79, p. 26), which replaced the lists at issue as from 23 March 2018 and extended the application of the restrictive measures, with respect to the applicant.
Therefore, as at today’s date, the applicant is subject to a further restrictive measure. It follows that the annulment of the contested acts, in so far as they concern the applicant, does not entail the removal of the applicant’s name from the lists at issue.
Consequently, it is not necessary to maintain the effects of the contested acts, in so far as they concern the applicant.
Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Council has been unsuccessful, it must be ordered to pay the costs, as applied for by the applicant.
In addition, under Article 138(1) of the Rules of Procedure, the Member States and institutions which intervened in the proceedings are to bear their own costs. It follows that the Commission and the United Kingdom must bear their own costs.
On those grounds,
THE GENERAL COURT (Third Chamber, Extended Composition)
hereby:
1.
Annuls Council Implementing Regulation (EU) No 125/2014 of 10 February 2014 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation (EU) No 714/2013, in so far as it concerns the Kurdistan Workers’ Party (PKK).
2.
Annuls Council Implementing Regulation (EU) No 790/2014 of 22 July 2014 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation No 125/2014, in so far as it concerns the PKK.
3.
Annuls Council Implementing Regulation (EU) 2015/513 of 26 March 2015 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation No 790/2014, in so far as it concerns the PKK.
4.
Annuls Council Decision (CFSP) 2015/521 of 26 March 2015, updating and amending the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931/CFSP on the application of specific measures to combat terrorism and repealing Decision 2014/483/CFSP, in so far as it concerns the PKK.
5.
Annuls Council Implementing Regulation (EU) 2015/1325 of 31 July 2015 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation 2015/513, in so far as it concerns the PKK.
6.
Annuls Council Decision (CFSP) 2015/1334 of 31 July 2015, updating the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931 on the application of specific measures to combat terrorism and repealing Decision 2015/521, in so far as it concerns the PKK.
7.
Annuls Council Implementing Regulation (EU) 2015/2425 of 21 December 2015 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation 2015/1325, in so far as it concerns the PKK.
8.
Annuls Council Implementing Regulation (EU) 2016/1127 of 12 July 2016 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation 2015/2425, in so far as it concerns the PKK.
9.
Annuls Council Implementing Regulation (EU) 2017/150 of 27 January 2017 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation No 2016/1127, in so far as it concerns the PKK.
10.
Annuls Council Implementing Regulation (EU) 2017/1420 of 4 August 2017 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation 2017/150, in so far as it concerns the PKK.
11.
Annuls Council Decision (CFSP) 2017/1426 of 4 August 2017 updating the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931/CFSP on the application of specific measures to combat terrorism and repealing Decision (CFSP) 2017/154, in so far as it concerns the applicant.
12.
For the remainder, dismisses the request that Council Regulation (EC) No 2580/2001 of 27 December 2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism be declared to be inapplicable to the PKK.
13.
Orders the Council of the European Union to bear its own costs and to pay those incurred by the PKK.
14.
Orders the European Commission and the United Kingdom of Great Britain and Northern Ireland to bear their own costs.
Frimodt Nielsen
Kreuschitz
Forrester
Półtorak
Perillo
Delivered in open court in Luxembourg on 15 November 2018.
E. Coulon
Registrar
S. Gervasoni
President
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Grand Chamber)
5 July 2016 ( *1 )
‛Reference for a preliminary ruling — Article 267 TFEU — Article 94 of the Rules of Procedure of the Court — Content of a request for a preliminary ruling — National rule providing that the national court is to be disqualified because it stated a provisional opinion in the request for a preliminary ruling when setting out the factual and legal context — Charter of Fundamental Rights of the European Union — Second paragraph of Article 47 and Article 48(1)’
In Case C‑614/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Sofiyski gradski sad (Sofia City Court, Bulgaria), made by decision of 15 December 2014, received at the Court on 31 December 2014, in the criminal proceedings against
Atanas Ognyanov
intervening party:
Sofiyska gradska prokuratura,
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, A. Tizzano, Vice-President, R. Silva de Lapuerta, M. Ilešič, J.L. da Cruz Vilaça, A. Arabadjiev, C. Toader and F. Biltgen, Presidents of Chambers, J.-C. Bonichot, M. Safjan, M. Berger (Rapporteur), E. Jarašiūnas, C.G. Fernlund, C. Vajda and S. Rodin, Judges,
Advocate General: Y. Bot,
Registrar: M. Aleksejev, Administrator,
having regard to the written procedure and further to the hearing on 12 January 2016,
after considering the observations submitted on behalf of:
—
the Netherlands Government, by M. Bulterman, C. Schillemans and M. Gijzen, acting as Agents,
—
the European Commission, by W. Bogensberger, R. Troosters and V. Soloveytchik, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 23 February 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 267 TFEU and Article 94 of the Rules of Procedure of the Court and of the second paragraph of Article 47 and Article 48(1) of the Charter of Fundamental Rights of the European Union (the ‘Charter’).
The request has been made in proceedings relating to the recognition of a criminal conviction and the execution, in Bulgaria, of a sentence of imprisonment imposed by a Danish court on Mr Atanas Ognyanov.
Legal context
EU law
Article 94 of the Rules of Procedure, headed ‘Content of the request for a preliminary ruling’, provides:
‘In addition to the text of the questions referred to the Court for a preliminary ruling, the request for a preliminary ruling shall contain:
(a)
a summary of the subject-matter of the dispute and the relevant findings of fact as determined by the referring court or tribunal, or, at least, an account of the facts on which the questions are based;
(b)
the tenor of any national provisions applicable in the case and, where appropriate, the relevant national case-law;
(c)
a statement of the reasons which prompted the referring court or tribunal to inquire about the interpretation or validity of certain provisions of EU law, and the relationship between those provisions and the national legislation applicable to the main proceedings.’
Bulgarian law
It is stated in the order for reference that, in accordance with Article 29 of the Nakazatelno-protsesualen kodeks (Code of Criminal Procedure; ‘the NPK’), a judge may not take any part in the hearing of a case where, inter alia, there are reasons to believe that judge to be biased. According to the case-law of the Varhoven kasatsionen sad (Supreme Court of Appeal, Bulgaria), if a judge expresses a provisional opinion on the substance of a case before the final judgment is delivered, that constitutes one particular example of bias.
In the event of bias, the panel of judges allocated the case are obliged to disqualify themselves, which means, first, that those judges are to undertake no further examination of the case, second, that the case is re-allocated to other judges of the court concerned and, third, that the designated new panel of judges recommences examination of the case at issue ab initio.
If a judge fails to disqualify himself, continues to examine the case and delivers a final judgment, that judgment will be defective, because its adoption will have taken place in ‘breach of essential procedural rules’. The higher court will set aside that judgment and the case at issue will be re-allocated to another judge for examination anew.
The referring court states that Bulgarian case-law adopts a particularly strict interpretation of the criterion of ‘bias’. In that regard, the referring court observes, inter alia, that review of that criterion is undertaken of the courts’ own motion and that even the slightest indication with respect to the facts of the case at issue or their legal classification leads automatically to there being grounds for the disqualification of a judge.
It is also stated in the order for reference that the expression by a judge of a provisional opinion entails not only that the judge is disqualified and his or her final judgment set aside, but also that an action for damages will be brought against the judge for a disciplinary offence. In accordance with points 2.3 and 7.4 of the Kodeks za etichno povedenie (National Code of Conduct), a judge is prohibited from making public statements on the outcome of a case for the examination of which he or she is responsible or from stating a provisional opinion. Further, point 7.3 of the National Code of Conduct provides that a judge may state a view on questions of legal principle, but may not refer to specific facts and their legal classification.
The dispute in the main proceedings and the questions referred for a preliminary ruling
By judgment of 28 November 2012, Mr Ognyanov, a Bulgarian national, was convicted of murder and aggravated theft by Retten i Glostrup (the court of Glostrup, Denmark) and sentenced to a cumulative fifteen years imprisonment. After having served part of his sentence of imprisonment in Denmark, Mr Ognyanov was handed over to the Bulgarian authorities, on 1 October 2013, so that he could serve the remainder of his sentence in Bulgaria.
By a request for a preliminary ruling, of 25 November 2014 brought in Case C‑554/14, Ognyanov, repeated and thereafter supplemented by two requests of 15 December 2014, the Sofiyski gradski sad (Sofia City Court, Bulgaria) referred to the Court various questions on the interpretation of Council Framework Decision 2008/909/JHA of 27 November 2008 on the application of the principle of mutual recognition to judgments in criminal matters imposing custodial sentences or measures involving deprivation of liberty for the purpose of their enforcement in the European Union (OJ 2008 L 327, p. 27), as amended by Council Framework Decision 2009/299/JHA of 26 February 2009 (OJ 2009 L 81, p. 24).
After the lodging of those questions for a preliminary ruling in Case C‑554/14, Ognyanov, the Sofiyska gradska prokuratura (the Sofia City Prosecutor, Bulgaria), a party to the main proceedings, requested that, inter alia, the panel of judges of the Sofiyski gradski sad (Sofia City Court) that was responsible for the examination of the case at issue should disqualify themselves, on the ground that, by setting out, in paragraphs 2 to 4 of the request for a preliminary ruling, the factual and legal context of that case, that court was expressing a provisional opinion on questions of fact and law before deliberations had begun.
The referring court questions the legality, having regard to EU law, of a national rule, such as that at issue in the main proceedings, which obliges a panel of judges in a Bulgarian court to be disqualified because it expressed, in the request for a preliminary ruling addressed to the Court, a provisional opinion, in that it set out the factual and legal context of the case at issue in the main proceedings.
In those circumstances the Sofiyski gradski sad (Sofia City Court, Bulgaria) decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Does it constitute an infringement of EU law (second paragraph of Article 267 TFEU, in conjunction with Article 94 of the Rules of Procedure of the Court of Justice, Articles 47 and 48 of the Charter … and other applicable provisions) if the court which submitted the request for a preliminary ruling allows the proceedings to continue before it after delivery of the preliminary ruling and delivers a decision on the merits of the case without disqualifying itself? The ground for such disqualification is the expression by that court of a preliminary view on the merits of the case in the request for a preliminary ruling (in that it considered certain facts to have been established and a certain legal provision to be applicable to those facts.
The question is referred on the assumption that all procedural provisions protecting the parties’ rights to adduce evidence and to make submissions were complied with in the determination of the facts and applicable law for the purposes of submitting the request for a preliminary ruling.
(2)
If the answer to the first question is that it is lawful for the hearing of the case to continue, does it constitute an infringement of EU law if:
(a)
The court reproduces in its final decision, without amendment, all the findings set out in its request for a preliminary ruling and declines to take new evidence or to hear the parties in relation to those factual and legal outcomes (with the court, in practice, taking new evidence and hearing the parties only in respect of matters not regarded as having been established in the request for a preliminary ruling)?
(b)
The court takes new evidence and hears the parties on all relevant issues, including those on which it has already stated its view in the request for a preliminary ruling, and sets out its view in its final decision on the basis of all the evidence adduced and after examining all the parties’ arguments, irrespective of whether the evidence was adduced before submission of the request for a preliminary ruling or after delivery of the preliminary ruling, and of whether the arguments were put forward beforehand or afterwards?
(3)
If the answer to the first question is that it is compatible with EU law for the hearing of the case to continue, is it compatible with EU law if the court decides not to allow the main proceedings to continue before it and to disqualify itself from the case on the ground of bias, it being contrary to national law (which offers a higher level of protection in respect of the interests of the parties and of justice) for the proceedings to be allowed to continue, and where such disqualification is based on the fact that:
(a)
before delivering its final decision, the court had expressed a preliminary view on the proceedings in the request for a preliminary ruling, which is permissible under EU law but which is prohibited under national law;
b)
the court’s final view would be set out in two legal acts instead of one (on the assumption that the request for a preliminary ruling constitutes a final, rather than a preliminary, view), which is permissible under EU law but which is prohibited under national law?’
Consideration of the questions referred for a preliminary ruling
The first question
By its first question, the referring court seeks, in essence, to ascertain whether Article 267 TFEU and Article 94 of the Rules of Procedure, read in the light of the second paragraph of Article 47 and Article 48(1) of the Charter, must be interpreted as precluding a national rule being interpreted in such a way that it obliges a referring court to disqualify itself from a pending case on the ground that it set out, in its request for a preliminary ruling, the factual and legal context of that case.
First, it must be recalled that the preliminary ruling procedure provided for in Article 267 TFEU constitutes the keystone of the European Union judicial system, which, by setting up a dialogue between one court and another, specifically between the Court of Justice and the courts and tribunals of the Member States, has the object of securing uniform interpretation of EU law, thereby serving to ensure its consistency, its full effect and its autonomy as well as, ultimately, the particular nature of the law established by the Treaties (see Opinion 2/13 of 18 December 2014, EU:C:2014:2454, paragraph 176 and the case-law cited).
In accordance with settled case-law, the procedure provided for by Article 267 TFEU is an instrument of cooperation between the Court of Justice and national courts and tribunals, by means of which the former provides the latter with interpretation of such EU law as is necessary for them to give judgment in cases upon which they are called to adjudicate (see orders of 8 September 2011, Abdallah, C‑144/11, not published, EU:C:2011:565, paragraph 9 and the case-law cited; of 19 March 2015, Andre, C‑23/15, not published, EU:C:2015:194, paragraph 4 and the case-law cited, and the judgment of 6 October 2015, Capoda Import-Export, C‑354/14, EU:C:2015:658, paragraph 23).
In accordance with equally settled case-law, Article 267 TFEU gives national courts the widest discretion in referring matters to the Court if they consider that a case pending before them raises questions involving the interpretation of provisions of EU law, or consideration of their validity, which are necessary for the resolution of the case before them. National courts are, moreover, free to exercise that discretion at whatever stage of the proceedings they consider appropriate (see judgments of 5 October 2010, Elchinov, C‑173/09, EU:C:2010:581, paragraph 26 and the case-law cited, and of 11 September 2014, A, C‑112/13, EU:C:2014:2195, paragraph 39 and the case-law cited). The choice of the most appropriate time to refer a question for a preliminary ruling lies within their exclusive jurisdiction (see judgments of 15 March 2012, Sibilio, C‑157/11, not published, EU:C:2012:148, paragraph 31 and the case-law cited, and of 7 April 2016, Degano Trasporti, C‑546/14, EU:C:2016:206, paragraph 16).
The need to provide an interpretation of EU law which will be of use to the national court means that the national court must define the factual and legal context of the questions it is asking or, at the very least, explain the assumptions of fact on which those questions are based (see orders of 8 September 2011, Abdallah, C‑144/11, not published, EU:C:2011:565, paragraph 10 and the case-law cited; of 19 March 2015, Andre, C‑23/15, not published, EU:C:2015:194, paragraph 5 and the case-law cited, and the judgment of 10 March 2016, Safe Interenvíos, C‑235/14, EU:C:2016:154, paragraph 114).
The requirements concerning the content of a request for a preliminary ruling, are expressly set out in Article 94 of the Rules of Procedure, of which the national court should, in the context of the cooperation instituted by Article 267 TFEU, be aware and which it is bound to observe scrupulously (see order of 3 July 2014, Talasca, C‑19/14, EU:C:2014:2049, paragraph 21).
There is moreover no dispute that the information provided in orders for reference serves not only to enable the Court to provide useful answers but also to give the governments of the Member States and other interested parties the opportunity to submit observations in accordance with Article 23 of the Statute of the Court of Justice of the European Union, and that it is the Court’s duty to ensure that that opportunity is safeguarded, given that, under that article, only the orders for reference are notified to the interested parties (see order of 8 September 2011, Abdallah, C‑144/11, not published, EU:C:2011:565, paragraph 11 and the case-law cited, and the judgment of 10 March 2016, Safe Interenvíos, C‑235/14, EU:C:2016:154, paragraph 116).
Last, if the relevant factual and legal context is not stated, that may constitute a ground for the request for a preliminary ruling to be declared to be manifestly inadmissible (see, to that effect, orders of 8 September 2011, Abdallah, C‑144/11, not published, EU:C:2011:565, paragraph 12; 4 July 2012, Abdel, C‑75/12, not published, EU:C:2012:412, paragraphs 6 and 7; 19 March 2014, Grimal, C‑550/13, not published, EU:C:2014:177, paragraph 19, and of 19 March 2015, Andre, C‑23/15, not published, EU:C:2015:194, paragraphs 8 and 9).
In setting out, in its request for a preliminary ruling, the factual and legal context of the main proceedings, a referring court, such as the Sofiyski gradski sad (Sofia City Court), is therefore doing no more than meeting the requirements of Article 267 TFEU and Article 94 of the Rules of Procedure.
That being the case, where a referring court, such as the court hearing the main proceedings, presents, in its request for a preliminary ruling, the relevant factual and legal context of the main proceedings, that is a response to the requirement of cooperation that is inherent in the preliminary reference mechanism and cannot, in itself, be a breach of either the right to a fair trial, enshrined in the second paragraph of Article 47 of the Charter, or the right to the presumption of innocence, guaranteed by Article 48(1) of the Charter.
In this case, it follows from the combined application of Article 29 of the NPK, as interpreted by the Varhoven kasatsionen sad (Supreme Court of Appeal), and points 2.3., 7.3. and 7.4. of the National Code of Conduct, that the presentation by a Bulgarian judge, in a request for a preliminary ruling, of the factual and legal context of the case at issue in the main proceedings is deemed to be the expression by that judge of a provisional opinion, which entails not only that the judge is disqualified and his final judgment set aside, but also that an action for damages will be brought against him for a disciplinary offence.
It follows that one effect of a national rule such as that at issue in the main proceedings is likely to be that a national court may choose to refrain from referring questions for a preliminary ruling to the Court, in order to avoid, on the one hand, being disqualified and exposed to disciplinary penalties or, on the other, lodging requests for preliminary rulings that are inadmissible. Consequently, such a rule is detrimental to the prerogatives granted to national courts and tribunals by Article 267 TFEU and, consequently, to the effectiveness of the cooperation between the Court and the national court and tribunals established by the preliminary ruling mechanism.
In the light of all the foregoing, the answer to the first question referred is that Article 267 TFEU and Article 94 of the Rules of Procedure, read in the light of the second paragraph of Article 47 and of Article 48(1) of the Charter, must be interpreted as precluding a national rule which is interpreted in such a way as to oblige a referring court to disqualify itself from a pending case, on the ground that it set out, in its request for a preliminary ruling, the factual and legal context of that case.
The second question
By its second question, the referring court seeks, in essence, to ascertain whether EU law, and in particular Article 267 TFEU, must be interpreted as precluding the possibility, after the delivery of the preliminary ruling, of the referring court making no change to the findings of fact or law made in the request for a preliminary ruling or, on the contrary, the possibility, after that delivery of the preliminary ruling, of the referring court hearing the parties again and undertaking further inquiries, which might lead it to alter those findings of fact or law.
In that regard, it must be recalled that, in accordance with settled case-law, Article 267 TFEU requires the referring court to give full effect to the interpretation of EU law provided by the Court (see, to that effect, judgment of 5 April 2016, PFE, C‑689/13, EU:C:2016:199, paragraphs 38 to 40 and the case-law cited).
On the other hand, neither that article, nor any other provision of EU law, requires the referring court, after the delivery of the preliminary ruling, to alter the findings of fact or law made in a request for a preliminary ruling. Equally, no provision of EU law prohibits the referring court from altering, after the delivery of the preliminary ruling, its findings in respect of the relevant factual and legal context.
In the light of the foregoing, the answer to the second question referred is that EU law, and in particular Article 267 TFEU, must be interpreted as meaning that it does not require the referring court, after the delivery of the preliminary ruling, to hear the parties again and to undertake further inquiries, which might lead it to alter the findings of fact or law made in the request for a preliminary ruling, nor does it prohibit the referring court from doing so, provided that the referring court gives full effect to the interpretation of EU law adopted by the Court.
The third question
By its third question, the referring court seeks, in essence, to ascertain whether EU law must be interpreted as precluding the referring court from applying a national rule, such as that at issue in the main proceedings, which is deemed to be contrary to EU law, on the ground that that rule ensures a higher degree of protection of the parties’ fundamental rights.
In that regard, it must be observed at the outset that the assumption that underlies that question, that the national rule at issue in the main proceedings provides an individual with enhanced protection of his right to a fair trial, within the meaning of the second paragraph of Article 47 of the Charter, cannot be accepted. As was stated in paragraph 23 of this judgment, the fact that a national court sets out, in the request for a preliminary ruling, in accordance with what is required by Article 267 TFEU and Article 94 of the Rules of Procedure, the factual and legal context of the main proceedings is not, in itself, a breach of that fundamental right. Consequently, the obligation to disqualify itself, imposed by that rule on a referring court which has, in a reference for a preliminary ruling, acted in that way cannot be considered as serving to enhance the protection of that right.
That said, it must be recalled that, in accordance with settled case-law, a judgment in which the Court gives a preliminary ruling is binding on the national court, as regards the interpretation or the validity of the acts of the EU institutions in question, for the purposes of the decision to be given in the main proceedings (see judgments of 20 October 2011, Interedil, C‑396/09, EU:C:2011:671, paragraph 36 and the case-law cited, and of 5 April 2016, PFE, C‑689/13, EU:C:2016:199, paragraph 38).
In addition, it must be stated that, in accordance with settled case-law, a national court which is called upon, within the exercise of its jurisdiction, to apply provisions of EU law, is under a duty to give full effect to those provisions, if necessary refusing of its own motion to apply any conflicting provision of national law, and it is not necessary for that court to request or to await the prior setting aside of that provision of national law by legislative or other constitutional means (see judgments of 20 October 2011, Interedil, C‑396/09, EU:C:2011:671, paragraph 38 and the case-law cited; of 4 June 2015, Kernkraftwerke Lippe-Ems, C‑5/14, EU:C:2015:354, paragraph 32 and the case-law cited, and of 5 April 2016, PFE, C‑689/13, EU:C:2016:199, paragraph 40 and the case-law cited).
Last, it must be added that the requirement to give full effect to EU law includes the obligation on a national court to alter established case-law, where necessary, if that is based on an interpretation of national law that is incompatible with EU law (see, to that effect, judgment of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraph 33 and the case-law cited).
It follows that, in this case, the referring court is obliged to ensure that Article 267 TFEU is given full effect, and if necessary to disapply, of its own motion, Article 29 of the NPK as interpreted by the Varhoven kasatsionen sad (Supreme Court of Appeal), where that interpretation is not compatible with EU law (see, to that effect, judgment of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraph 34).
In the light of the foregoing, the answer to the third question referred is that EU law must be interpreted as precluding a referring court from applying a national rule, such as that at issue in the main proceedings, which is deemed to be contrary to EU law.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Grand Chamber) hereby rules:
1.
Article 267 TFEU and Article 94 of the Rules of Procedure of the Court, read in the light of the second paragraph of Article 47 and of Article 48(1) of the Charter of Fundamental Rights of the European Union, must be interpreted as precluding a national rule which is interpreted in such a way as to oblige the referring court to disqualify itself from a pending case, on the ground that it set out, in its request for a preliminary ruling, the factual and legal context of that case.
2.
EU law, and in particular Article 267 TFEU, must be interpreted as meaning that it does not require the referring court, after the delivery of the preliminary ruling, to hear the parties again and to undertake further inquiries, which might lead it to alter the findings of fact or law made in the request for a preliminary ruling, nor does it prohibit the referring court from doing so, provided that the referring court gives full effect to the interpretation of EU law adopted by the Court of Justice of the European Union.
3.
EU law must be interpreted as precluding a referring court from applying a national rule, such as that at issue in the main proceedings, which is deemed to be contrary to EU law.
[Signatures]
( *1 ) Language of the case: Bulgarian. |
OPINION OF ADVOCATE GENERAL
BOT
delivered on 15 January 2015 ( )
Case C‑3/14
Prezes Urzędu Komunikacji Elektronicznej,
Telefonia Dialog sp. z o.o.
v
T-Mobile Polska SA, formerly Polska Telefonia Cyfrowa SA
(Request for a preliminary ruling from the Sąd Najwyższy (Poland))
‛Reference for a preliminary ruling — Electronic communications networks and services — Directive 2002/19/EC — Article 5 — Powers and responsibilities of the national regulatory authorities with regard to access and interconnection — Directive 2002/21/EC — Article 7(3) — Notification of measures envisaged by national regulatory authorities — Scope of the procedure — Scope of the condition concerning the purpose of the decision — Scope of the condition concerning that measure’s effect on trade between Member States — Decision of a national regulatory authority adopted in connection with the resolution of a dispute between two national operators, within the meaning of Article 20 of Directive 2002/21/EC — Decision imposing on one of those operators the obligations laid down in Article 28 of Directive 2002/22/EC in respect of access to non-geographic numbers’
1.
By this reference for a preliminary ruling, the Court is asked to define the scope of the notification procedure laid down by the EU legislature in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive). ( )
2.
Under that provision, a national regulatory authority (‘NRA’) is required to notify the Commission and the NRAs of the other Member States of any draft measures which are adopted on the basis of the provisions expressly referred to by the EU legislature in Article 7(3)(a) of the Framework Directive and which also ‘affect trade between Member States’ within the meaning of Article 7(3)(b) of that directive.
3.
The Sąd Najwyższy (Supreme Court) (Poland) requests the Court, in essence, to clarify the scope of each of those two conditions.
4.
That request has been made in proceedings brought by the Prezes Urzędu Komunikacji Elektronicznej (President of the Office of Electronic Communications — ‘the President of the UKE’), the Polish NRA, and Telefonia Dialog sp. z o.o. (‘Telefonia Dialog’) against T-Mobile Polska SA, formerly Polska Telefonia Cyfrowa SA (‘T-Mobile Polska’), one of the main telecommunications operators in Poland. At the request of Telefonia Dialog SA (‘Telefonia Dialog’) and in order to resolve the dispute between it and T-Mobile Polska, the President of the UKE in effect imposed on T-Mobile Polska obligations designed to ensure that end-users would have the right to access non-geographic numbers guaranteed in Article 28 of Directive 2002/22/EC. ( ) According to Article 2(d) and (f) of the Universal Service Directive, a ‘non-geographic number’ is a number from the national numbering plan the digit structure of which does not contain any geographic significance used for routing calls to the physical location of the network termination point. It includes, inter alia, mobile, freephone and premium rate numbers. It is clear from the material in the file that the President of the UKE did not notify that measure to the European Commission or to the NRAs of the other Member States prior to its adoption.
5.
By its questions, the referring court asks the Court, in essence, whether an NRA is required to notify, under the procedure referred to in Article 7(3) of the Framework Directive, a measure such as that at issue in the main proceedings. In particular, it asks whether that measure, by which the NRA imposed on an operator obligations in respect of access to non-geographic numbers in order to resolve a dispute, falls within the scope of the procedure and, more precisely, whether it satisfies the two conditions referred to in Article 7(3)(a) and (b) of the Framework Directive.
6.
In this Opinion I shall explain why I consider that such a measure does fall within the scope of Article 7(3) of the Framework Directive and ought therefore to be notified to the Commission and the NRAs of the other Member States since it affects trade between Member States.
7.
In that regard, I shall propose that the Court should rule that the condition concerning the measure’s effect on trade between Member States, referred to in Article 7(3)(b) of the Framework Directive, requires it to be shown that the measure at issue is capable of having a significant effect on trade between Member States by having an influence, direct or indirect, actual or potential, on the pattern of trade between them. Since such an assessment is a matter of fact, I shall submit that it is for each of the competent national authorities to conduct such an examination in each particular case, taking into account the nature of the measure and services concerned and the position and importance of the operators concerned on the market.
I – Legal framework
A – EU law
1. The Access Directive
8.
Article 1(1) of Directive 2002/19/EC ( ) reads as follows:
‘Within the framework set out in [the Framework Directive], this Directive harmonises the way in which Member States regulate access to, and interconnection of, electronic communications networks and associated facilities. The aim is to establish a regulatory framework, in accordance with internal market principles, for the relationships between suppliers of networks and services that will result in sustainable competition, interoperability of electronic communications services and consumer benefits.’
9.
Article 5 of the Access Directive, entitled ‘Powers and responsibilities of the [NRAs] with regard to access and interconnection’, provides:
‘1. [NRAs] shall, acting in pursuit of the objectives set out in Article 8 of [the Framework Directive], encourage and where appropriate ensure, in accordance with the provisions of this Directive, adequate access and interconnection, and the interoperability of services, exercising their responsibility in a way that promotes efficiency, sustainable competition, efficient investment and innovation, and gives the maximum benefit to end-users.
In particular, without prejudice to measures that may be taken regarding undertakings with significant market power in accordance with Article 8, [NRAs] shall be able to impose:
(a)
to the extent that is necessary to ensure end-to-end connectivity, obligations on undertakings that control access to end-users, including in justified cases the obligation to interconnect their networks where this is not already the case;
…
3. Obligations and conditions imposed in accordance with paragraphs 1 and 2 … shall be implemented in accordance with the procedures referred to in Articles 6 and 7 of [the Framework Directive].
4. With regard to access and interconnection, Member States shall ensure that the [NRA] is empowered to intervene at its own initiative where justified or, in the absence of agreement between undertakings, at the request of either of the parties involved, in order to secure the policy objectives of Article 8 of [the Framework Directive], in accordance with the provisions of this Directive and the procedures referred to in Articles 6 and 7, 20 and 21 of [the Framework Directive].’
10.
Article 8 of the Access Directive, entitled ‘Imposition, amendment or withdrawal of obligations’, reads as follows:
‘1. Member States shall ensure that [NRAs] are empowered to impose the obligations identified in Articles 9 to 13.
…
4. Obligations imposed in accordance with this Article shall be based on the nature of the problem identified, proportionate and justified in the light of the objectives laid down in Article 8 of [the Framework Directive]. Such obligations shall only be imposed following consultation in accordance with Articles 6 and 7 of that Directive.
…’
2. The Framework Directive
11.
Recitals 15 and 38 in the preamble to the Framework Directive state:
‘(15)
It is important that [NRAs] consult all interested parties on proposed decisions and take account of their comments before adopting a final decision. In order to ensure that decisions at national level do not have an adverse effect on the single market or other Treaty objectives, [NRAs] should also notify certain draft decisions to the Commission and other [NRAs] to give them the opportunity to comment. It is appropriate for [NRAs] to consult interested parties on all draft measures which have an effect on trade between Member States. The cases where the procedures referred to in Articles 6 and 7 apply are defined in this Directive and in the Specific Directives ...
...
(38)
Measures that could affect trade between Member States are measures that may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States in a manner which might create a barrier to the single market. They comprise measures that have a significant impact on operators or users in other Member States, which include, inter alia: measures which affect prices for users in other Member States; measures which affect the ability of an undertaking established in another Member State to provide an electronic communications service, and in particular measures which affect the ability to offer services on a transnational basis; and measures which affect market structure or access, leading to repercussions for undertakings in other Member States.’
12.
Article 6 of the Framework Directive, entitled ‘Consultation and transparency mechanism’, provides as follows:
‘Except in cases falling within Articles 7(6), 20 or 21 Member States shall ensure that where [NRAs] intend to take measures in accordance with this Directive or the Specific Directives which have a significant impact on the relevant market, they give interested parties the opportunity to comment on the draft measure within a reasonable period ...’
13.
Article 7 of the Framework Directive is entitled ‘Consolidating the internal market for electronic communications’. It provides as follows:
‘1. In carrying out their tasks under this Directive and the Specific Directives, [NRAs] shall take the utmost account of the objectives set out in Article 8, including insofar as they relate to the functioning of the Internal Market.
2. [NRAs] shall contribute to the development of the internal market by cooperating with each other and with the Commission in a transparent manner to ensure the consistent application, in all Member States, of the provisions of this Directive and the Specific Directives ...
3. In addition to the consultation referred to in Article 6, where [an NRA] intends to take a measure which:
(a)
falls within the scope of Articles 15 or 16 of this Directive, Articles 5 or 8 of [the Access Directive] or Article 16 of [the Universal Service Directive], and
(b)
would affect trade between Member States,
it shall at the same time make the draft measure accessible to the Commission and the [NRAs] in other Member States, together with the reasoning on which the measure is based, in accordance with Article 5(3), and inform the Commission and other [NRAs] thereof. [NRAs] and the Commission may make comments to the [NRA] concerned only within one month or within the period referred to in Article 6 if that period is longer. The one-month period may not be extended.
…’
14.
Article 20 of the Framework Directive, entitled ‘Dispute resolution between undertakings’, reads:
‘1. In the event of a dispute arising in connection with obligations arising under this Directive or the Specific Directives between undertakings providing electronic communications networks or services in a Member State, the [NRA] concerned shall, at the request of either party, and without prejudice to the provisions of paragraph 2, issue a binding decision to resolve the dispute in the shortest possible time frame …
…
3. In resolving a dispute, the [NRA] shall take decisions aimed at achieving the objectives set out in Article 8. Any obligations imposed on an undertaking by the [NRA] in resolving a dispute shall respect the provisions of this Directive or the Specific Directives.
…’
3. The Universal Service Directive
15.
Article 28 of the Universal Service Directive comes within Chapter IV of the directive, entitled ‘End-user interests and rights’. That article concerns access to non-geographic numbers and provides as follows:
‘Member States shall ensure that end-users from other Member States are able to access non-geographic numbers within their territory …’
B – Polish law
16.
The Law on Telecommunications (Ustawa Prawo telekomunikacyjne) of 16 July 2004, ( ) in the version applicable at the material time, transposes into national law the provisions adopted by the EU legislature in the context of the ‘telecoms package’.
17.
Article 15 of that law, which is in Chapter 3, entitled ‘Consultation Procedure’, is designed to transpose Article 6 of the Framework Directive. Article 15 provides as follows:
‘Before the President of the UKE gives a decision on:
(1)
market analysis and the designation of a telecommunications undertaking with significant market power, or the annulment of a decision in that regard,
(2)
the imposition, withdrawal, maintenance or amendment of regulatory obligations in relation to a telecommunications undertaking, whether or not it possesses significant market power,
(3)
granting access to telecommunications, referred to in Articles 28 to 30,
(4)
other matters referred to in the Law,
he shall follow a consultation procedure to enable interested parties to express in writing their position in relation to the draft decision within the specific time-limit.’
18.
Article 18 of that law is in Chapter 4, entitled ‘Consolidation Procedure’. It is designed to transpose Article 7 of the Framework Directive and provides as follows:
‘If the decisions referred to in Article 15 may affect trade between Member States, at the same time as he initiates the consultation procedure, the President of the UKE shall initiate a consolidation procedure and shall send the … Commission and the regulatory authorities of the other Member States the draft decisions, together with the reasoning on which they are based.’
19.
Articles 27 and 28 of the Law on Telecommunications are designed to transpose Article 5 of the Access Directive. Articles 27 and 28 read as follows:
‘Article 27
1. The President of the UKE may, of his own motion or at the written request of a party to negotiations for the conclusion of an access agreement, by order, lay down a time-limit for closing the negotiations, which must not exceed 90 days from the day on which the request for the conclusion of such an agreement is submitted.
2. If the negotiations do not commence, if access is refused by the operator required to grant such access, or if the agreement is not concluded within the time-limit referred to in paragraph 1, any party may request the President of the UKE to adopt a decision regarding the points in dispute or defining the terms of cooperation.
…
‘Article 28
1. The President of the UKE shall take his decision on the grant of access within 90 days of the date of the submission of the request referred to in Article 27(2), taking account of the following criteria:
(1)
the interest of users of the telecommunications networks;
(2)
the obligations imposed on telecommunications undertakings;
(3)
the promotion of modern telecommunications services;
(4)
the nature of existing contentious issues and the practical possibility of implementing solutions concerning the technical and economic aspects of access, proposed by telecommunications undertakings party to the negotiations, which may provide alternatives;
(5)
a guarantee of:
(a)
the integrity of the networks and the interoperability of services,
(b)
non-discriminatory access conditions,
(c)
the development of a competitive market for telecommunications services;
…
4. The decision on access shall replace that part of the access agreement covered by the decision.
…
6. The decision on access may be amended by the President of the UKE at the request of any party concerned or ex officio, where this is justified by the need to protect the interests of end-users, effective competition or interoperability of services.
…’
20.
Article 79(1) of the Law on Telecommunications transposes Article 28 of the Universal Service Directive. It reads as follows:
‘The operator of the public telecommunications network shall ensure that end-users on its network and end-users from other Member States, where this is technically and economically feasible, are able to access non-geographic numbers within the territory of the Republic of Poland, except where a called subscriber has placed restrictions on calls from end-users located in specific geographical areas.’
II – The facts of the main proceedings and the questions referred for a preliminary ruling
21.
The order for reference states that Telefonia Dialog requested the President of the UKE to take the measures necessary in order to amend the terms of an agreement between that company and T-Mobile Polska concerning access by end-users to non-geographic numbers.
22.
It was on the basis of Article 28 of the Law on Telecommunications, which transposes Article 5 of the Access Directive, entitled, it will be recalled, ‘Powers and responsibilities of the [NRAs] with regard to access and interconnection’, that the President of the UKE, by a decision of 19 December 2008, imposed on Telefonia Dialog the obligation to provide call termination services on its network in return for remuneration as defined in that decision. T-Mobile Polska for its part was required to provide access for its subscribers to information and entertainment services provided on Telefonia Dialog’s network in return for remuneration also defined in that decision.
23.
In proceedings brought by T-Mobile Polska, the Sąd Okręgowy w Warszawie (Regional Court, Warsaw) annulled the decision of the President of the UKE, on the ground that the latter had failed to make the notification required under Article 7(3) of the Framework Directive. In the opinion of the Sąd Okręgowy w Warszawie, that decision concerned citizens of Member States using T-Mobile Polska’s roaming services and therefore affected trade between Member States.
24.
That judgment was upheld by the Sąd Apelacyjny w Warszawie (Court of Appeal, Warsaw).
25.
The President of the UKE lodged an appeal on a point of law with the Sąd Najwyższy. He considers that the Sąd Apelacyjny w Warszawie, in finding that the measure at issue led to repercussions on the single market, failed to interpret correctly the concept of the ‘[effect on] trade between Member States’ referred to in Article 7(3) of the Framework Directive and, consequently, infringed that provision.
26.
In those circumstances the Sąd Najwyższy decided to stay the proceedings before it and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Must Article 7(3) of [the Framework Directive], in conjunction with Article 28 of the Universal Service Directive, be interpreted as meaning that every measure taken by [an NRA] in order to fulfil the obligation arising from Article 28 of [the Universal Service Directive] affects trade between Member States where that measure may ensure that end-users from other Member States are able to access non-geographic numbers within the territory of that Member State?
(2)
Must Article 7(3) in conjunction with Articles 6 and 20 of [the Framework Directive] be interpreted as meaning that, in resolving disputes between undertakings providing electronic communications networks or services concerning the fulfilment by one of those undertakings of the obligation arising from Article 28 of [the Universal Service Directive], [an NRA] cannot conduct consolidation proceedings even where the measure affects trade between Member States and national law requires the [NRA] to conduct consolidation proceedings in every case where a measure may affect that trade?
(3)
If the answer to Question 2 is in the affirmative, must Article 7(3) in conjunction with Articles 6 and 20 of [the Framework Directive], read in conjunction with Article 288 TFEU and Article 4(3) TEU, be interpreted as meaning that a national court is obliged to refrain from applying provisions of national law which require the [NRA] to conduct consolidation proceedings in every case where a measure taken by that [NRA] may affect trade between Member States?’
III – Preliminary observations
27.
I suggest that the Court should examine the questions in a different order from that adopted by the Sąd Najwyższy, for the following reasons.
28.
In its questions, the referring court asks the Court, in essence, whether an NRA is required to comply with the notification procedure referred to in Article 7(3) of the Framework Directive where it imposes, in the context of a dispute between two undertakings providing electronic communications services in a Member State, the obligations concerning access to non-geographic numbers laid down by the EU legislature in Article 28 of the Universal Service Directive.
29.
The cases in which NRAs are required to notify their draft measures are expressly indicated by the EU legislature in Article 7(3) of the Framework Directive. Two conditions must be met.
30.
The first concerns the purpose of the measure. Thus, according to Article 7(3)(a) of the Framework Directive, it must be a measure ‘[falling within the scope] of Articles 15 or 16 of [that] Directive, Articles 5 or 8 of [the Access Directive] or Article 16 of [the Universal Service Directive]’.
31.
The second condition concerns the repercussions of the measure on the single market. According to Article 7(3)(b) of the Framework Directive, it must be a measure ‘[affecting] trade between Member States’.
32.
In its first question, the referring court asks about the scope of that second condition. In effect, the Sąd Najwyższy is asking whether a measure such as that at issue in the main proceedings, which is designed to ensure access to non-geographic numbers, would affect trade between Member States, within the meaning of Article 7(3)(b) of the Framework Directive.
33.
Moreover, in its second question it asks about the scope of the first condition concerning the nature of the decision. The referring court is asking in effect whether the notification procedure is applicable to a measure that is adopted on the basis of Article 20 of the Framework Directive in order to resolve a dispute between national operators.
34.
In the light of the foregoing, it appears to me to be more logical therefore to reverse the order in which those two questions are considered. Indeed, were I to take the view that a measure such as that at issue in the main proceedings, adopted in connection with the resolution of a dispute between undertakings, did not fall within one of the situations expressly defined by the EU legislature in Article 7(3)(a) of the Framework Directive, it would not be necessary to examine whether that measure might, under Article 7(3)(b) of that directive, lead to repercussions as regards trade between Member States.
IV – My analysis
A – The scope of the condition laid down in Article 7(3)(a) of the Framework Directive concerning the nature of the measure
35.
In its second question, the referring court asks the Court, in essence, whether, under Article 7(3) of the Framework Directive, an NRA is required to notify a measure by which it imposes on a telecommunications operator obligations in respect of access to non-geographic numbers, where that measure is adopted in connection with the resolution of a dispute within the meaning of Article 20 of that directive. ( )
36.
The question arises because, in Article 20 of the Framework Directive, the EU legislature does not make clear that such a decision must be notified to the Commission and the NRAs of the other Member States under the procedure referred to in Article 7(3) of that directive.
37.
The question also arises because that decision does not, at first sight, fall within one of the cases identified by the EU legislature in Article 7(3)(a) of that directive.
38.
Under that provision, an NRA is required to notify measures by which:
—
it defines the relevant market or carries out a market analysis in accordance with Articles 15 and 16 of the Framework Directive;
—
it implements obligations in respect of access to, and interconnection of, electronic communications networks in accordance with Article 5 of the Access Directive;
—
it imposes, amends or withdraws, in accordance with Article 8 of the Access Directive, obligations applicable to operators designated as having significant market power on a specific market, and in particular
—
obligations for transparency of the terms and conditions for interconnection or access in accordance with Article 9 of the Access Directive;
—
obligations of non-discrimination in accordance with Article 10 of the Access Directive;
—
obligations for accounting separation in accordance with Article 11 of the Access Directive;
—
obligations in respect of access to specific network elements and associated facilities in accordance with Article 12 of the Access Directive, and
—
price control and cost accounting requirements in accordance with Article 13 of the Access Directive, and
—
it maintains, amends or withdraws obligations relating to retail markets in accordance with Article 16(3) of the Universal Service Directive.
39.
The EU legislature therefore makes no express reference to a measure adopted on the basis of Article 20 of the Framework Directive.
40.
None the less, in my view that does not preclude such a decision from falling within the scope of the notification procedure referred to in Article 7(3) of the Framework Directive where that measure concerns one of the obligations laid down in Article 7(3)(a) of the Framework Directive and leads to repercussions as regards trade between Member States in accordance with Article 7(3)(b) of that directive.
41.
Article 20 of the Framework Directive is a purely procedural provision. As will be recalled, it sets out the rules and procedure applicable where an NRA intervenes in a dispute arising between undertakings providing electronic communications networks or services in a Member State and adopts a binding decision for the purpose of resolving that dispute.
42.
Implementation of the notification procedure is not dependent on the nature of the procedure following which the NRA adopted the measure in question. As is clear from the wording of Article 7(3)(a) of the Framework Directive, implementation of that procedure depends solely on the purpose of the measure. Does it seek to define a relevant market, provide access to an electronic communications service or impose on an operator on the market obligations in respect of price control?
43.
In the case in the main proceedings, it is therefore necessary to address the actual purpose of the decision adopted by the President of the UKE, irrespective of the procedural framework within which it was taken.
44.
The order for reference states that that measure was adopted by the President of the UKE in order to implement the obligations referred to in Article 28 of the Universal Service Directive, which is designed to ensure that end-users have the right to access non-geographic numbers on their territory. Such a decision therefore concerns access to an electronic communications service.
45.
Although that measure was taken in connection with the procedure for the resolution of disputes referred to in Article 20 of the Framework Directive, the referring court confirms that it was adopted under the powers conferred on the President of the UKE by Article 28 of the Law on Telecommunications, which transposes into national law Article 5 of the Access Directive. It should be borne in mind that that provision confers on each of the NRAs the right, the obligation even, to impose on operators on the market obligations in respect of access to, and interconnection of, electronic communications services. It is a substantive provision which clearly applies to the measure at issue in the main proceedings.
46.
The measure adopted by the President of the UKE is therefore based, so far as its purpose is concerned, on Article 5 of the Access Directive, which lays down the powers and responsibilities incumbent on NRAs in so far as access and interconnection are concerned and, as regards procedure, on Article 20 of the Framework Directive, which lays down the procedural rules applicable as regards the resolution of a dispute.
47.
In that regard, I would point out that the EU legislature establishes a very close link between measures adopted on the basis of Article 5 of the Access Directive and the procedural mechanisms referred to in Articles 6, 7, 20 and 21 of the Framework Directive. As is very clear from Article 5(3) and (4) of the Access Directive, the obligations and conditions imposed by NRAs with regard to access and interconnection must be implemented in accordance with the consultation and notification procedures referred to in Articles 6 and 7 of the Framework Directive and, where appropriate, in compliance with the rules of procedure referred to in Articles 20 and 21 of the Framework Directive, where they relate to the resolution of a national or cross-border dispute.
48.
That being said, it is necessary at this point to state that measures adopted on the basis of Article 5 of the Access Directive expressly fall within the cases identified in Article 7(3)(a) of the Framework Directive. The NRAs are therefore required to notify them to the Commission and the NRAs of the other Member States where they affect trade between Member States.
49.
That interpretation is confirmed by the objectives pursued by the EU legislature in this matter.
50.
The objective, as expressly stated in recital 15 in the preamble to the Framework Directive, is to ensure that decisions adopted by NRAs at national level do not have an adverse effect on the single market. Moreover, according to recital 2 in the preamble to the Commission recommendation of 15 October 2008, ( ) such decisions must not have an adverse effect on achievement of the objectives pursued by the EU legislature in establishing a regulatory framework for the telecommunications market, which are referred to in Article 8 of the Framework Directive. In other words, the EU legislature requires NRAs to contribute to the development of the single market by cooperating in a transparent manner, among themselves and with the Commission, in order to ensure a coherent application of the rules laid down in the context of the ‘telecoms package’ and thus avoid any distortion of competition that might hinder the development of the telecommunications market.
51.
It would be contrary to those objectives to exclude from the notification procedure measures adopted by NRAs in connection with the resolution of a dispute. Such measures are of an administrative and not a judicial nature and their notification is clearly part of the cooperation that the EU legislature seeks to establish between the NRAs and the Commission. Consequently, exclusion of such measures from the scope of Article 7(3) of the Framework Directive would, in my view, be likely to disrupt the harmonisation sought. I would observe in that regard that in recital 32 in the preamble to the Framework Directive the EU legislature expressly stated that the ‘intervention of [an NRA] in the resolution of a dispute between undertakings providing electronic communications networks or services in a Member State should seek to ensure compliance with the obligations arising under [the Framework Directive] or the Specific Directives’, which include the requirement of transparency and cooperation.
52.
It is interesting to note, moreover, that, in connection with the pursuit of those objectives, the Commission stated, in recital 4 in the preamble to its abovementioned recommendation, that it ‘will give [NRAs], if they so request, the opportunity to discuss any draft measures, before formal notification of such measures under Article 7 of [the Framework Directive]’.
53.
In the light of all those considerations, I therefore take the view that Article 7(3) of the Framework Directive must be interpreted as meaning that a measure adopted in connection with the resolution of a dispute, by which an NRA imposes on an operator obligations in respect of access to non-geographic numbers, and does so in accordance with its powers and responsibilities under Articles 5 of the Access Directive, 20 of the Framework Directive and 28 of the Universal Service Directive, falls within the scope of the notification procedure and must therefore be notified where that measure affects trade between Member States.
B – The scope of the condition laid down in Article 7(3)(b) of the Framework Directive concerning the measure’s effect on trade between Member States
54.
In its first question, the referring court asks the Court, in essence, whether, under Article 7(3) of the Framework Directive, a measure by which an NRA seeks, in accordance with Article 28 of the Universal Service Directive, to ensure that end-users are able to access non-geographic numbers necessarily affects trade between Member States, so that such a measure must be notified to the Commission and to the NRAs of the other Member States.
55.
In order to answer that question it is necessary to determine the scope of the criterion of the measure’s ‘[effect on] trade between Member States’, referred to in Article 7(3)(b) of the Framework Directive.
56.
That criterion, as we have seen above, determines the scope of the notification procedure. Although this has been the subject of much case-law in the context of competition litigation, the Court has not yet ruled on its scope in the context of litigation in the telecommunications sector.
57.
First of all, it should be noted that the EU legislature expressly defines the scope of that criterion in recital 38 in the preamble to the Framework Directive.
58.
It covers ‘measures that may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States in a manner which might create a barrier to the single market’, the EU legislature explaining moreover that such measures ‘comprise measures that have a significant impact on operators or users in other Member States’.
59.
I note, first of all, that that definition is the same as the definition adopted by the Court and the Commission in competition law cases. In its judgment in Völk, ( ) a seminal judgment in this matter, the Court held that the concept of ‘[the effect on] trade between Member States’, referred to in Article 85(1) of the EEC Treaty (subsequently Article 85(1) of the EC Treaty, then Article 81(1) EC and now Article 101(1) TFEU), requires that the agreement in question be capable of having ‘an influence, direct or indirect, actual or potential, on the pattern of trade between Member States in such a way that it might hinder the attainment of the objectives of a single market between States’. ( ) Two years later in Béguelin Import, ( ) the Court also held that the concept of the effect on trade between Member States relates to agreements and practices which affect trade between Member States ‘to an appreciable extent’. ( )
60.
That definition was also used by the Commission in its Notice entitled ‘Guidelines on the effect on trade concept contained in Articles 81 [EC] and 82 [EC]’, ( ) to which I shall make further reference below.
61.
Consequently, the definition of ‘[the effect on] trade between Member States’ for the purposes of Article 7(3) of the Framework Directive, adopted by the EU legislature, and the definition of the effect on trade between Member States for the purposes of Articles 101 TFEU and 102 TFEU are the same.
62.
It is quite logical that those definitions should be the same when one considers that the telecommunications market nowadays is a competitive market on which operators may engage in conduct which may fall foul of Articles 101 TFEU and 102 TFEU.
63.
In that regard, as is clear from the regulatory framework laid down in the telecommunications sector, the definition and analysis of the relevant markets, the position and power of economic operators on those markets and the effect of the practices adopted by those operators on those markets derive from an economic analysis based on competition law methodology. Moreover, the EU legislature expressly stated this with regard to obligations in respect of access to, and interconnection of, electronic communications networks in recital 13 in the preamble to the Access Directive.
64.
In those circumstances and like all the parties who submitted observations in the main proceedings, I think that the concept of ‘[the effect on] trade between Member States’ used by the EU legislature in Article 7(3) of the Framework Directive should have the same scope as the concept of the effect on trade between Member States which it used in the context of competition law, and in particular of Article 101 TFEU, and should be assessed using the same methodology.
65.
That methodology was set out in the Guidelines, which are based on the case-law of the Court in that area.
66.
Under those Guidelines, for trade between Member States to be affected within the meaning of Articles 101 TFEU and 102 TFEU, it is required, as I have said above, that the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States. ( ) According to the Court, that assessment must be based on examination of a set of objective factors of law or of fact relating to the actual circumstances of the agreement. ( ) In that context, the competent authorities must take into account the nature of the agreement or practice in question, the nature of the products concerned and the position and importance of the undertakings involved.
67.
The nature of the agreement and the power of the undertakings on the market indicate the capacity of that agreement to affect trade between Member States. The nature of the products concerned indicates whether it is likely that intra-Community trade will be affected. Where the purchase or sale of a product takes place in the context of cross-border trade or represents a significant share of the activities of an undertaking seeking to become established or to increase its activities in other Member States, it is easier to show that such an agreement may lead to repercussions on the single market.
68.
Moreover, under the Guidelines, having an effect on trade between Member States, for the purposes of Articles 101 TFEU and 102 TFEU, means that the agreement or practice in question must be capable of having a minimum level of cross-border effects, ( ) involving at least two Member States. The criterion of the effect on trade between Member States includes a quantitative element which limits the applicability of EU law to agreements and practices that are capable of having effects of a certain magnitude. Assessing whether the effect is appreciable again depends on the circumstances of each case and in particular the nature of the agreement or practice in question, the nature of the products concerned and the market position of the undertakings involved. ( )
69.
As I have said above, I am of the view that the same methodology must be used to assess whether a measure adopted by an NRA affects trade between Member States.
70.
That assessment is, to my mind, a matter of fact which each competent national authority must determine in each particular case. Those authorities must therefore assess whether the measure they are planning to adopt may affect trade between Member States to an appreciable or significant extent by having an influence, direct or indirect, actual or potential, on the pattern of trade between them. To that end, their assessment should, inter alia, be based on the nature of the measure and services concerned and on the position and importance of the undertakings concerned on the market. ( )
71.
In recital 38 in the preamble to the Framework Directive the EU legislature sets out a non-exhaustive list of measures that might have a significant impact on operators or users in other Member States. It includes, inter alia, measures which affect market structure or access, thereby leading to repercussions for undertakings established in other Member States. It also includes measures which affect prices for users in other Member States and measures which affect the ability of an undertaking established in another Member State to provide an electronic communications service.
72.
Thus, for example, the Commission considers that measures concerning the setting of termination rates ( ) lead to repercussions for operators in other Member States so that it should be notified in advance of such measures under the procedure referred to in Article 7(3) of the Framework Directive. ( ) With regard to termination rates, the Commission considers that they are a component of the cost of calls between customers of operators of different networks and are included in the caller’s telephone bill, so that such a measure may be regarded as having a significant effect on users. It considers, moreover, that the level of termination rates has a direct influence on the capacity of operators established in other Member States to provide their services in the Member State in question as a result of the termination rates set.
73.
Similarly, the Commission considers that measures by which an NRA sets the rates for the wholesale supply of broadband access and the method of calculating them should be notified in advance in accordance with Article 7(3) of the Framework Directive.
74.
In the main proceedings, it is therefore for the national court to determine in this particular case whether the measure at issue, adopted in order to ensure that end-users are able to access non-geographic numbers, may likewise affect trade between Member States, so that all the conditions required under the notification procedure are satisfied.
75.
To that end, the national court must therefore take into account the nature of that measure and the nature of the services concerned.
76.
In that regard, I would point out that that measure requires T-Mobile Polska to ensure that end-users, when they are within the territory of the Republic of Poland and making use of the roaming arrangement available on a Polish operator’s network, will be able to access non-geographic numbers.
77.
I note that, according to Article 2(d) and (f) of the Universal Service Directive, a ‘non-geographic number’ is a number from the national numbering plan the digit structure of which does not contain any geographic significance used for routing calls to the physical location of the network termination point. It includes in particular mobile, freephone and premium rate numbers.
78.
I also understand, in the present case, that the measure at issue lays down the rules for setting the rates for the service providing access to non-geographic numbers under the agreement between T-Mobile Polska and Telefonia Dialog.
79.
All this goes to show, in my view, that that measure is capable of affecting trade between Member States.
80.
First, the access to non-geographic numbers which T-Mobile Polska is required to ensure benefits not only the end-users of that company’s network but also those who use its roaming services. As the Commission rightly states, roaming involves a transnational dimension of communication. At the hearing, T-Mobile Polska also stated that it had entered into more than 140 roaming contracts with operators in the other Member States.
81.
Secondly, the measure at issue sets the prices of telecommunications services and lays down rules for reviewing those rates. If those rules are included in T-Mobile Polska’s agreement they are, to my mind, liable to have direct repercussions for the end-user since they are a component of the cost of a call and, hence, affect the amount of the caller’s telephone bill. In those circumstances, it seems to me that such a measure may have a significant effect on users. Furthermore, it is not impossible, as the Sąd Apelacyjny w Warszawie held, that the measure might also have repercussions as regards the conditions under which operators can access the market, in particular operators established in other Member States.
82.
Moreover, the national court must take into consideration the position and importance on the market of the undertakings concerned, in particular of T-Mobile Polska. According to the information available to me and that provided by T-Mobile Polska at the hearing, that undertaking is one of the main telecommunications operators in Poland and in Eastern Europe. In 2006, as is apparent from Polska Telefonia Cyfrowa, ( ) the President of the UKE had already identified that undertaking as having significant power in the market for the provision of voice call termination services and decided to impose on it certain regulatory obligations. ( ) In 2008, T-Mobile Polska held a 29% market share, and in 2013 its market share was 27%. That information regarding the importance of T-Mobile Polska on the market clearly goes to show that the volume of communications passing over that undertaking’s network, including those made to non-geographic numbers, is significant.
83.
Although the above considerations show that the measure at issue may lead to repercussions as regards trade between Member States, in my view they are insufficient to conclude that intra-Community trade may be affected to an appreciable extent. It is for the national court, in the light of all the evidence available to it in the context of the present case, to determine the precise extent of that effect.
84.
In the light of those considerations, I am therefore of the view that Article 7(3) of the Framework Directive must be interpreted as meaning that a measure by which an NRA seeks, in accordance with Article 28 of the Universal Service Directive, to ensure that end-users are able to access non-geographic numbers is capable of affecting trade between Member States, where that measure may affect to an appreciable extent trade between those States by having an influence, direct or indirect, actual or potential, on the pattern of trade between them.
85.
That assessment concerns a matter of fact which it is for each of the competent national authorities to determine in each particular case, taking into account the nature of the measure and services concerned and the position and importance of the operators concerned on the market.
C – Third question
86.
There is no need, in my view, to examine the referring court’s third question in view of the answers I propose to give to the first two questions. Moreover, as I have stated above, it is clear from the wording of the Polish legislation, as set out in the documents available to me, that it is not at variance with the obligations laid down by the EU legislature in Article 7(3) of the Framework Directive.
V – Conclusion
87.
In the light of the foregoing considerations, I propose that the Court should answer the Sąd Najwyższy’s questions as follows:
(1)
Article 7(3) of Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) must be interpreted as meaning that a measure adopted in connection with the resolution of a dispute, by which a national regulatory authority imposes on an operator obligations in respect of access to non-geographic numbers, and does so in accordance with its powers and responsibilities under Article 5 of Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (Access Directive), Article 20 of Directive 2002/21 and Article 28 of Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive), falls within the scope of the notification procedure and must therefore be notified where that measure affects trade between Member States.
(2)
Article 7(3) of Directive 2002/21 must be interpreted as meaning that a measure by which a national regulatory authority seeks, in accordance with Article 28 of Directive 2002/22, to ensure that end-users are able to access non-geographic numbers is capable of affecting trade between Member States, where that measure may affect to an appreciable extent trade between those States by having an influence, direct or indirect, actual or potential, on the pattern of trade between them.
That assessment concerns a matter of fact which it is for each of the competent national authorities to determine in each particular case, taking into account the nature of the measure and services concerned and the position and importance of the operators concerned on the market.
( ) Original language: French.
( ) OJ 2002 L 108, p. 33, ‘Framework Directive’.
( ) Directive of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive) (OJ 2002 L 108, p. 51).
( ) Directive of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (Access Directive) (OJ 2002 L 108, p. 7).
( ) Dz. U. No 171, item 1800.
( ) Like the Commission, I am of the view that the Polish legislation is not at variance with the obligations laid down by the EU legislature in Article 7(3) of the Framework Directive.
( ) Recommendation on notifications, time-limits and consultations provided for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services (OJ 2008 L 301, p. 23).
( ) 5/69, EU:C:1969:35.
( ) Paragraph 5.
( ) 22/71, EU:C:1971:113.
( ) Paragraph 16. Emphasis added.
( ) OJ 2004, C 101, p. 81, ‘the Guidelines’.
( ) See point 23 of the Guidelines.
( ) Völk (EU:C:1969:35, paragraphs 5 and 7).
( ) See point 13 of the Guidelines.
( ) See point 28 of the Guidelines.
( ) See, by way of an example, Javico (C‑306/96, EU:C:1998:173, paragraph 17).
( ) Termination rates are the wholesale tariffs charged by the operator of a customer receiving a phone call on a mobile phone to the operator of the caller’s network for connecting, or ‘terminating’, the call.
( ) See Commission press releases of 25 June 2009 and 24 June 2010, available at: http://europa.eu/rapid/press-release_IP-09-1008_en.htm?locale=EN and http://europa.eu/rapid/press-release_IP-10-804_en.htm.
( ) C‑410/09, EU:C:2011:294.
( ) Paragraph 14. |
JUDGMENT OF THE COURT (Second Chamber)
12 February 2015 ( *1 )
‛Action for annulment — Directive 2013/51/Euratom — Choice of legal basis — EAEC Treaty — Articles 31 EA and 32 EA — FEU Treaty — Article 192(1) TFEU — Protecting human health — Radioactive substances in water intended for human consumption — Legal certainty — Sincere cooperation among the institutions’
In Case C‑48/14,
ACTION for annulment under Articles 263 TFEU and 106a(1) EA brought on 30 January 2014,
European Parliament, represented by L. Visaggio and J. Rodrigues, acting as Agents, with an address for service in Luxembourg,
applicant,
v
Council of the European Union, represented by O. Segnana and R. Liudvinaviciute-Cordeiro, acting as Agents, with an address for service in Luxembourg,
defendant,
supported by:
Czech Republic, represented by M. Smolek and E. Ruffer, acting as Agents,
French Republic, represented by G. de Bergues and D. Colas and by N. Rouam, acting as Agents,
European Commission, represented by P. Van Nuffel and M. Patakia, acting as Agents,
interveners,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, K. Lenaerts (Rapporteur), Vice-President of the Court, A. Arabadjiev, J.L. da Cruz Vilaça and C. Lycourgos, Judges,
Advocate General: Y. Bot,
Registrar: A. Calot Escobar,
having regard to the written procedure,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
By its application, the European Parliament seeks annulment of Council Directive 2013/51/Euratom of 22 October 2013 laying down requirements for the protection of the health of the general public with regard to radioactive substances in water intended for human consumption (OJ 2013 L 296, p. 12, ‘the contested Directive’).
Legal context
EAEC Treaty
Articles 30 EA to 32 EA, which are included in Chapter 3, entitled ‘Health and Safety’, of Title II of the EAEC Treaty, provide:
‘Article 30
Basic standards shall be laid down within the Community for the protection of the health of workers and the general public against the dangers arising from ionising radiations.
The expression ‘basic standards’ means:
(a)
maximum permissible doses compatible with adequate safety;
(b)
maximum permissible levels of exposure and contamination;
(c)
the fundamental principles governing the health surveillance of workers.
Article 31
The basic standards shall be worked out by the Commission after it has obtained the opinion of a group of persons appointed by the Scientific and Technical Committee from among scientific experts, and in particular public health experts, in the Member States. The Commission shall obtain the opinion of the Economic and Social Committee on these basic standards.
After consulting the European Parliament the Council shall, on a proposal from the Commission, which shall forward to it the opinions obtained from these Committees, establish the basic standards; the Council shall act by a qualified majority.
Article 32
At the request of the Commission or of a Member State, the basic standards may be revised or supplemented in accordance with the procedure laid down in Article 31.
The Commission shall examine any request made by a Member State.’
Under Article 106a(3) EA, ‘[t]he provisions of the [TEU] and of the [FEU] Treaty shall not derogate from the provisions of this Treaty.’
Directive 98/83/EC
Council Directive 98/83/EC of 3 November 1998 on the quality of water intended for human consumption (OJ 1998 L 330, p. 32), as amended by Regulation (EC) No 596/2009 of the European Parliament and of the Council of 18 June 2009 (OJ 2009 L 188, p. 14, ‘Directive 98/83’), provides in Article 1:
‘1. This Directive concerns the quality of water intended for human consumption.
2. The objective of this Directive shall be to protect human health from the adverse effects of any contamination of water intended for human consumption by ensuring that it is wholesome and clean.’
Article 5 of Directive 98/83, entitled ‘Quality standards’, provides in paragraphs 1 and 2:
‘1. Member States shall set values applicable to water intended for human consumption for the parameters set out in Annex I.
2. The values set in accordance with paragraph 1 shall not be less stringent than those set out in Annex I. As regards the parameters set out in Annex I, Part C, the values need be fixed only for monitoring purposes and for the fulfilment of the obligations imposed in Article 8.’
Part C of Annex I to Directive 98/83, entitled ‘Indicator parameters’, provides:
‘…
Radioactivity
Parameters
Parametric value
Unit
Notes
Tritium
Bq/l
Notes 8 and 10
Total indicative dose
0,10
mSv/year
Notes 9 and 10
...
Note 8: Monitoring frequencies to be set later in Annex II.
Note 9: Excluding tritium, potassium ‑40, radon and radon decay products; monitoring frequencies, monitoring methods and the most relevant locations for monitoring points to be set later in Annex II.
Note 10: 1. The Commission shall adopt the measures required under Note 8 on monitoring frequencies, and Note 9 on monitoring frequencies, monitoring methods and the most relevant locations for monitoring points in Annex II. Those measures, designed to amend non-essential elements of this Directive, by supplementing it shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 12(3).
When elaborating those measures the Commission shall take into account, inter alia, the relevant provisions under existing legislation or appropriate monitoring programmes including monitoring results as derived from them.
...’
The contested Directive
Proposal COM(2012) 147 for a Commission Directive of 28 March 2012 laying down requirements for the protection of the health of the general public with regard to radioactive substances in water intended for human consumption was based on Article 31 EA and 32 EA. The Parliament, by legislative resolution of 12 March 2013, approved amendments concerning the replacement of that legal basis by that resulting from Article 192(1) TFEU.
However, the Council rejected the amendment of the legal basis contemplated by the Parliament and, on 22 October 2013, adopted the contested Directive on the basis of Articles 31 EA and 32 EA.
Recitals 1 to 5 in the preamble to the contested Directive provide:
‘(1)
The ingestion of water is one of the pathways of incorporation of radioactive substances into the human body. In accordance with Council Directive 96/29/Euratom [of 13 May 1996 laying down basic safety standards for the protection of the health of workers and the general public against the dangers arising from ionising radiation], the contribution to the exposure of the general public as a whole from practices which involve a risk from ionising radiation must be kept as low as reasonably achievable.
(2)
In view of the importance for human health of the quality of water intended for human consumption, it is necessary to lay down, at Community level, quality standards which have an indicator function and to provide for the monitoring of compliance with those standards.
(3)
Council Directive 98/83/EC … sets out indicator parameters relating to radioactive substances in Annex I, Part C and related monitoring provisions in Annex II thereto. However, those parameters fall within the scope of the basic standards defined in Article 30 of the [EA] Treaty.
(4)
The requirements for monitoring levels of radioactive substances in water intended for human consumption should therefore be adopted in specific legislation that ensures the uniformity, coherence and completeness of radiation protection legislation under the [EAEC] Treaty.
(5)
Since the Community is competent to adopt the basic safety standards for the protection of the health of workers and general public against the dangers arising from ionising radiations, the provisions of this Directive supersede those of Directive 98/83/EC as regards the requirements for the protection of the health of the general public with regard to radioactive substances in water intended for human consumption.’
Article 1 of the contested Directive provides:
‘This Directive lays down requirements for the protection of the health of the general public with regard to radioactive substances in water intended for human consumption. It lays down parametric values and frequencies and methods for monitoring radioactive substances.’
Article 2(3) of the contested Directive defines the ‘indicative dose’ (‘the ID’) as meaning ‘the committed effective dose for one year of ingestion resulting from all the radionuclides whose presence has been detected in a supply of water intended for human consumption, of natural and artificial origin, but excluding tritium, potassium-40, radon and short-lived radon decay products.’
In accordance with Article 5(1) of the contested Directive, ‘Member States shall set parametric values applicable for the monitoring of radioactive substances in water intended for human consumption in accordance with Annex I.’
Annex I to the contested Directive, entitled ‘Parametric values for radon, tritium, and ID of water intended for human consumption’, reads as follows:
‘
Parameter
Parametric value
Unit
Notes
Radon
Bq/l
Note 1
Tritium
Bq/l
Note 2
ID
0,10
mSv
Note 1:
(a)
Member States may set a level for radon which is judged inappropriate to be exceeded and below which optimisation of protection should be continued, without compromising water supply on a national or regional scale. The level set by a Member State may be higher than 100 Bq/l but lower than 1000 Bq/l. In order to simplify national legislation, Member States may choose to adjust the parametric value to this level.
(b)
Remedial action is deemed to be justified on radiological protection grounds, without further consideration, where radon concentrations exceed 1000 Bq/l.
Note 2: Elevated levels of tritium may indicate the presence of other artificial radionuclides. If the tritium concentration exceeds its parametric value, an analysis of the presence of other artificial radionuclides shall be required.’
Article 6(1) and (2) of the contested Directive provides:
‘1. Member States shall take all measures necessary to ensure that monitoring for radioactive substances in water intended for human consumption is undertaken in accordance with the monitoring strategies and frequencies set out in Annex II, in order to check whether the values of radioactive substances comply with the parametric values laid down pursuant to Article 5(1).
…
2. Monitoring for the ID shall be carried out, and analytical performance characteristics shall be in accordance with the requirements set out in Annex III.’
Procedure before the Court and the forms of order sought
By decisions of the President of the Court of 14 May, 28 May and 26 June 2014, the French Republic, the Commission and the Czech, respectively, were granted leave to intervene in support of the form of order sought by the Council.
The Parliament claims that the Court should:
—
annul the contested Directive; and
—
order the Council to pay the costs.
The Council, supported by the Czech Republic, the French Republic and the Commission, contends that the Court should:
—
dismiss the action; and
—
order the Parliament to pay the costs.
The Council, supported by the French Republic and the Commission requests, in the alternative, should the Court uphold the appeal, that the effects of the contested Directive be maintained until the entry into force, within a reasonable period, of new legislation to replace it.
The action
The Parliament puts forward three pleas in law in support of its action. The first plea alleges an incorrect choice of the legal basis for the contested Directive, the second, infringement of the principle of legal certainty, and the third, infringement of the principle of sincere cooperation among the institutions, set out in Article 13(2) TEU.
The first plea in law, alleging an incorrect choice of the legal basis for the contested Directive
Arguments of the parties
The Parliament, referring to recitals 3 to 5 in the preamble to the contested Directive, claims that the main objective of the contested Directive corresponds to that of EU policy in the field of the environment, listed in Article 191(1) TFEU, particularly the objectives of the protection of human health and the prudent and rational use of natural resources. In its view, the contested Directive should have been based on Article 192(1) TFEU (see judgment in Commission v Parliament and Council, C‑411/06, EU:C:2009:518, paragraphs 45 to 47).
The Parliament claims that it follows from Article 1 of Directive 98/83 that the scheme established by the latter was intended to apply to all forms of water contamination intended for human consumption, regardless of the source. The contested Directive accordingly disrupts the uniformity of the scheme established by Directive 98/83.
According to the Parliament, it is clear from the explanatory memorandum for Commission proposal COM(2012) 147 final that the Commission considers that certain provisions of Directive 98/83, namely those in Part C of Annex I and Annex II thereto, in fact fall within Articles 30 EA to 32 EA. However, Regulation No 596/2009 added in Part C of Annex I to Directive 98/83 Note 10 on radioactive substances. Regulation No 596/2009 was based on Article 175(1) EC, now Article 192(1) TFEU. Neither the EU legislature nor the Commission at that time considered it necessary to add the provisions of the EAEC Treaty as a legal basis for that regulation.
In the present case, instead of proceeding to an amendment of Directive 98/83 seeking to include provisions on the parametric values of radioactive substances as well as provisions on their monitoring, the Council endorsed a proposal which distorts the uniform system established by that directive.
The Parliament also claims, in its reply, that its argument does not question the principle set out in Article 106a(3) EA. According to the Parliament, the contested Directive should have had its legal basis in Article 192(1) TFEU since it fits into the regulatory framework established by Directive 98/83. By the contested Directive, the Council, acting on the basis of Articles 31 EA and 32 EA, enacted new rules regarding a particular aspect of the framework established by Directive 98/83, that is to say, protection requirements with regard to radioactive substances in water intended for human consumption, and accordingly acted contrary to the objective pursued by that directive. In determining the appropriate legal basis for the contested Directive, account ought to have been taken, first, of the fact that Directive 98/83 constitutes the cornerstone of the system of protecting human health against the harmful effects of contaminated water intended for human consumption and, secondly, of the fact that the contested Directive takes effect specifically in relation to one aspect of the scheme established by Directive 98/83 (see the judgment in UK v Council, C‑656/11, EU:C:2014:97, paragraphs 50, 51, 64 and 66).
The Council and the interveners, after recalling that the provisions of Chapter 3 of Title II of the EAEC Treaty, which include Articles 31 EA and 32 EA, are to be interpreted broadly in order to give them practical effect (judgments in Parliament v Council, C‑70/88, EU:C:1991:373, paragraph 14; Commission v Council, C‑29/99, EU:C:2002:734, paragraphs 78 to 80, and ČEZ, C‑115/08, EU:C:2009:660, paragraphs 100 and 112), argue that, having regard to the purpose and content of the contested Directive, it was correctly based on Articles 31 EA and 32 EA.
Findings of the Court
It should be recalled that, according to Article 31 EA, the Council, acting by a qualified majority, after consulting the European Parliament on a proposal from the Commission, is to establish the basic standards referred to in Article 30 EA relating to the protection of the health of workers and the general public against the dangers arising from ionising radiations. Article 32 EA states that, at the request of the Commission or of a Member State, the basic standards accordingly adopted may be revised in accordance with that procedure.
Although the preamble to the contested Directive refers to Articles 31 EA and 32 EA, as it does not include revisions of the basic standards previously adopted on the basis of the EAEC Treaty, only Article 31 EA could constitute the legal basis.
Article 192(1) TFEU provides that the European Parliament and the Council are to act in accordance with the ordinary legislative procedure when deciding what action is to be taken by the Union in order to achieve its objectives on environmental policy, which include, inter alia, protecting human health.
As for the question whether the contested Directive could legitimately be adopted on the basis of Article 31 EA, it is clear from settled case-law that the choice of legal basis for a measure must rest on objective factors that are amenable to judicial review; these include the purpose and content of that measure (see, inter alia, judgments in Parliament v Council, EU:C:1991:373, paragraph 9; Parliament v Council, C‑130/10, EU:C:2012:472, paragraph 42; Commission v Council, C‑137/12, EU:C:2013:675, paragraph 52; and Commission v Parliament and Council, C‑43/12, EU:C:2014:298, paragraph 29).
The legal basis which has been used for the adoption of other European Union measures which might, in certain cases, display similar characteristics is irrelevant in that regard, as the legal basis for a measure must be determined having regard to its purpose and content (see judgment in United Kingdom v Council, EU:C:2014:97, paragraph 48 and the case-law cited). The Parliament cannot therefore base any argument on the fact that the contested Directive contains certain aspects which are identical to those set out in Part C of Annex I to Directive 98/83, which itself was based on Article 130 S(1) of the EC Treaty, now Article 192(1) TFEU.
In the present case, it must be noted that the contested Directive aims, as is clear from Article 1, to protect the health of the general public by defining the requirements for radioactive substances in water intended for human consumption. Recitals 1 and 2 in the preamble to that directive explain for that purpose that the ingestion of water is one of the pathways of incorporation of radioactive substances in the human body and that it is therefore necessary to lay down, at Community level, quality standards which have an indicator function and to provide for the monitoring of compliance with those standards.
The purpose pursued by the contested Directive thus corresponds to the purpose of a basic standard within the meaning of Article 30 EA, which aims to protect the health of the general public against the dangers arising from ionising radiation.
As regards the content of the contested Directive, it lays down the parametric values and frequencies and methods for monitoring radioactive substances in water intended for human consumption. The content of the contested Directive also corresponds to the content of a basic standard within the meaning of Article 30 EA which, in accordance with points (a) and (b) of the second paragraph of that article, in respect of the ionising radiation, sets maximum permissible doses compatible with adequate safety and the maximum permissible levels of exposure and contamination. It should in addition be noted that the control of radioactivity of water is expressly covered by the provisions of Chapter 3 of Title II of the EAEC Treaty, which includes Articles 30 EA and 31 EA.
As for the Parliament’s argument that the main objective of the contested Directive corresponds to that of EU policy in the field of the environment, listed in Article 191(1) TFEU, and that, accordingly, the contested Directive should have been based on Article 192(1) TFEU, it should admittedly be noted that under Article 191(1) TFEU, EU policy on the environment is to contribute to the pursuit, in particular, of the protection of human health.
However, the Court has repeatedly held that the provisions of Chapter 3 of Title II of the EAEC Treaty are to be interpreted broadly in order to give them practical effect (see, inter alia, judgments in Commission v Council, EU:C:2002:734, paragraph 78, and ČEZ, EU:C:2009:660, paragraph 100). Those provisions, which include Articles 30 EA and 31 EA, accordingly are intended to ensure the consistent and effective protection of the health of the general public against the dangers arising from ionising radiations, whatever their source and whatever the categories of persons exposed to such radiations (judgments in Parliament v Council, EU:C:1991:373, paragraph 14, and ČEZ, EU:C:2009:660, paragraph 112).
In addition, if the Treaties contain a more specific provision that is capable of constituting the legal basis for the measure in question, the measure must be founded on that provision (see judgments in Commission v Council, C‑338/01, EU:C:2004:253, paragraph 60, and in Commission v Council, Case C‑533/03, EU:C:2006:64, paragraph 45).
Article 31 EA constitutes a more specific legal basis for protecting the health of populations against radioactive substances in water intended for human consumption than the general legal basis resulting from Article 192(1) TFEU. The EAEC Treaty contains a set of rules relating precisely to the protection of populations and the environment against ionising radiations (judgment in ČEZ, EU:C:2009:660, paragraph 83).
In any event, if the mere finding that a measure relating to radioactive substances is to protect human health within the meaning of Article 191(1) TFEU were sufficient for Article 192(1) TFEU to be accepted as the appropriate legal basis for that measure, Article 31 EA could no longer serve as the legal basis for Community action since the basic standards within the meaning of Article 30 EA have, by their nature, the protection of human health as their objective. The Parliament’s argument accordingly misconstrues not only the practical effect of Article 31 EA, which constitutes a more specific legal basis than Article 192(1) TFEU, but also the principle enshrined in Article 106a(3) EA, according to which the provisions of the TFEU are not to derogate from the provisions of the EAEC Treaty.
It follows from all the foregoing that the contested Directive was legitimately adopted on the basis of Article 31 EA.
The first plea in law alleging an incorrect choice of the legal basis for the contested Directive must therefore be rejected.
The second plea in law, alleging infringement of the principle of legal certainty
Arguments of the parties
The Parliament claims that the Council has created a situation of legal uncertainty since the adoption of the contested Directive was not accompanied by the repeal of Directive 98/83 as regards its part relating to radioactive substances. In the absence of an express repeal, the parametric values of Part C of Annex I to that directive remain in force, in the same way as those of the contested Directive. The same is true of the authorisation granted to the Commission to adopt measures in accordance with the regulatory procedure with scrutiny as provided in Note 10 of Part C of Annex I to Directive 98/83. The overlapping of the two schemes, that of the contested Directive and that of Directive 98/83, undermines legal certainty.
According to the Parliament, recital 5 in the preamble to the contested Directive, according to which the provisions of the contested Directive supersede those of Directive 98/83, is not sufficient in itself to overcome that legal uncertainty. Indeed, the coexistence of two pieces of legislation both seeking the same objective, namely the protection of human health against radioactive substances in water intended for human consumption, but having different content, generates uncertainty which cannot be eliminated by reference to the principle of lex specialis derogat legi generali. In any event, the Member States remain obliged, pursuant to Directive 98/83, to leave in force the provisions adopted to implement Part C of Annex I and Annex II to that directive and the infringement of that obligation may be relied on by any interested party before the competent national courts. That obligation cannot be removed except by express repeal of the provisions at issue which requires the use of the legal basis resulting from Article 192(1) TFEU. It is clear from the contested Directive that the failure to repeal those provisions is not a mere oversight. Moreover, according to the Parliament, the drafter of a measure is not permitted to use the principle of lex specialis derogat legi generali to explain a conflict between two measures which it created.
The Council and the interveners note that recital 5 in the preamble to the contested Directive clearly shows that the provisions of the contested Directive supersede those of Directive 98/83 as regards the requirements for the protection of the health of the general public with regard to radioactive substances in water intended for human consumption.
Therefore, in their view, there is no ambiguity regarding the relationship between the provisions of the contested Directive and those of Directive 98/83. In accordance with the principle of legal certainty, the Member States, addressees of the contested Directive, are in a position to determine what their obligations are.
Findings of the Court
According to settled case-law, the principle of legal certainty requires that rules of law be clear and precise and predictable in their effect, so that interested parties can ascertain their position in situations and legal relationships governed by EU law (see judgments in France Télécom v Commission, C‑81/10 P, EU:C:2011:811, paragraph 100 and the case-law cited, and in LVK — 56, C‑643/11, EU:C:2013:55, paragraph 51).
In the present case, it should be noted that there is no contradiction in the relationship between the contested Directive and Directive 98/83. In fact, the contested Directive fixes, in Annex I, exactly the same parametric values as those set out in Part C of Annex I to Directive 98/83, namely, for tritium, 100 Bq per litre, and, for the total indicative dose of radioactivity, 0.10 mSv per year.
It follows that, even if the contested Directive and Directive 98/83 lay down rules of law relating to radioactive substances in water intended for human consumption, the overlapping of the two schemes is not such as to affect the clear, precise and predictable nature of the applicable rules.
Furthermore, it should be noted that, although the contested Directive includes new rules, in particular those relating to radon, as those rules are contained only in the contested Directive, the clear, precise and predictable nature of those rules cannot in addition be affected by the overlapping of legal schemes resulting from the contested Directive and Directive 98/83.
Finally, it should be noted that, in relation to Directive 98/83 which concerns, in general, the quality of water intended for human consumption, the contested Directive is a lex specialis with regard to the protection of human health against the dangers of radioactive substances in such waters. Contrary to the Parliament’s claims, the principle of lex specialis derogat legi generali is applicable even if the lex generalis and the lex specialis emanate from the same institution.
It follows that, although the allegation made by Parliament for the first time in its observations on the statements in intervention, according to which there are differences between the legal content of the measures concerned, is correct, the provisions of the contested Directive supersede those of Directive 98/83 in the event of any inconsistency between the schemes established by the two directives concerned, as expressly confirmed by recital 5 in the preamble to the contested Directive.
In those circumstances, no breach of the principle of legal certainty can be established.
Accordingly, the second plea in law cannot be upheld.
The third plea in law, alleging infringement of the principle of sincere cooperation among the institutions, laid down in Article 13(2) TEU
Arguments of the parties
The Parliament claims that no valid legal reason may be relied upon to create — for radioactive substances in water intended for human consumption — a separate scheme on the basis of the EAEC Treaty, with its purpose being the same protection and control measures as those specified in Part C of Annex I and Annex II to Directive 98/83. The provisions of Directive 98/83 concern, it is true, radiation protection, but they are only one of the aspects of the overall framework of safeguards established by Directive 98/83, for which they share the same ultimate objective, namely the protection of the environment and human health, provided for in Article 191(1) TFEU.
The Parliament notes that the choice of legal basis cannot in any case be based on considerations relating to the procedure to be followed for the adoption of the measure in question or relating to the scheme applicable to that measure once it is adopted (judgment in Commission v Council, EU:C:2013:675, paragraph 74). Action to artificially separate part of a legislative act in force, which is clearly of a secondary nature in the general scheme of that measure, in order to be the subject of a separate legal measure with a different legal basis and subject to a different legal scheme, constitutes an infringement of the duty of sincere cooperation among institutions, enshrined in Article 13(2) TEU.
In its observations on the statements in intervention, the Parliament also claims that, in order to observe the duty of sincere cooperation, it was necessary, first, to repeal part of Directive 98/83 on the basis of Article 192(1) TFEU and under the ordinary legislative procedure, which would have allowed all the institutions concerned to decide the question of whether it was legally correct and politically expedient to extract the provisions relating to radioactive substances in water intended for human consumption from Directive 98/83, in order to make them the subject of an autonomous measure on the basis of the EAEC Treaty.
The Council and the interveners contend that the contested Directive does not infringe Article 13(2) TEU.
Findings of the Court
Under Article 13(2) TEU, the institutions are to practise mutual sincere cooperation.
That sincere cooperation, however, is exercised within the limits of the powers conferred by the Treaties on each institution. The obligation resulting from Article 13(2) TEU is therefore not such as to change those powers.
As to whether the Council infringed the principle of sincere cooperation by adopting the contested Directive, it must be recalled that, as was stated in paragraph 39 of the present judgment, the contested Directive was founded on an appropriate legal basis, namely Article 31 EA.
The fact that, for the purposes of adopting the contested Directive, the Parliament was consulted and did not intervene as co-legislator under the ordinary legislative procedure, is accordingly solely a result of the choice made by the framers of the treaties and not from an infringement of the principle of sincere cooperation (see, to that effect, judgment in Parliament v Commission, EU:C:2012:472, paragraph 82).
Finally, the Parliament’s argument that, before the adoption of the contested Directive, Directive 98/83 should have been partially repealed on the basis of Article 192(1) TFEU and in compliance with the provisions of the TEU Treaty relating to the ordinary legislative procedure, cannot be upheld.
In fact, the Parliament’s argument is tantamount to accepting that the exercise by the Council of the powers conferred on it by Articles 30 EA and 31 EA may be subject to the prior approval of Parliament, even though those provisions only grant it an advisory role. As is clear from paragraph 58 of the present judgment, the powers that Parliament and the Council derive from Articles 30 EA and 31 EA cannot be limited or extended, respectively, under the principle of sincere cooperation.
The third plea in law must therefore be rejected.
It follows from all the foregoing that the action must be dismissed in its entirety.
Costs
Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party must be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Council has applied for costs and the Parliament has been unsuccessful, the latter must be ordered to pay the costs.
In accordance with Article 140(1) of the Rules of Procedure, the Czech Republic, the French Republic and the Commission must bear their own costs.
On those grounds, the Court (Second Chamber) hereby:
1.
Dismisses the action;
2.
Orders the European Parliament to pay the costs;
3.
Orders the Czech Republic, the French Republic and the Commission to bear their own costs.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE COURT (Fifth Chamber)
17 December 2015 ( * )
‛Reference for a preliminary ruling — Article 56 TFEU — Freedom to provide services — Principles of equality and of non-discrimination — Obligation of transparency — Scope of that obligation — National collective agreements — Social protection scheme supplemental to the general scheme — Appointment by the social partners of an insurer responsible for managing that scheme — Extension of that scheme by ministerial order to all employees and employers of the sector concerned — Limitation of the temporal effects of a preliminary ruling of the Court of Justice’
In Joined Cases C‑25/14 and C‑26/14,
TWO REQUESTS for a preliminary ruling under Article 267 TFEU from the Conseil d’État (Council of State, France), made by decision of 30 December 2013, received at the Court on 20 January 2014, in the proceedings
Union des syndicats de l’immobilier (UNIS)
v
Ministre du Travail, de l’Emploi et de la Formation professionnelle et du Dialogue social,
Syndicat national des résidences de tourisme (SNRT) and Others (C‑25/14),
and
Beaudout Père et Fils SARL
v
Ministre du Travail, de l’Emploi et de la Formation professionnelle et du Dialogue social,
Confédération nationale de la boulangerie et boulangerie-pâtisserie française,
Fédération générale agro-alimentaire — CFDT and Others (C‑26/14),
THE COURT (Fifth Chamber),
composed of T. von Danwitz, President of the Fourth Chamber, acting as President of the Fifth Chamber, D. Šváby (Rapporteur), A. Rosas, E. Juhász and C. Vajda, Judges,
Advocate General: N. Jääskinen,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 22 January 2015,
after considering the observations submitted on behalf of:
—
Union des syndicats de l’immobilier (UNIS), by C. Bertrand and F. Blancpain, avocats,
—
Beaudout Père et Fils SARL, by F. Uroz and P. Praliaud, avocats,
—
Syndicat national des résidences de tourisme (SNRT) and Others, by J.‑J. Gatineau, avocat,
—
Confédération nationale de la boulangerie and boulangerie-pâtisserie française, by D. Le Prado and J. Barthélémy, avocats,
—
Fédération générale agroalimentaire — CFDT and Others, by O. Coudray, avocat,
—
the French Government, by D. Colas, R. Coesme and F. Gloaguen, acting as Agents,
—
the Belgian Government, by M. Jacobs, L. Van den Broeck and J. Van Holm, acting as Agents,
—
the European Commission, by A. Tokár and O. Beynet, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 19 March 2015,
gives the following
Judgment
These requests for a preliminary ruling concern the interpretation of Article 56 TFEU.
The requests have been made in two separate sets of proceedings brought by (i) the Union des syndicats de l’immobilier (UNIS) and (ii) Beaudout Père et Fils SARL, seeking annulment of two orders made by the ministre du Travail, de l’Emploi et de la Formation professionnelle et du Dialogue social (Minister for Labour, Employment, Professional Training and Social Dialogue), which extend to all employers and employees in the sector concerned collective agreements appointing a provident society as the single managing body of one or more supplementary schemes for insurance or for reimbursement of healthcare costs.
Legal context
Under Article L. 911-1 of the Social Security Code (code de la sécurité sociale), in the version applicable to the cases before the referring court, the collective cover afforded to employees as a supplement to the cover provided by the social security system may be determined, inter alia, by means of collective agreements. In accordance with Article L. 911-2 of that code, such collective cover may be provided against risks relating to personal physical injury or associated with maternity in order to supplement the cover provided by the social security system. Under Article L. 2262-1 of the Labour Code (code du travail), in the version applicable to those cases, those collective agreements are, in principle, binding on the signatories to them and on members of the signatory organisations or groups. Article L. 911-3 of the Social Security Code provides that the agreements may, however, be extended by an order made by the competent Minister.
The procedure for extending those agreements is governed by the Labour Code, in particular Articles L. 2261-15, L. 2261-16, L. 2261-19, L. 2261-24, L. 2261-27 and D. 2261-3 thereof.
It follows that sectoral agreements and occupational or inter-occupational agreements concluded in joint committees composed of representatives of employers and employees, as well as the addenda and annexes thereto, may, under certain conditions, be extended by an order made by the competent Minister, so as to make them binding on all employees and employers falling within the scope of the collective agreement concerned. Such a procedure may be instigated either (i) at the request of an employer or employee organisation represented on the joint committee within which that agreement was concluded or (ii) on the initiative of the Minister responsible for labour.
That procedure entails a notice being published in the Official Journal of the French Republic stating where the agreement has been filed and inviting interested bodies and persons to submit their observations within a period of 15 days starting from the date of publication of the notice. The National Commission for Collective Bargaining must have been consulted in advance, and must have issued a reasoned opinion in favour of the extension. In the event that at least two employers’ organisations or two employees’ organisations represented on that commission oppose the extension, giving reasons for so doing, the Minister may hold further, detailed consultations with the commission, and may subsequently decide to extend the agreement having regard to any new opinion which the commission may issue.
In accordance with Article L. 912-1 of the Social Security Code, in the version applicable to the cases before the referring court, when collective agreements affording employees cover provide for a pooling of the risks with one or more bodies authorised to act as insurers, to which undertakings subject to those agreements are required to be affiliated, those agreements must contain a clause providing for the arrangements for the pooling of risks to be reviewed within a period not exceeding five years.
The actions in the main proceedings and the questions referred for a preliminary ruling
So far as Case C‑25/14 is concerned, the Conseil d’État (Council of State) explains that Addendum No 48, of 23 November 2010, and Addenda Nos 49 and 50, of 17 May 2011, to the National Collective Agreement on Real Property set up an insurance scheme covering death, incapacity for work and invalidity, and a scheme for reimbursement of healthcare costs, for all employees in the sector concerned.
Article 17 of Addendum No 48 appoints the provident society Institution de prévoyance de groupe Mornay (IPGM) as the sole insurer for those two schemes.
By order of 13 July 2011, the Minister for Labour, Employment and Health made those addenda binding on all employees and employers in the sector concerned.
By an action brought on 23 September 2011, UNIS sought annulment of that ministerial order on the ground, inter alia, that IPGM had been appointed as the sole insurer for those schemes in breach of the obligation of transparency arising from the principles of non-discrimination on grounds of nationality and of equal treatment which derive from Article 56 TFEU
According to the referring court, IGPM, despite being a non-profit-making organisation operating on the principle of solidarity, must be considered to be an undertaking engaged in economic activity, which was selected by the social partners from among other undertakings with which it is in competition on the market in the relevant insurance services.
So far as Case C‑26/14 is concerned, the referring court explains that Addendum No 83 of 24 April 2006 to the National Collective Agreement for Traditional Bakery and Pastry-Making Undertakings established a supplementary scheme for the reimbursement of healthcare costs for all employees in that sector, the basis for the scheme being a pooling of the insured risks and compulsory participation by employers.
Article 6 of Addendum No 100 to the aforementioned collective agreement appoints the provident society AG2R Prévoyance as the sole insurer for that scheme. The services and contributions relating to the scheme are also established by an addendum to the collective agreement.
By order of 23 December 2011, the Minister for Labour, Employment and Health made Addendum No 100 binding on all employees and employers in the sector concerned.
Relying implicitly on paragraphs 59 to 65 of the judgment in AG2R Prévoyance (C‑437/09, EU:C:2011:112), which left this question to be determined by national courts, the referring court considers that AG2R Prévoyance, although it is non-profit-making and acts on the basis of the principle of solidarity, was freely chosen by the social partners, following negotiations which concerned inter alia the arrangements pertaining to its appointment, from among the provident societies, mutual associations and insurance firms that were suitable to be appointed as the manager of a supplementary scheme such as the scheme concerned. AG2R Prévoyance must accordingly be regarded as an undertaking engaged in an economic activity which was chosen by the social partners from among other undertakings with which it is in competition on the market in the relevant insurance services.
However, the referring court, still implicitly relying on the judgment in AG2R Prévoyance (C‑437/09, EU:C:2011:112), adopts the analysis in paragraphs 66 to 81 of that judgment and consequently considers that neither the addendum at issue nor the order extending the agreement is unlawful from the point of view of Articles 102 TFEU and 106 TFEU. It also rejects, as unrelated to those articles, the complaint that the appointment of the insurer was not preceded by any call for tenders.
On the other hand, the Conseil d’État (Council of State) mentions, in the two orders for reference, the judgment in Sporting Exchange (C‑203/08, EU:C:2010:307), relating to the grant of an exclusive right to operate games of chance. It states that, according to paragraph 47 of that judgment, the obligation of transparency is a mandatory prior condition of the right of a Member State to award to an operator the exclusive right to carry on an economic activity, irrespective of the method of selecting that operator.
In that connection, the referring court is uncertain whether compliance with that obligation is also a prior condition for the extension, by a Member State, to all undertakings within a sector, of a collective agreement under which a single insurer, chosen by the social partners, is entrusted with the management of a compulsory supplementary social insurance scheme for employees in that sector.
Accordingly, the Conseil d’État (Council of State) decided to stay both sets of proceedings and to refer to the Court of Justice, in each case, the following question:
‘Is compliance with the obligation of transparency flowing from Article 56 TFEU a mandatory prior condition for the extension, by a Member State, to all undertakings within a sector, of a collective agreement under which a single operator, chosen by the social partners, is entrusted with the management of a compulsory supplementary social insurance scheme for employees?’
By order of the President of the Court of 29 January 2014, Cases C‑25/14 and C‑26/14 were joined for the purposes of the written and oral procedure and the judgment.
The request that the oral procedure be reopened
By a letter received at the Court Registry on 8 April 2015, the Confédération nationale de la boulangerie et boulangerie-pâtisserie française requested the reopening of the oral procedure. It maintained, in essence, that certain arguments, which were presented as being vital for the purposes of the present references, had not been debated between the interested persons. The point in question is, in essence, whether the contract at issue in the main proceedings presents certain cross-border interest in view of its characteristics and the consequences arising both from the self-administered nature of the supplementary scheme at issue in the main proceedings in Case C‑26/14 and from the procedures for concluding a collective agreement and the powers which the competent Minister has concerning the extension of such an agreement as regards the assessment of whether there is any restriction of the freedom to provide services and the possible justification for such a restriction.
It should be recalled in that regard that the Court, under Article 83 of its Rules of Procedure, may at any time, after hearing the Advocate General, order that the oral procedure be reopened, in particular if it considers that it lacks sufficient information or where the case must be decided on the basis of an argument that has not been debated between the parties or the interested persons referred to in Article 23 of the Statute of the Court of Justice of the European Union.
In the present case, the Court, having heard the Advocate General, takes the view that it has all the information necessary to answer the question referred and that that information has been debated between the parties.
The request made by the Confédération nationale de la boulangerie et boulangerie-pâtisserie française must therefore be rejected.
The question referred for a preliminary ruling
By the question which it raises in each of the requests for a preliminary ruling, the Conseil d’État (Council of State) asks, in essence, whether the obligation of transparency, which flows from Article 56 TFEU, applies to the extension by a Member State, to all employers and employees within a sector, of a collective agreement concluded by the employers’ and employees’ respective representatives for a sector, under which a single economic operator, chosen by the social partners, is entrusted with the management of a compulsory supplementary social insurance scheme established for employees.
As a preliminary point, it should be recalled, first, that, in the case of supplies of services which involve action on the part of national authorities, such as the award of a services concession, the obligation of transparency does not apply to every operation but only to those that present certain cross-border interest because they are, objectively, of such a kind as to be of interest to economic operators established in Member States other than the State of the authority which awards them (see by analogy, inter alia, judgment in SECAP and Santorso, C‑147/06 and C‑148/06, EU:C:2008:277, paragraph 24).
It should be noted in this regard that the referring court has not established the facts needed to enable the Court to ascertain whether, in the cases in the main proceedings, there is certain cross-border interest. It must be borne in mind that, as is apparent from Article 94 of the Rules of Procedure, the Court must be able to find in a request for a preliminary ruling an account of the facts on which the questions are based and of the connection, inter alia, between those facts and those questions. Accordingly, the findings of fact needed to make it possible to ascertain whether there is certain cross-border interest, and more generally all the findings to be made by the national courts and on which the applicability of an act of secondary or primary EU legislation depends, should be made before the questions are referred to the Court (see judgment in Azienda sanitaria locale n. 5 Spezzino and Others, C‑113/13, EU:C:2014:2440, paragraph 47).
However, because of the spirit of cooperation in relations between the national courts and the Court of Justice in the context of the preliminary ruling procedure, the lack of such preliminary findings by the referring court concerning the existence of certain cross-border interest does not necessarily lead to the request being inadmissible if the Court, in the light of the information in the documents before it, considers that it is in a position to give a useful answer to the referring court. That is the case, in particular, where the order for reference contains sufficient relevant information for the existence of such an interest to be determined (judgment in Enterprise Focused Solutions, C‑278/14, EU:C:2015:228, paragraph 19 and the case-law cited).
Whether there is certain cross-border interest must be determined on the basis of all the relevant factors, such as the financial value of the contract, the place where it is to be performed or its technical features, having regard to the particular characteristics of the contract concerned (see to that effect, inter alia, judgment in Belgacom, C‑221/12, EU:C:2013:736, paragraph 29 and the case-law cited).
So far as the existence of certain cross-border interest is concerned, the Court notes that the observations of the interested parties show that there are differences of opinion on this issue.
Consequently, the Court’s answer is given subject to the proviso that the referring court establishes that there is certain cross-border interest in the case in the main proceedings (judgment in Enterprise Focused Solutions, C‑278/14, EU:C:2015:228, paragraph 19 and the case-law cited). Accordingly, the following statements are made on the premiss that the grant of the right to manage each of the supplementary social insurance schemes at issue in the main proceedings for all employers and employees within the sectors concerned presents certain cross-border interest, a matter which must, however, be determined by the referring court.
Secondly, where a public authority renders binding, for all employers and employees in a sector, a collective agreement appointing a single body to manage a compulsory supplementary social insurance scheme throughout a given period, that decision also binds those who, since they are not members of an organisation which is a signatory to that agreement, were not represented when the agreement in question was negotiated and concluded.
Thirdly, it is by operation of that decision that that body acquires an exclusive right (see, to that effect, judgment in Albany, C‑67/96, EU:C:1999:430, paragraph 90). The extension decision has the effect of excluding operators established in other Member States which might be interested in carrying out that management activity (see, by analogy, judgment in Sporting Exchange, C‑203/08, EU:C:2010:307, paragraph 47).
Fourthly, where a public authority creates an exclusive right, the obligation of transparency is, in principle, to be complied with (see, to that effect, judgment in Sporting Exchange, C‑203/08, EU:C:2010:307, paragraph 47). Accordingly, where a public authority exercises its power to extend the binding nature of a collective agreement appointing a single body to manage a supplementary social insurance scheme, it must previously have given potentially interested operators other than the one appointed an opportunity to express their interest in providing such management and must have acted with full impartiality when appointing the operator entrusted with management of that supplementary scheme.
So far as the question raised is concerned, it is apparent that, in a process such as that at issue in the main proceedings, it is the action of a public authority which creates an exclusive right and, thus, when that action is taken, the obligation of transparency flowing from Article 56 TFEU must, in principle, be complied with.
It should be observed in this regard that the extension decision at issue in the main proceedings is not exempt, because of its subject-matter (an agreement concluded following collective bargaining between organisations representing respectively employers and employees within a sector), from the requirements of transparency resulting from Article 56 TFEU.
According to the case-law, the obligation of transparency stems from the principles of equal treatment and non-discrimination, compliance with which is required by the freedom to provide services guaranteed by Article 56 TFEU. Indeed, in the absence of all transparency, an award to an undertaking located in the Member State in which the award procedure takes place, amounts to a difference in treatment which operates mainly to the detriment of all undertakings which might be interested but which are located in other Member States, since those undertakings have had no real opportunity of expressing their interest, and that difference in treatment amounts, in principle, to indirect discrimination on grounds of nationality, which is, in principle, prohibited by Article 56 TFEU (see, to that effect, inter alia, judgments in Coname, C‑231/03, EU:C:2005:487, paragraphs 17 to 19, and Belgacom, C‑221/12, EU:C:2013:736, paragraph 37 and the case-law cited).
Although the obligation of transparency does not necessarily require there to be a call for tenders, it does require there to be a degree of publicity sufficient to enable, on the one hand, competition to be opened up and, on the other, the impartiality of the award procedure to be reviewed (see, to that effect, inter alia, judgment in Engelmann, C‑64/08, EU:C:2010:506, paragraph 50 and the case-law cited).
It should be recalled that the question raised in each of the cases concerns only the decision by which a public authority decides to extend a collective agreement to all employers and employees within a sector. Moreover, the rights of employers which did not take part in the conclusion of that agreement are affected only by that extension.
In principle, therefore, a Member State may create an exclusive right for an economic operator by rendering binding for all employers and employers in a sector a collective agreement under which that operator, chosen by the social partners, is entrusted with the management of a compulsory supplementary social insurance scheme established for the employees in that sector, but may do so only if the adoption of the decision extending the collective agreement appointing a single managing body is conditional upon the obligation of transparency being complied with.
In this regard, it must be noted that neither the referring court nor the French Government has mentioned any possible justification for the fact that the exclusive right to manage a supplementary social insurance scheme is awarded without any form of publicity.
The French Government maintains that procedures such as those around the adoption of the extension orders at issue in the main proceedings ensure that the obligation of transparency is complied with.
As has been recalled at paragraph 39 of the present judgment, although that obligation does not necessarily entail an obligation to call for tenders, it does require there to be a degree of publicity sufficient to enable, on the one hand, competition to be opened up and, on the other, the impartiality of the award procedure to be reviewed.
The following factors, even if taken together, do not represent a degree of publicity sufficient to ensure that interested operators may — in keeping with the objectives of the obligation of transparency — express their interest in managing the social insurance scheme at issue in the main proceedings, before an extension decision is adopted with full impartiality: (i) the fact that the collective agreements and the addenda thereto have been filed with an administrative authority and may be consulted on the Internet, (ii) the fact that notice is published in an official journal of the intention to start the procedure for extending such an addendum and (iii) the fact that any interested party has an opportunity to submit observations following that publication. Indeed, interested parties have only 15 days within which to submit their observations, an appreciably shorter time than the periods laid down, except in urgent cases, in Articles 38, 59 and 65 of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114, and corrigendum OL 2004 L 351, p. 44), as amended by Commission Regulation (EU) No 1251/2011 of 30 November 2011 (OJ 2011 L 319), which is not applicable in the present case but which may serve as a reference point in this regard. Furthermore, according to the observations made by the French Government at the hearing before the Court, the competent Minister merely conducts a review of legality. It thus appears to be the case that the fact that a more advantageous offer exists and that an interested party has informed the Minister about it cannot prevent the extension of that agreement, this being a matter which the referring court must determine.
In view of the foregoing considerations, the answer to the question raised in both cases is that the obligation of transparency, which flows from Article 56 TFEU, precludes the extension by a Member State, to all employers and employees within a sector, of a collective agreement concluded by the employers’ and employees’ respective representatives for a sector, under which a single economic operator, chosen by the social partners, is entrusted with the management of a compulsory supplementary social insurance scheme established for employees, where the national rules do not provide for publicity sufficient to enable the competent public authority to take full account of information which has been submitted concerning the existence of a more favourable offer.
Temporal limitation of the effects of the present judgment
In its observations, the French Government has asked that, in the event that the Court considers that publicity measures such as those applying to the adoption of the extension orders at issue in the main proceedings do not satisfy the requirements resulting from the obligation of transparency, the effect of the Court’s judgment should be limited in time. It submits that that limitation should enable those extension orders to continue to produce effects until the end of the current period, as provided for by the schemes concerned, and that the effects of the present judgment should apply only to similar collective agreements extended after delivery of the present judgment.
The French Government maintains, first, that, if the general obligation to conclude a contract with a single managing body appointed by the social partners in the framework of existing supplementary social insurance schemes were called in question, that would have serious repercussions, since, in addition to the 142000 and 117476 employees in the real property and bakery and pastry-making sectors respectively, approximately 2400000 employees, when all occupations are taken into account, would be affected. That would cause detriment to the principle of risk pooling, as it has been applied. The latter is particularly important in these schemes, which are characterised by a high degree of solidarity, and thus their financial equilibrium and the benefits they provide would be affected. As a consequence, calling that general obligation into question in this way would jeopardise the cover to which the employees concerned are currently entitled under those schemes. The French Government also contends that it would also be liable to give rise to vast numbers of cases before the national courts.
Secondly, the French Government submits that the operators concerned have acted in good faith, fully complying with the national legislation in force, in particular so far as concerns the obligation to review, within a period not exceeding five years, agreements appointing a managing body, and wholly unaware that there has been any infringement of the obligation of transparency.
In that regard, it should be noted that, according to settled case-law, it is only exceptionally that the Court may decide to restrict for any person concerned the opportunity of relying on a provision which it has interpreted with a view to calling into question legal relationships established in good faith (see, inter alia, judgment in Transportes Jordi Besora, C‑82/12, EU:C:2014:108, paragraph 41 and the case-law cited). Application of that case-law in the context of the cases in the main proceedings requires, however, that the specific features of public procurement law and the very particular nature of the situation at issue in the main proceedings be taken into account.
In the area of public procurement, Articles 2d and 2f of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ 1989 L 395, p. 33), as amended by Directive 2007/66/EC of the European Parliament and of the Council of11 December 2007 (OJ 2007 L 335, p. 31), read in the light of recitals 25 to 27 of Directive 2007/66, enable the Member States to limit, under certain conditions, the right to bring actions against contracts concluded in breach of EU law (see, to that effect, judgment in MedEval, C‑166/14, EU:C:2015:779, paragraphs 34 and 35). It follows that, in certain circumstances, the interest in preventing legal uncertainty may justify putting the stability of contractual arrangements already in the course of performance before observance of EU law.
In this case, maintaining the effects of the extension decision at issue in the main proceedings is justified, above all, in view of the situation of the employers and employees who, on the basis of the extended collective agreements at issue, have entered into a contract for supplementary social insurance in a particularly sensitive social context. Given that those employers and employees were not directly involved in the extension procedure, they must be found to have entered into contractual commitments affording them guarantees as to supplementary insurance, in reliance on a legal situation in respect of which the Court has given clarification — as regards the specific scope of the obligation of transparency flowing from Article 56 TFEU — only in the present judgment.
In the specific circumstances of the cases in the main proceedings, it must be held that the effects of the present judgment will not concern the collective agreements under which a single body was appointed to manage a supplementary social insurance scheme and which a public authority has, before the date of delivery of the present judgment, made binding on all employers and employees within a sector, without prejudice to legal proceedings brought before that date.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
The obligation of transparency, which flows from Article 56 TFEU, precludes the extension by a Member State, to all employers and employees within a sector, of a collective agreement concluded by the employers’ and employees’ respective representatives for a sector, under which a single economic operator, chosen by the social partners, is entrusted with the management of a compulsory supplementary social insurance scheme established for employees, where the national rules do not provide for publicity sufficient to enable the competent public authority to take full account of information which has been submitted concerning the existence of a more favourable offer.
The effects of the present judgment do not concern the collective agreements under which a single body was appointed to manage a supplementary social insurance scheme and which a public authority has, before the date of delivery of the present judgment, made binding on all employers and employees within a sector, without prejudice to legal proceedings brought before that date.
[Signatures]
( * ) Language of the case: French. |
OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 26 March 2015 ( )
Joined Cases C‑108/14 and C‑109/14
Beteiligungsgesellschaft Larentia + Minerva mbH & Co. KG
v
Finanzamt Nordenham (C‑108/14)
and
Finanzamt Hamburg-Mitte
v
Marenave Schiffahrts AG (C‑109/14)
(Requests for a preliminary ruling from the Bundesfinanzhof (Germany))
‛Reference for a preliminary ruling — Taxation — Common system of value added tax: uniform basis of assessment — Parent (holding) company which received supplies subject to VAT with a view to the procurement of equity capital used to guarantee shareholdings in two subsidiaries to which that same parent company subsequently provided services for remuneration — National legislation limiting tax integration to legal persons in a relationship of subordination in financial, economic and organisational terms’
I – Introduction
1.
The present requests for a preliminary ruling from the Bundesfinanzhof (Federal Finance Court) (Germany) essentially concern, first, the method used to calculate two holding companies’ input value added tax (VAT) deduction in respect of the acquisition of shareholdings in other companies in the management of which those holding companies involve themselves and, second, the question whether the second subparagraph of Article 4(4) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment ( ) (‘the Sixth Directive’) precludes tax legislation which prohibits partnerships from participating as ‘subordinate’ entities in a VAT group within the meaning of that article.
2.
These questions have been raised in two disputes between, first, Beteiligungsgesellschaft Larentia + Minerva mbH & Co. KG (‘Larentia + Minerva’) and the Finanzamt Nordenham (Tax Office, Nordenham) (C‑108/14) and, second, the Finanzamt Hamburg-Mitte (Tax Office, Hamburg-Centre) and Marenave Schiffahrts AG (‘Marenave’) (C‑109/14). ( )
3.
In the first case, Larentia + Minerva holds, as a limited partner, 98% of the shares in two subsidiaries constituted in the form of limited partnerships with a limited liability company as general partner (GmbH & Co. KG) which each operate a vessel. It also provides those subsidiaries, as a ‘management holding company’, with administrative and business services for remuneration.
4.
In respect of these services subject to VAT, Larentia + Minerva deducted in full the input VAT paid in raising from a third party capital which was used to fund the acquisition of its shareholdings in the subsidiaries and its services, in particular administrative and consultancy services, provided to those subsidiaries for remuneration.
5.
The Finanzamt Nordenham allowed that deduction only very partially, in an amount of 22%, as the majority of the costs connected with the acquisition of shareholdings in the subsidiaries were attributed to the non-economic area of the holding company’s activity, namely holding shares in subsidiaries, for which there is no input tax deduction. The 2005 VAT amendment notice of 24 September 2007 was challenged by Larentia + Minerva before the Niedersächsisches Finanzgericht (Finance Court of Lower Saxony), which dismissed the claim. Larentia + Minerva thereupon lodged an appeal on a point of law with the Bundesfinanzhof.
6.
In the second case, Marenave increased its capital in 2006 and the costs for the issue of shares in connection with that increase gave rise to a VAT payment of EUR 373 347.57.
7.
In the same year that company, as a holding company, acquired shares in four ‘limited shipping partnerships’, which are partnerships in the business management of which it was involved for remuneration. From the VAT payable in respect of the revenue from those management activities in 2006, it deducted, inter alia, the entire sum of EUR 373 347.57 as input VAT.
8.
By a decision of 15 January 2009, the Finanzamt Hamburg-Mitte refused to allow the deduction in respect of that sum, given the lack of actual involvement of the holding company in the management of the subsidiaries. However, the Finanzgericht Hamburg-Mitte (Finance Court, Hamburg-Centre) upheld the action brought against that decision and allowed in full the input tax deduction claimed by Marenave. The Finanzamt Hamburg-Mitte lodged an appeal on a point of law with the Bundesfinanzhof against the judgment of the Finanzgericht Hamburg-Mitte.
9.
In the two cases before it, the referring court considers that the services purchased by the holding companies are used for both economic activities and non-economic activities and that deduction of input tax can be claimed only to the extent to which the expenses are to be attributed to the economic activity of the holding companies. Consequently, the referring court takes the view that there is no entitlement to full deduction but asks whether the principles identified by the Court in Cibo Participations (C‑16/00, EU:C:2001:495) do not preclude such a finding. Nevertheless, the referring court does not ask the Court directly about this subject. Its first question simply seeks clarification about the method for calculating the input VAT deduction which objectively reflects the portion of the input expenditure actually to be attributed to economic activities and to non-economic activities in the case of the holding companies. Second, if the question of input VAT deduction by the holding companies were to be resolved by taking into consideration the subsidiaries’ taxable output transactions with third parties, the referring court enquires about the scope of the second subparagraph of Article 4(4) of the Sixth Directive relating to VAT groups, invoked for the first time in the appeal proceedings on a point of law by Larentia + Minerva and by Marenave. In this regard, the Bundesfinanzhof asks whether national law is compatible with that provision when, among other things, it precludes such a mechanism for partnerships and whether, if that is not the case, the second subparagraph of Article 4(4) of the Sixth Directive can be relied on directly by taxable persons.
10.
In those circumstances, the Bundesfinanzhof decided to stay the proceedings and, in each of these cases, to refer the following questions for a preliminary ruling:
‘(1)
Which calculation method is to be used to calculate a holding company’s (pro rata) input [VAT] deduction in respect of input supplies connected with the procurement of capital for the purchase of shares in subsidiary companies, if the holding company subsequently (as intended from the outset) provides various taxable services to those companies?
(2)
Does the provision on the consolidation of several persons into a single taxable person in the second subparagraph of Article 4(4) of [the Sixth Directive] ... preclude national legislation under which (firstly) only a legal person, but not a partnership, can be integrated into the undertaking of another taxable person (a so-called “Organträger” (controlling company)) and which (secondly) requires that this legal person “is integrated into the undertaking of the Organträger” in financial, economic and organisational terms (in the sense of a relationship of control and subordination)?
(3)
If the previous question is answered in the affirmative: can a taxable person rely directly on the second subparagraph of Article 4(4) of [the Sixth Directive] ...?’
11.
Written observations on those questions were submitted by Larentia + Minerva, Marenave, the German Government, Ireland, the Austrian and United Kingdom Governments and the European Commission. With the exception of the Austrian Government, which was not represented in the oral procedure, those interested parties and the Polish Government presented oral argument at the hearing on 7 January 2015.
II – Analysis
A – The first question
12.
As I stated in point 9 of this Opinion, the first question asked by the referring court is based on the premise that VAT paid by the two holding companies in the main proceedings may be partially deducted only in so far as, in the case of Larentia + Minerva, the costs connected with the acquisition of shareholdings in its subsidiaries and, in the case of Marenave, the costs for the issue of shares are attributed, for the most part, to the non-economic activity of those holding companies in respect of the acquisition and holding/management of shares in their respective subsidiaries.
13.
Basing itself on that premise, the referring court seeks further explanation from the Court on the calculation method that should be used to apportion input VAT as objectively and uniformly as possible where a holding company’s expenditure is attributed to economic activities and to non-economic activities.
14.
If we were to confine ourselves strictly to answering that question, I consider, like all the interested parties participating in these proceedings, that the Court would have to decline jurisdiction to provide further information about such a calculation method in addition to that which is already evident from its present case-law.
15.
It should be pointed out in particular that, when it was asked a similar question in Securenta (C‑437/06, EU:C:2008:166), the Court noted that the provisions of the Sixth Directive do not include rules relating to the methods or criteria which the Member States are required to apply when adopting provisions permitting the apportionment of input VAT paid according to whether the relevant expenditure relates to economic activities or to non-economic activities, as the rules on input VAT deduction laid down in the Sixth Directive are connected exclusively with economic activities. ( )
16.
Consequently, as the Sixth Directive does not contain the guidance necessary for such precise calculations, it is for the Member States to establish methods and criteria appropriate to that aim, exercising their discretion having regard to the aims and broad logic of the directive, in particular in compliance with the principle of fiscal neutrality. ( )
17.
The Court accordingly concluded that, in exercising that discretion, the Member States must ensure that deduction is made only for that part of the VAT which is proportional to the amount relating to transactions giving rise to the right to deduct and therefore ensure that the calculation of the proportion of economic activities to non-economic activities objectively reflects the part of the input expenditure actually to be attributed, respectively, to those two types of activity. In this context, the Member States nevertheless have the right to apply any appropriate formula, such as the investment formula or the transaction formula (which were mentioned by the national court in Securenta), without being required to restrict themselves to only one of those methods. ( )
18.
The Court confirmed these findings in paragraphs 42 and 47 of the judgment in Portugal Telecom (C‑496/11, EU:C:2012:557), stating, in essence, that, irrespective of the methods of calculation chosen or applied by the Member States, those methods must objectively reflect the part of the input expenditure actually to be attributed, respectively, to economic activities and to non-economic activities.
19.
In the present cases, the referring court states that the German legislature has not yet adopted any formula of the kind mentioned by the Court in Securenta, giving rise to considerable legal uncertainty which must, in its view, be alleviated by the Court.
20.
I consider that the Court cannot accede to that request both on grounds connected with respect for the residual jurisdiction of the Member States and for practical reasons related to the diversity and complexity of the factual situations, which do not allow the Court to favour one method or formula over another.
21.
For similar reasons, the fact that a national legislature has not yet opted for one method or another but, as is pointed out by the referring court and by the German Government in its written observations, has preferred to leave that assessment, in the light of the circumstances of the specific case, to taxable persons and to the tax authorities also cannot lead the Court to consider that it is entitled to assume the role of that legislature.
22.
On the contrary, the national courts must ascertain whether, having regard to the situations referred to them, the method(s) of calculation applied either by the taxable person or, as the case may be, by the national tax authorities objectively reflect the part of the input expenditure actually to be attributed, respectively, to the economic activities and the non-economic activities of the taxable person.
23.
In the present cases, the referring court must therefore verify whether the application of the method considered appropriate by the tax authorities, which is, according to the information provided by the referring court, the investment formula, satisfies that objective.
24.
I am uncertain, however, about the referring court’s premise in so far as it takes the view that the two holding companies carry out in part economic activities and in part non-economic activities.
25.
This goes beyond a mere question of assessment of the facts in the main proceedings, which, of course, falls exclusively within the jurisdiction of the referring court in the context of the cooperation provided for by Article 267 TFEU.
26.
As is pointed out by Larentia + Minerva and Marenave, the question must be asked whether the holding companies’ involvement in the management of the subsidiaries should, pursuant to the principles identified in Cibo Participations (C‑16/00, EU:C:2001:495) in particular, lead to the conclusion that such holding companies exercise only an economic activity, and thus to the exclusion of any non-economic activity. According to those parties, it follows that there is consequently a right to full deduction of input VAT in respect of the services provided to those holding companies in connection with the acquisition of shareholdings in their subsidiaries.
27.
In its case-law on the VAT status of holding companies, the Court draws a distinction between two cases, depending on whether or not the holding companies involve themselves in the management of their subsidiaries.
28.
Holding companies in the first category are those the sole purpose of which is to hold and manage shares in other companies and which do not provide those companies with any services for remuneration and thus do not involve themselves directly or indirectly in the management of other undertakings, other than by exercising their rights as shareholders.
29.
Such holding companies do not have the status of a taxable person within the meaning of Article 4 of the Sixth Directive and therefore have no right to deduct tax pursuant to Article 17 of that directive. According to case-law, the mere acquisition and holding of shares in a company is not to be regarded as an economic activity within the meaning of the Sixth Directive, conferring on the holder the status of a taxable person. The mere acquisition of financial holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis because any dividend yielded by that holding is merely the result of ownership of the property. ( )
30.
However, the Court has repeatedly held that ‘it is otherwise where the holding is accompanied by direct or indirect involvement in the management of the companies in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder’. ( ) The Court goes on to state that the involvement of a holding company in the management of companies in which it has acquired a shareholding constitutes an economic activity within the meaning of Article 4(2) of the Sixth Directive where it entails carrying out transactions which are subject to VAT by virtue of Article 2 of that directive, such as the supply by a holding company to its subsidiaries of administrative, financial, commercial and technical services. ( )
31.
As follows from the typology of holding companies set out by the referring court, such holding companies are classified as ‘management’ holding companies.
32.
It is common ground in the present cases that the two holding companies in the main proceedings come under that second category and that they are therefore subject to VAT in respect of the supplies which they provide for remuneration to their subsidiaries.
33.
The referring court acknowledges, moreover, that those holding companies are entitled to deduct the input VAT allotted to the services which they purchased from third-party undertakings in connection with capital transactions involving their subsidiaries. In the view of the referring court, however, that deduction is only pro rata. The holding companies’ input supplies in connection with the raising of capital were intended primarily for a non-economic activity of the holding companies, namely the (non-taxable) acquisition and holding of their respective shares in their subsidiaries.
34.
In this regard I would point out, first of all, that the referring court does not state that those supplies were attributed to the mere holding of shares in other subsidiaries in the management of which the holding companies do not involve themselves, an activity which cannot be regarded as economic and which therefore entails the obligation to apportion input VAT between the economic and non-economic activities of those holding companies.
35.
Second, I consider that the logic underlying the Court’s case-law concerning the dichotomy between holding companies which do or do not involve themselves in the management of their subsidiaries has repercussions for the allocation of the expenditure connected with input capital transactions by holding companies to their output economic activity.
36.
In Cibo Participations, which concerned a similar situation to those in the main proceedings, the Court ruled that expenses incurred by a holding company involved in the management of a subsidiary in respect of various services which it purchased in connection with the acquisition of a shareholding in that subsidiary form part of the taxable person’s general costs and are, as such, cost components of its products. Such services therefore do, in principle, have a direct and immediate link with the holding company’s business as a whole. ( )
37.
As the Court must have known that, by its very nature, such a holding company also managed shareholdings which did not entail an economic activity, the approach taken in that judgment means, first, that expenditure incurred by the holding company in respect of the acquisition of shareholdings in its subsidiaries is connected only with the holding company’s economic activity and not, even partially, with its non-economic activity, which consists in managing shareholdings and, second, that the holding company is, in principle, permitted to deduct all the VAT paid on input transactions.
38.
This assessment is confirmed by paragraph 34 of the judgment in Cibo Participations, in which the Court refers to the system of deduction provided for in the first subparagraph of Article 17(5) of the Sixth Directive, the application of which relates only to the apportionment of VAT on input transactions used both for economic transactions, in respect of which VAT is deductible, and for transactions in respect of which VAT is not deductible, hence VAT on expenditure connected exclusively with economic activities. ( )
39.
The expenditure connected with the acquisition of shareholdings in subsidiaries incurred by a holding company which involves itself in their management, within the meaning of the Court’s case-law, is therefore attributed to that holding company’s economic activity. Consequently, VAT paid on that expenditure will be subject to full deduction pursuant to Article 17(2) of the Sixth Directive unless the input economic transactions are exempt from VAT under the Sixth Directive, in which case the right to deduct will be based on the proportion method under Article 17(5) of that directive. ( ) In my view, that is the proper interpretation of Cibo Participations.
40.
This analysis is perfectly capable of being extended to expenditure connected, not with the acquisition of shareholdings in subsidiaries, but with other capital transactions effected by a management holding company, such as the increase in its capital through the issue of shares for the ultimate purpose of funding the acquisition and operation of sea vessels, as appears to be the situation in Case C‑109/14.
41.
The Court has already recognised in Kretztechnik (C‑465/03, EU:C:2005:320) that a share issue does not, per se, fall within the scope of the Sixth Directive but may be carried out by a company in order to increase its capital for the benefit of its economic activity in general, which means that the costs of the supplies acquired by that company in connection with the operation concerned form part of its overheads and are therefore, as such, component parts of the price of its products, as those supplies have a direct and immediate link with the whole economic activity of the taxable person. ( )
42.
The fact that in the main proceedings in Case C‑109/14 the shares had been issued by a management holding company and not by a company, such as Kretztechnik, that carried on only an economic activity would not, in view of the findings made in Cibo Participations, appear necessarily to entail different consequences for the fundament right of full deduction of input VAT.
43.
In any event, neither the referring court nor the interested parties in these proceedings have suggested that a distinction should be drawn between the tax treatment of expenditure incurred by a management holding company depending on whether that expenditure is connected with the acquisition of shareholdings or with other capital transactions.
44.
In the light of the foregoing, I consider that the first question should be answered to the effect that expenditure connected with capital transactions incurred by a holding company which involves itself directly or indirectly in the management of its subsidiaries has a direct and immediate link with that holding company’s economic activity as a whole. Input VAT on that expenditure should not therefore be apportioned between economic and non-economic activities. If the holding company effects transactions which are subject to VAT and transactions which are exempt, the proportion method provided for in Article 17(5) of the Sixth Directive will be used to calculate the right to deduct input VAT.
B – The second question
45.
By its second question, the referring court asks, in essence, whether the second subparagraph of Article 4(4) of the Sixth Directive, which provides that Member States may treat several persons as a single taxable person, precludes national legislation which, first, limits to legal persons alone the possibility of being integrated into the undertaking of another taxable person (a ‘controlling company’) and, second, requires that those legal persons be integrated into the undertaking of the controlling company in financial, economic and organisational terms, namely in the sense of a relationship of control and subordination.
46.
According to the wording of the second subparagraph of Article 4(4) of the Sixth Directive, the directive permits each Member State to treat several persons as a single taxable person where they are established in the territory of that Member State and, while legally independent, are closely bound to one another by financial, economic and organisational links. ( )
47.
That provision thus established in EU legislation the concept of a VAT group, which, as was stated in the Explanatory Memorandum to the Proposal for the Sixth Directive, ( ) is intended, either in the interests of simplifying administration or with a view to combating abuses, to allow Member States not to treat as distinct those taxable persons whose independence is purely a legal technicality. ( )
48.
In practice, since the VAT group is regarded as a single taxable person, the entities forming it do not continue to submit VAT declarations separately or to be identified, within and outside their group, as taxable persons. ( )
49.
It follows that the VAT group’s internal transactions, that is to say, transactions effected for consideration between the constituent members, do not exist, in principle, for VAT purposes. The right to deduct input VAT is therefore determined, not on the basis of the transactions between the members of the group, but solely on the basis of the group’s transactions with third parties. ( )
50.
In the present context, although the referring court does not express any doubt that the Federal Republic of Germany chose the option available under the second subparagraph of Article 4(4) of the Sixth Directive, a fact confirmed, moreover, by the German Government in its written observations, the referring court is uncertain whether the holding companies and their respective subsidiaries are capable of obtaining the status of VAT group, such that the group is eligible, in respect of transactions effected for remuneration between the subsidiaries and third-party undertakings, for full deduction of input VAT linked to capital transactions by the holding companies.
51.
Whilst such full deduction cannot be excluded in the light of my proposed answer to the first question, two points have to be made at the present juncture.
52.
First, the factual situations underlying each of the first two questions are mutually exclusive. In other words, either a VAT group exists or it does not exist. A holding company which involves itself in the management of its subsidiaries cannot under any circumstances benefit from a right to deduct input VAT on expenditure connected with capital transactions involving its subsidiaries and at the same time claim to form a VAT group with those subsidiaries within which, as I have already stated, transactions are not subject to VAT.
53.
Second, it is evident from the information contained in the orders for reference that the issue of the grant of the status of VAT group was only raised for the first time before the referring court, which is giving the final ruling at the stage of the appeal on a point of law. Neither the tax authorities nor the courts below the referring court have therefore previously been able to take a view on whether that status should be granted to Larentia + Minerva and to Marenave and their respective subsidiaries.
54.
These findings might suggest that the interpretation of the Sixth Directive requested in the second question ultimately bears no relation to the actual facts of the main actions or is hypothetical, such that that question (and, moreover, the third question, which is closely linked to it) should be declared inadmissible. ( ) Doubts in this regard have also been expressed by Ireland, both in its written observations and at the hearing before the Court.
55.
Notwithstanding this, I nevertheless consider that it is helpful to give a substantive answer to this question. As was suggested by the referring court and confirmed by the German Government at the hearing, fulfilment of the conditions governing eligibility for the status of VAT group or tax entity is objective and may be established, in German law, by any court or tribunal irrespective of any request made to that effect. Consequently, the question whether the restrictions on eligibility for such a group provided for under German legislation are compatible with the second subparagraph of Article 4(4) of the Sixth Directive has a bearing on the outcome of the disputes in the main proceedings, as the right to full deduction of input VAT would be likely to be recognised if those restrictions could be set aside.
56.
Turning to the substance, then, the referring court seeks guidance on two points. First of all, and in essence, it is necessary to ascertain whether the second subparagraph of Article 4(4) of the Sixth Directive precludes a Member State from limiting the formation of VAT groups to entities having legal personality, to the exclusion, therefore, of partnerships, such as the subsidiaries of the two holding companies in the main proceedings, which are operated in the form of limited partnerships. Second, the referring court asks whether a Member State may require the relationship between the members of the VAT group to be a relationship of control and subordination by which the ‘subordinate’ entities are integrated into the controlling company.
1. The condition relating to the legal personality of the members of the VAT group
57.
In German law, under the first sentence of point 2 of Paragraph 2(2) of the Umsatzsteuergesetz (Law on Turnover Tax; UStG), a trade or profession is not exercised independently if, in the light of the overall actual circumstances, a legal person is integrated in financial, economic or organisational terms into the undertaking of the controlling company.
58.
Whilst it is clear from the orders for reference that, in German law, partnerships may be the controlling bodies of the tax entity, such partnerships, in particular limited partnerships, having no legal personality, could not be controlled and could not therefore participate in a VAT group as it exists in Germany.
59.
In my view, as Ireland and the Commission have rightly pointed out, there is nothing in the Sixth Directive to permit the exclusion of partnerships from participation in a VAT group.
60.
This assessment follows already from the wording of the second subparagraph of Article 4(4) of the Sixth Directive, which mentions, in quite generic terms, that ‘persons’ may be treated as a single taxable person, which, as Advocate General Jääskinen rightfully noted in his Opinion in Commission v Ireland (C‑85/11, EU:C:2012:753, points 30 and 31), contrasts with the legal framework stemming from the Second VAT Directive. ( ) The Court concluded that the wording of Article 11 of Directive 2006/112, which reproduced the similar wording of the second subparagraph of Article 4(4) of the Sixth Directive, did not preclude a Member State from providing that non-taxable persons may individually be included in a VAT group. ( ) In another case, the Court also held, albeit indirectly, that the second subparagraph of Article 4(4) of the Sixth Directive is directed at ‘persons, in particular companies’. ( )
61.
It follows from this case-law that the scope of the second subparagraph of Article 4(4) of the Sixth Directive is not limited to a specific form of company or to the entities that are members of a VAT group having legal personality.
62.
Moreover, contrary to the second subparagraph of Article 4(4) of the Sixth Directive, certain provisions of that directive, such as Articles 28a to 28c, refer only to ‘legal persons’, which also indicates that the EU legislature did not intend to limit the scope of Article 4 to entities having legal personality.
63.
I therefore consider that the scope ratione personae of the second subparagraph of Article 4(4) of the Sixth Directive extends to all persons.
64.
However, that finding does not provide an answer to the first part of the second question referred to the Court by the Bundesfinanzhof.
65.
In order to identify that answer, it is first necessary to assess whether the Sixth Directive precludes a Member State from limiting the scope of the second subparagraph of Article 4(4) of that directive when it exercises its option to allow VAT groups to be formed within its territory. In other words, it is necessary to determine whether Member States retain a margin of discretion as regards the ‘persons’ whom they consider to be eligible for participation in VAT groups within their territory.
66.
In the light of the case-law, this question calls for a nuanced response in my view.
67.
It is true that the Court has ruled, with regard to the first paragraph of Article 11 of Directive 2006/112, which reproduced the wording of the second subparagraph of Article 4(4) of the Sixth Directive, that, according to its wording, the application of that article is not made subject to conditions other than those set out. ( ) In Commission v Sweden (C‑480/10, EU:C:2013:263, paragraph 35) and Commission v Finland (C‑74/11, EU:C:2013:266, paragraph 63), the Court stated that that provision also did not stipulate that the Member States are able to impose other conditions on economic operators in order to form a VAT group, such as carrying out a certain type of activity or being part of a particular sector of activity.
68.
It might therefore appear that the scheme provided for by the second subparagraph of Article 4(4) of the Sixth Directive (and now by the first paragraph of Article 11 of Directive 2006/112) does not confer any margin of discretion on the Member States.
69.
However, in those same judgments, the Court recognised, not by reference to the wording of the provision in question, but on the basis of its objectives, the possibility for Member States to restrict the application of the scheme provided for under Article 11 of Directive 2006/112 in compliance with EU law. ( ) On the basis of that finding, the Court then rejected the allegations that the Kingdom of Sweden and the Republic of Finland had failed to fulfil their obligations, holding that the Commission had failed to show that the restriction of the application of the VAT group scheme to undertakings in the financial and insurance sector in those two Member States, motivated by the goal of preventing tax evasion and avoidance in accordance with the second paragraph of Article 11 of Directive 2006/112, was contrary to EU law. ( )
70.
Since, in my view, that case-law can be applied to the Sixth Directive, it therefore appears to confer a margin of discretion on the Member States when they exercise the option provided for in the second subparagraph of Article 4(4) of the Sixth Directive, although that margin of discretion is subject to the pursuit of the objectives of Article 4(4) of that directive in compliance with EU law.
71.
In practice, I therefore consider that the restrictions on the scheme provided for in the second subparagraph of Article 4(4) of the Sixth Directive must be necessary and appropriate for the abovementioned objective of preventing abusive practices or conduct or the objectives of preventing tax evasion and avoidance in compliance with EU law, in particular the principle of fiscal neutrality, which is a fundamental principle of the common system of VAT. ( )
72.
In this case, in order to be regarded as legitimate, it must be possible to justify the exclusion of partnerships from participation in a VAT group on the basis of the objectives pursued by Article 4(4) of the Sixth Directive, having due regard to the principle of fiscal neutrality.
73.
Although it is for the referring court to determine these points, it should be observed that in its requests for a preliminary ruling it has already essentially made clear, first, that it cannot identify a link between the requirement under point 2 of Paragraph 2(2) of the UStG that all members of a VAT group must have legal personality and the pursuit of the objectives of Article 4(4) of the Sixth Directive and, second, that that requirement might infringe the principle of fiscal neutrality in so far as it has regard to a single legal form in order to prevent certain entities from benefiting from participation in a VAT group.
74.
I share that point of view.
75.
However, the following two additional comments should be made.
76.
First, as regards the objectives of preventing tax evasion or avoidance which, as has been highlighted, are now set out in the second paragraph of Article 11 of Directive 2006/112, it must be stated that it was only upon the adoption of Directive 2006/69/EC of 24 July 2006 ( ) that the EU legislature introduced a third subparagraph in Article 4(4) of the Sixth Directive, expressly recognising that Member States which have exercised the option of permitting the formation of VAT groups in their territory ‘may adopt any measures needed to prevent tax evasion or avoidance through the use of [the second subparagraph of Article 4(4) of the Sixth Directive]’.
77.
At least as far as Case C‑108/14 is concerned, the relevant tax year is 2005, which is well before the date of adoption of Directive 2006/69 and the date of its entry into force.
78.
Nevertheless, I do not think that this means that, prior to the entry into force of Directive 2006/69, the Member States were unable to adopt measures pursuing such objectives in the exercise of the option available to them under the second subparagraph of Article 4(4) of the Sixth Directive.
79.
As the Commission and the United Kingdom Government have rightly pointed out in their written observations, the Court has made clear on many occasions that the prevention of tax evasion and avoidance was one of the objectives recognised and encouraged by the Sixth Directive, ( ) including in situations where the national tax authorities could not rely on any express powers granted by the EU legislature under specific provisions of that directive. ( )
80.
However, like the referring court and the Commission, I fail to see why a distinction based on legal form or on the existence or non-existence of legal personality of undertakings is necessary and appropriate in order to prevent tax evasion and avoidance.
81.
Second, in my view, such a distinction is also contrary to the principle of fiscal neutrality since, as the German Government acknowledged at the hearing, entities which are individually fully liable to VAT cannot participate in a VAT group solely by reason of their specific legal form.
82.
It should be noted in this regard that VAT grouping may entail cash flow advantages to its members as the group’s internal transactions, which would be subject to VAT in principle, are exempt from that tax. ( ) Depriving economic operators of those advantages by reason of the legal form through which one of those operators exercises its activity amounts to a difference in treatment of similar transactions, which are therefore in competition with one another, aside from the fact that the characteristic of the taxable person is precisely the economic activity and not the legal form. ( )
83.
The VAT group mechanism must promote fiscal neutrality whilst reflecting economic reality. In my view, it must not lead to the creation of artificial distinctions according to the legal form by means of which economic operators exercise their activity.
84.
I therefore propose that the first part of the second question be answered to the effect that the second subparagraph of Article 4(4) of the Sixth Directive precludes a Member State, in the exercise of the option available under that provision, from making the formation of a VAT group subject to the condition that all the members of that group must have legal personality, unless that condition is justified by the prevention of abusive practices or tax evasion or avoidance, having due regard to the principle of fiscal neutrality, this being a matter which must be determined by the referring court.
2. The need for the members of the VAT group to have a relationship of control and subordination
85.
As has been stated, the second subparagraph of Article 4(4) of the Sixth Directive permits treatment as a single taxable person in the case of entities which, while legally independent, are closely bound by financial, economic and organisational links.
86.
The first sentence of point 2 of Paragraph 2(2) of the UStG requires the entities to be integrated in financial, economic and organisational terms into the undertaking of the controlling company.
87.
The Bundesfinanzhof states that, according to its settled case-law, the integration required by that provision necessitates the existence of a relationship of control and subordination between the controlling company and the controlled company as the ‘subordinate person’.
88.
According to the referring court, that financial integration exists if the controlling company is financially involved in the controlled company in such a way that it can impose its will by majority vote in the general meeting. It is a characteristic of economic integration that the controlled company appears as a component of the controlling company in the latter’s structure. Lastly, the referring court points out that organisational integration requires that the controlling company uses the possibility, associated with financial integration, of controlling the subsidiary in its day-to-day business management, governing the subsidiary company by its management methods and imposing its will on the subsidiary.
89.
However, the referring court does not state precisely in what financial, economic and/or organisational terms the economic operators in the main proceedings do not satisfy the integration condition laid down in the first sentence of point 2 of Paragraph 2(2) of the UStG, as interpreted by the Bundesfinanzhof. Neither the observations submitted by Larentia + Minerva nor those submitted by Marenave really cast any light on this question.
90.
That being said, it is common ground that the requirements laid down by the first sentence of point 2 of Paragraph 2(2) of the UStG go beyond those stemming from the second subparagraph of Article 4(4) of the Sixth Directive. The existence of ‘close’ financial, economic and organisational links does not necessarily mean either the integration of a member into the undertaking of another member of the VAT group or a relationship of control and subordination between those members. ( ) At the hearing before the Court, the Commission pointed out that of the 16 Member States which had taken the option provided for in the second subparagraph of Article 4(4) of the Sixth Directive, only 4 of them, including the Federal Republic of Germany, required such links of integration and of subordination. Furthermore, as Larentia + Minerva stressed in its written observations, by holding, in particular in Commission v Ireland (C‑85/11, EU:C:2013:217, paragraph 47), that the formation of a VAT group may be necessary in order to combat certain abuses such as, for example, the fact that one undertaking can be split up artificially among several taxable persons so that each might benefit from a special scheme, it seems that the Court implicitly acknowledged that it is possible to have recourse to horizontal VAT groups (‘Gleichordnungskonzerne’) in accordance with the second subparagraph of Article 4(4) of the Sixth Directive.
91.
The fact that in Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 19) the Court alluded indirectly to a relationship of subordination between the members of a VAT group cannot, in my view, be effectively relied on in the present context, as the question which had been referred to it in that case did not in any way relate to this point. In Commission v Ireland (C‑85/11, EU:C:2013:217, paragraph 43) and Commission v Finland (C‑74/11, EU:C:2013:266, paragraph 36) in particular, the Court also rejected on this ground an argument put forward by the Commission which was derived from the same paragraph of the judgment in Ampliscientifica and Amplifin.
92.
These considerations also lead me to reject the argument, essentially put forward by the Austrian Government, that the existence of a relationship of subordination is inherent in the condition of ‘close links’ under the second subparagraph of Article 4(4) of the Sixth Directive since, under the first subparagraph of Article 4(4), it is precisely the existence of such a relationship between natural persons and their employer which prevents them from being treated as persons liable to VAT.
93.
Such an argument not only ignores the difference in the wording of the first and second subparagraphs of Article 4(4) of the Sixth Directive, as the latter does not use the expression ‘relationship of employer and employee’ but, more broadly, ‘close links’. It also disregards the fact that the Court has recognised that a Member State may provide that non-taxable persons may be members of VAT groups and that the term ‘taxable person’ is not therefore synonymous with ‘persons’ within the meaning of the second subparagraph of Article 4(4) of the Sixth Directive.
94.
That said, it is clear from the observations submitted by the interested parties that they ultimately disagree on the question whether the requirements of the first sentence of point 2 of Paragraph 2(2) of the UStG, as interpreted by the case-law of the Bundesfinanzhof, constitute additional conditions to those laid down by the second subparagraph of Article 4(4) of the Sixth Directive (an argument essentially supported by Larentia + Minerva, Marenave, Ireland and the Commission), which would mean that those conditions must be justified having regard to the objectives of preventing abuse or tax evasion or avoidance, or whether they are simply specifications or clarifications of the condition relating to the existence of close financial, economic and organisational links provided for in that article of the Sixth Directive, a view supported by the German, Austrian and United Kingdom Governments.
95.
Although at first sight it is not easy to choose between these alternatives, the arguments set out by the first group of interested parties nevertheless seem more consistent with the case-law.
96.
In Commission v Ireland (C‑85/11, EU:C:2013:217, paragraph 36) and Commission v Finland (C‑74/11, EU:C:2013:266, paragraph 29) in particular, the Court described as an ‘other condition’, that is to say, a condition additional to those set out in the first paragraph of Article 11 of Directive 2006/112 (which reproduced the conditions under the second subparagraph of Article 4(4) of the Sixth Directive), a requirement under which the ‘persons’ referred to in that provision should individually have had the status of a taxable person. In other words, a Member State which transposed the second subparagraph of Article 4(4) of the Sixth Directive by limiting eligibility for VAT groups solely to ‘taxable persons’ did not clarify the meaning of that provision, but introduced an additional condition for the application of that provision.
97.
Consequently, following the Court’s logic in those judgments and in the judgment in Commission v Sweden (C‑480/10, EU:C:2013:263), although such an additional condition is not in itself incompatible with the second subparagraph of Article 4(4) of the Sixth Directive, in view of the margin of discretion conferred on the Member States, it must nevertheless be justified by the pursuit of the objectives of preventing abuse and tax evasion or avoidance in compliance with EU law, in particular the principle of fiscal neutrality.
98.
It follows that the condition under the first sentence of point 2 of Paragraph 2(2) of the UStG, to the effect that close financial, economic and organisational links can exist only where there is a relationship of control and subordination between the members of the VAT group, may be compatible with the Sixth Directive, on condition that it is necessary and proportionate to the pursuit of the abovementioned objectives, having due regard in particular to the principle of fiscal neutrality.
99.
Although it is for the referring court to determine whether those conditions are satisfied, I am nevertheless uncertain whether a national measure which requires such an intensity of links between persons to form a single taxable person does not go beyond what is necessary to attain those objectives. Aside from particular circumstances specific to a certain Member State, which have not been adduced before the Court in these proceedings, however, it is difficult to understand, in general, why the pursuit of the abovementioned objectives would make necessary a relationship of control and subordination between the members of a VAT group in order to satisfy the condition relating to the existence of close financial, economic and organisational links. Whilst the existence of such a relationship of control and subordination between the members of a VAT group is undoubtedly a sufficient condition to attain those objectives and to satisfy the condition laid down in the second subparagraph of Article 4(4) of the Sixth Directive, I doubt whether it is strictly necessary.
100.
I therefore suggest that the second part of the second question be answered to the effect that national legislation under which close financial, economic and organisational links within the meaning of the second subparagraph of Article 4(4) of the Sixth Directive can exist only where there is a relationship of control and subordination between the members of the VAT group is liable to be compatible with that article, on condition that it is necessary and proportionate to the pursuit of the objectives of preventing abusive practices and tax evasion or avoidance in compliance with EU law, in particular the principle of fiscal neutrality, this being a matter which must be determined by the referring court.
C – The third question
101.
By its third question, the referring court expresses uncertainty as to the direct effect of the second subparagraph of Article 4(4) of the Sixth Directive in the event that it precludes a national measure such as that provided for in the first sentence of point 2 of Paragraph 2(2) of the UStG.
102.
If the Court decides to follow the proposals made in this Opinion in response to the second question, it cannot be ruled out that, following the necessary examination by the referring court, that court may conclude that the first sentence of point 2 of Paragraph 2(2) of the UStG is incompatible with the second subparagraph of Article 4(4) of the Sixth Directive. Therefore, in order to provide a helpful answer to the referring court, I think that an answer should be given to the third question which it has referred to the Court.
103.
According to settled case-law, wherever provisions of the Sixth Directive or of Directive 2006/112 appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, they may, in the absence of implementing measures adopted within the prescribed period, be relied on against any national provision which is incompatible with those directives or in so far as they define rights which individuals are able to assert against the State. ( )
104.
It is thus necessary to establish whether the second subparagraph of Article 4(4) of the Sixth Directive may, so far as its subject-matter is concerned, be considered to be unconditional and sufficiently precise as to permit an individual to rely on it before the national courts with a view to opposing the application of national legislation which is incompatible with that article.
105.
In this regard, I consider, first and foremost, that an objection to recognition of the direct effect of the second subparagraph of Article 4(4) of the Sixth Directive, as raised by the Austrian Government and Ireland in particular, solely on the ground that that article confines itself to giving the Member States the option to allow the formation of VAT groups in their territory, is not convincing.
106.
The Court has already acknowledged on several occasions that the fact that a provision of a directive gives Member States a choice does not necessarily render it impossible to determine with sufficient precision, on the basis of the provisions of that directive alone, the content of the rights thus conferred on individuals. ( )
107.
Furthermore, the existence of discretion on the part of the Member States in implementing provisions of the Sixth Directive has not been used by the Court as an argument which in itself eliminates the possibility of recognising the direct effect of some of those provisions. ( )
108.
In particular, the Court has ruled that, although the Member States undoubtedly have a discretion as regards laying down the conditions for the application of certain exemptions provided for by the Sixth Directive, that fact does not prevent individuals who are able to show that their tax position actually comes within one of the categories of exemption laid down in that directive from relying on it directly, in particular where, having exercised its powers under that provision, a Member State has adopted national provisions which are not compatible with that directive, in particular with the principle of fiscal neutrality. ( )
109.
Consequently, the fact that, in the exercise of the option available to it under the second subparagraph of Article 4(4) of the Sixth Directive, the Federal Republic of Germany retains a certain margin of discretion does not necessarily mean that individuals are deprived of the right to rely directly on the provisions of that article before the national courts.
110.
On the contrary, in my view, once a Member State has exercised the option granted by the second subparagraph of Article 4(4) of the Sixth Directive, that article confers on all ‘persons’ the possibility of being treated as a single taxable person and thus identifies clearly the beneficiaries of that provision in an unconditional and sufficiently precise manner.
111.
The fact that, where appropriate, that provision may entail a proviso relating to justifications based on the prevention of abusive practices or tax evasion or avoidance does not call this finding into question, since such justifications are not only subject to judicial review, ( ) but are also encouraged by the Sixth Directive, and may even be regarded as limits inherent in the scope of the rights conferred on individuals by that directive. ( )
112.
On the other hand, the substantive condition under the second subparagraph of Article 4(4) of the Sixth Directive that the financial, economic and organisational links between several persons must be ‘close’ in order for them to form a single taxable person undoubtedly needs to be specified at national level. If regard is simply had to close financial links, they can thus be dependent on a variable percentage of participation in the capital and/or in voting rights within a company or on particular contractual relationships between economic operators, such as the existence of franchise contracts. ( ) However, these criteria are not exclusive. In any event, Member States which have chosen the option provided for in the second subparagraph of Article 4(4) of the Sixth Directive must therefore specify the substantive condition laid down therein even though, unlike the situation of VAT exemption, which can be determined objectively on the basis of the interpretation of the provisions of the Sixth Directive, it is not possible to identify directly, in the actual wording of that article, the precise meaning of the ‘close’ links mentioned therein.
113.
That being the case, I consider that the second subparagraph of Article 4(4) of the Sixth Directive does not have direct effect.
114.
If the Court should concur with this proposal, and in so far as the referring court has made a prior finding that the first sentence of point 2 of Paragraph 2(2) of the UStG is incompatible with the second subparagraph of Article 4(4) of the Sixth Directive, it will still be for the referring court to determine whether national law can be interpreted, as far as possible, in a manner consistent with EU law. ( )
115.
It should be noted in this regard that the Commission pointed out in its written observations that a German tax court attempted to give such a consistent interpretation, holding that partnerships ‘with a capital-based structure’, like the limited partnerships in the main proceedings, might come within the scope ratione personae of the first sentence of point 2 of Paragraph 2(2) of the UStG. ( )
116.
At least as regards persons capable of participating in a VAT group, such an example from case-law suggests that an interpretation in conformity with EU law is certainly feasible, without, however, leading to a contra legem interpretation.
117.
As regards the condition relating to the integration of the member company into the controlling company of the VAT group, to which the application of the first sentence of point 2 of Paragraph 2(2) of the UStG is subject, as I have already highlighted, it is clear from the orders for reference that it is mainly by way of judicial decision that that condition has been interpreted in German law as requiring a relationship of control and subordination between the members of the VAT group.
118.
Aside from the previously addressed question of legal personality, as has also already been stated, the information provided by the referring court does not make it possible to determine why the economic operators in the main proceedings do not satisfy the condition laid down in the first sentence of point 2 of Paragraph 2(2) of the UStG, as interpreted by the Bundesfinanzhof.
119.
In any event, it is for the referring court to determine, in the cases in the main proceedings, whether the integration condition provided for in the first sentence of point 2 of Paragraph 2(2) of the UStG can be interpreted, as far as possible, as permitting undertakings which are bound to one another by close financial, economic and organisational links within the meaning of the second subparagraph of Article 4(4) of the Sixth Directive to benefit from VAT group status, without necessarily having a link of subordination or relationships of control and subordination.
120.
Consequently, I propose that the third question be answered to the effect that a taxable person cannot rely directly on the second subparagraph of Article 4(4) of the Sixth Directive and that it is, however, for the referring court, as far as possible, to interpret its national legislation in conformity with the Sixth Directive.
III – Conclusion
121.
In the light of the foregoing considerations, I propose that the questions referred by the Bundesfinanzhof be answered as follows:
(1)
Expenditure connected with capital transactions incurred by a holding company which involves itself directly or indirectly in the management of its subsidiaries has a direct and immediate link with that holding company’s economic activity as a whole. Input value added tax on that expenditure should not therefore be apportioned between the economic and non-economic activities of the holding company. If the holding company effects transactions which are subject to value added tax and transactions which are exempt, the proportion method provided for in Article 17(5) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment will be used to calculate the right to deduct input value added tax.
(2)
The second subparagraph of Article 4(4) of Sixth Directive 77/388 precludes a Member State, in the exercise of the option available under that provision, from making the formation of a VAT group subject to the condition that all the members of that group must have legal personality, unless that condition is justified by the prevention of abusive practices or of tax evasion or avoidance, having due regard to EU law, in particular the principle of fiscal neutrality, this being a matter which must be determined by the referring court.
National legislation under which close financial, economic and organisational links, within the meaning of the second subparagraph of Article 4(4) of Sixth Directive 77/388, can exist only where there is a relationship of control and subordination between the members of the VAT group is liable to be compatible with that article, on condition that it is necessary and proportionate to the pursuit of the objectives of preventing abusive practices and tax evasion or avoidance in compliance with EU law, in particular the principle of fiscal neutrality, this being a matter which must be determined by the referring court.
(3)
A taxable person cannot rely directly on the second subparagraph of Article 4(4) of Sixth Directive 77/388. It is, however, for the referring court, as far as possible, to interpret its national legislation in conformity with that provision of the Sixth Directive.
( ) Original language: French.
( ) OJ 1977 L 145, p. 1. As the matters at issue in the main proceedings took place before 1 January 2007, the date of entry into force of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), the latter directive is therefore not applicable.
( ) By decision of the President of the Court of 26 March 2014, these cases were joined for the purposes of the written and oral procedure and the judgment.
( ) See, to this effect, Securenta (C‑437/06, EU:C:2008:166, paragraph 33).
( ) Idem (paragraphs 34 to 36).
( ) Ibid. (paragraphs 37 and 38).
( ) See, inter alia, Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 19), and Portugal Telecom (C‑496/11, EU:C:2012:557, paragraph 32).
( ) See, inter alia, Polysar Investments Netherlands (C‑60/90, EU:C:1991:268, paragraph 14); Floridienne and Berginvest (C‑142/99, EU:C:2000:623, paragraph 18); Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 20); SKF (C‑29/08, EU:C:2009:665, paragraph 30); and Portugal Telecom (C‑496/11, EU:C:2012:557, paragraph 33) (my italics).
( ) Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 22), and Portugal Telecom (C‑496/11, EU:C:2012:557, paragraph 34).
( ) Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 33). See also, inter alia, SKF (C‑29/08, EU:C:2009:665, paragraph 58).
( ) See, to this effect, Securenta (C‑437/06, EU:C:2008:166, paragraph 33) and my Opinion in Vereniging Noordelijke Land- en Tuinbouw Organisatie (C‑515/07, EU:C:2008:769, point 79). See also the judgment in Portugal Telecom (C‑496/11, EU:C:2012:557, paragraph 40).
( ) The methods for calculating the proportion fall within the sphere of application of the Member States’ national legislation: see, in this regard, Le Crédit Lyonnais (C‑388/11, EU:C:2013:541, paragraphs 30 and 31).
( ) See Kretztechnik (C‑465/03, EU:C:2005:320, paragraph 36).
( ) It should be noted that this provision was subsequently reproduced with a similar wording in Article 11 of Directive 2006/112/EC.
( ) Proposal for a Sixth Council Directive on the harmonisation of legislation of Member States concerning turnover taxes — Common system of value added tax: uniform basis of assessment (COM(73) 950, 20 June 1973).
( ) See to this effect, inter alia, Commission v Ireland (C‑85/11, EU:C:2013:217, paragraph 47) and Commission v Sweden (C‑480/10, EU:C:2013:263, paragraph 37).
( ) See, to this effect, Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 19) and Skandia America (USA), filial Sverige (C‑7/13, EU:C:2014:2225, paragraph 29).
( ) See also, to this effect, Communication from the Commission to the Council and the European Parliament on the VAT group option provided for in Article 11 of Council Directive 2006/112/EC on the common system of value added tax (COM(2009) 325 final, 2 July 2009, p. 11). It should be stated that transactions effected between a member of the group and a third party are attributable to the group itself: see Skandia America (USA), filial Sverige (C‑7/13, EU:C:2014:2225, paragraph 29).
( ) See, inter alia, with regard to case-law on the inadmissibility of questions referred for a preliminary ruling which bear no relation to the actual facts of the action or are hypothetical, Unió of Pagesos of Catalunya (C‑197/10, EU:C:2011:590, paragraph 17 and the case-law cited).
( ) Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967, p. 16).
( ) Commission v Ireland (C‑85/11, EU:C:2013:217, paragraphs 38 to 41). See also Commission v Netherlands (C‑65/11, EU:C:2013:265, paragraphs 35 to 39); Commission v Finland (C‑74/11, EU:C:2013:266, paragraphs 30 to 34); Commission v United Kingdom (C‑86/11, EU:C:2013:267, paragraphs 33 to 37); and Commission v Denmark (C‑95/11, EU:C:2013:268, paragraphs 34 to 38).
( ) Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 19).
( ) See, inter alia, Commission v Ireland (C‑85/11, EU:C:2013:217, paragraph 36), and Commission v Sweden (C‑480/10, EU:C:2013:263, paragraph 35).
( ) Commission v Sweden (C‑480/10, EU:C:2013:263, paragraph 38), and Commission v Finland (C‑74/11, EU:C:2013:266, paragraph 66).
( ) Commission v Sweden (C‑480/10, EU:C:2013:263, paragraphs 39 and 40), and Commission v Finland (C‑74/11, EU:C:2013:266, paragraphs 67 and 68).
( ) With regard to the fundamental character of this principle, see, inter alia, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 59); Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 25). With regard to the limits imposed by the principle of neutrality on the application by the Member States of measures pursuing objectives of preventing tax evasion and avoidance, see, inter alia, Profaktor Kulesza, Frankowski, Jóźwiak, Orłowski (C‑188/09, EU:C:2010:454, paragraph 26 and the case-law cited).
( ) Council Directive 2006/69/EC of 24 July 2006 amending Directive 77/388/EEC as regards certain measures to simplify the procedure for charging value added tax and to assist in countering tax evasion or avoidance, and repealing certain Decisions granting derogations (OJ 2006 L 221, p. 9).
( ) See, inter alia, Gemeente Leusden and Holin Groep (C‑487/01 and C‑7/02, EU:C:2004:263, paragraph 76); Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 71); Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446); Ampliscientifica and Amplifin (C‑162/07, EU:C:2008:301, paragraph 29); and R. (C‑285/09, EU:C:2010:742, paragraph 36).
( ) See, in particular, Halifax and Others (C‑255/02, EU:C:2006:121), which concerned tax avoidance and abusive practices, and Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446), which concerned tax evasion.
( ) See, to this effect, Communication from the Commission, cited above, p. 11, and Opinion of Advocate General Jääskinen in Commission v Ireland (C‑85/11, EU:C:2012:753, point 45).
( ) The Court has already found, in circumstances linked to the scope of VAT exemptions, that the Sixth Directive precludes distinctions based solely on the legal form by means of which taxable persons exercise their activities: see, in this regard, Gregg (C‑216/97, EU:C:1999:390, paragraph 20); Kügler (C‑141/00, EU:C:2002:473, paragraph 30); Linneweber and Akritidis (C‑453/02 and C‑462/02, EU:C:2005:92, paragraph 25); and Canterbury Hockey Club and Canterbury Ladies Hockey Club (C‑253/07, EU:C:2008:571, paragraphs 30 and 31).
( ) It should be noted that the use of the adverb ‘closely’ in the second subparagraph of Article 4(4) of the Sixth Directive to describe the links between the entities concerned replaced the adverb ‘organically’, previously used, at least in certain language versions of the text, in point 2, fourth paragraph, of Annex A to the Second Directive, which interpreted Article 4 of that directive. The clarification introduced by point 2, fourth paragraph, of Annex A to the Second Directive with regard to the definition of ‘taxable person’ for the purposes of Article 4 of the Second Directive was largely inspired by the German ‘Organschaft’ regime.
( ) See, inter alia, Becker (8/81, EU:C:1982:7, paragraph 25); Kügler (C‑141/00, EU:C:2002:473, paragraph 51); Linneweber and Akritidis (C‑453/02 and C‑462/02, EU:C:2005:92, paragraph 33); and MDDP (C‑319/12, EU:C:2013:778, paragraph 47).
( ) See Flughafen Köln/Bonn (C‑226/07, EU:C:2008:429, paragraph 30); Cobelfret (C‑138/07, EU:C:2009:82, paragraph 61); and Balkan and Sea Properties and Provadinvest (C‑621/10 and C‑129/11, EU:C:2012:248, paragraph 57).
( ) See, inter alia, Stockholm Lindöpark (C‑150/99, EU:C:2001:34, paragraph 31 and the case-law cited). See also MDDP (C‑319/12, EU:C:2013:778, paragraph 51 and the case-law cited).
( ) See Linneweber and Akritidis (C‑453/02 and C‑462/02, EU:C:2005:92, paragraphs 34 to 37). See also JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies (C‑363/05, EU:C:2007:391, paragraph 61).
( ) See, by analogy, with regard to the direct effect of Article 4(5) of the Sixth Directive, Comune di Carpaneto Piacentino and Others (231/87 and 129/88, EU:C:1989:381, paragraph 32). See also, in a different context, Gavieiro Gavieiro and Iglesias Torres (C‑444/09 and C‑456/09, EU:C:2010:819, paragraph 81).
( ) See, to this effect, Schoenimport ‘Italmoda’ Mariano Previti and Others (C‑131/13, C‑163/13 and C‑164/13, EU:C:2014:2455, paragraphs 57 to 59).
( ) In its abovementioned Communication (p. 9), the Commission proposes to infer the existence of close financial links from the holding of at least 50% of the share capital or voting rights of a company or from the existence of franchise contracts. It should be noted that certain Member States acknowledge the existence of such financial links in the case where a company holds at least 10% of the share capital of another company.
( ) See, inter alia, Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraphs 108 to 114).
( ) See paragraph 34 of the Commission’s written observations, which refer to the judgment of the Finanzgericht München (Finance Court, Munich) of 13 March 2013, reference 3 K 235/10. |
JUDGMENT OF THE COURT (Fifth Chamber)
3 December 2015 ( * )
‛Appeal — Regional policy — Regional operational programme (ROP) Puglia (Italy) covered by objective No 1 (2000-2006) — Reduction of the Community financial assistance initially granted by the European Regional Development Fund’
In Case C‑280/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 9 June 2014,
Italian Republic, represented by G. Palmieri, acting as Agent, and by P. Gentili, avvocato dello Stato,
appellant,
the other party to the proceedings being:
European Commission, represented by D. Recchia and A. Steiblytė, acting as Agents, with an address for service in Luxembourg,
defendant at first instance,
THE COURT (Fifth Chamber),
composed of T. von Danwitz (Rapporteur), President of the Fourth Chamber, acting as President of the Fifth Chamber, D. Šváby, A. Rosas, E. Juhász and C. Vajda, Judges,
Advocate General: P. Cruz Villalón,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 13 May 2015,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
By its appeal, the Italian Republic seeks to have set aside the judgment of the General Court of the European Union of 28 March 2014 in Italy v Commission (T‑117/10, EU:T:2014:165, ‘the judgment under appeal’), by which the General Court dismissed its action for annulment of Commission Decision C(2009) 10350 final of 22 December 2009 reducing the financial assistance from the European Regional Development Fund awarded to the Italian Republic pursuant to Commission Decision C(2000) 2349 of 8 August 2000 approving the regional operational programme ROP Puglia, in respect of the period 2000-2006, under objective No 1 (‘the decision at issue’).
Legal context
Article 38(1) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1) provides as follows:
‘Without prejudice to the Commission’s responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. To that end, the measures they take shall include:
(a)
verifying that management and control arrangements have been set up and are being implemented in such a way as to ensure that Community funds are being used efficiently and correctly;
(b)
providing the Commission with a description of these arrangements;
(c)
ensuring that assistance is managed in accordance with all the applicable Community rules and that the funds placed at their disposal are used in accordance with the principles of sound financial management;
…’
According to Article 39(1) to (3) of Regulation No 1260/1999:
‘1. The Member States shall, in the first instance, bear the responsibility for investigating irregularities, acting upon evidence of any major change affecting the nature or conditions for the implementation or supervision of assistance and making the financial corrections required.
The Member State shall make the financial corrections required in connection with the individual or systemic irregularity. The corrections made by the Member State shall consist in cancelling all or part of the Community contribution. …
2. If, after completing the necessary verifications, the Commission concludes that:
…
(c)
there are serious failings in the management or control systems which could lead to systemic irregularities;
the Commission shall suspend the interim payments in question and, stating its reasons, request that the Member State submit its comments and, where appropriate, carry out any corrections, within a specified period of time.
If the Member State objects to the observations made by the Commission, the Member State shall be invited to a hearing by the Commission, in which both sides in cooperation based on the partnership make efforts to reach an agreement about the observations and the conclusions to be drawn from them.
3. At the end of the period set by the Commission, the Commission may, if no agreement has been reached and the Member State has not made the corrections and taking account of any comments made by the Member State, decide within three months to:
…
(b)
make the financial corrections required by cancelling all or part of the contribution of the Funds to the assistance concerned.
The Commission shall when deciding the amount of a correction take account, in compliance with the principle of proportionality, of the type of irregularity or change and the extent and financial implications of the shortcomings found in the management or control systems of the Member States.
…’
Article 4 of Commission Regulation (EC) No 438/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the management and control systems for assistance granted under the Structural Funds (OJ 2001 L 63, p. 21) provides:
‘Management and control systems shall include procedures to verify the delivery of the products and services co-financed and the reality of expenditure claimed and to ensure compliance with the terms of the relevant Commission decision under Article 28 of Regulation … No 1260/1999 and with applicable national and Community rules …
The procedures shall require the recording of verifications of individual operations on the spot. The records shall state the work done, the results of the verification and the measures taken in respect of discrepancies. Where any physical or administrative verifications are not exhaustive, but performed on a sample of operations, the records shall identify the operations selected and describe the sampling method.’
Article 8 of Regulation No 438/2001 is worded as follows:
‘The managing or paying authority shall keep an account of amounts recoverable from payments of Community assistance already made, and ensure that the amounts are recovered without unjustified delay. After recovery, the paying authority shall repay the irregular payments recovered, together with interest received on account of late payment, by deducting the amounts concerned from its next statement of expenditure and request for payment to the Commission, or, if this is insufficient, by effecting a refund to the Community. …’
Article 9 of Regulation No 438/2001, which is entitled ‘Certification of expenditure’, provides that certificates relating to statements of interim and final expenditure are to be drawn up by a person or department within the paying authority that is functionally independent of any services that approve claims. That article also specifies, inter alia, the checks which that authority must carry out before certifying such statements of expenditure.
Article 10 of that regulation, entitled ‘Sample checks on operations’, provides:
‘1. Member States shall organise checks on operations on an appropriate sampling basis, designed in particular to:
(a)
verify the effectiveness of the management and control systems in place;
(b)
verify selectively, on the basis of risk analysis, expenditure declarations made at the various levels concerned.
2. The checks carried out before the winding-up of each assistance shall cover at least 5% of the total eligible expenditure and be based on a representative sample of the operations approved, taking account of the requirements of paragraph 3. Member States shall seek to spread the implementation of the checks evenly over the period concerned. They shall ensure an appropriate separation of tasks as between such checks and implementation or payment procedures concerning operations.
3. The selection of the sample of operations to be checked shall take into account:
(a)
the need to check an appropriate mix of types and sizes of operations;
(b)
any risk factors which have been identified by national or Community checks;
(c)
the concentration of operations under certain intermediate bodies or certain final beneficiaries, so that the main intermediate bodies and final beneficiaries are checked at least once before the winding-up of each assistance.’
Background to the dispute
By Decision C(2000) 2349 of 8 August 2000, the Commission approved the regional operation programme (ROP) Puglia, for the period 2000-2006, under Objective No 1 (‘the Puglia ROP programme’) and made EUR 1721827000 available to the Italian authorities from the European Regional Development Fund (ERDF).
In 2007, the Commission carried out audits of the management and control systems set up by the authorities responsible for that programme and concluded that those authorities had not established management and control systems that ensured sound financial management of the assistance from the ERDF and that the systems that had been put in place did not provide adequate assurance of the correctness, regularity and eligibility of payment claims.
Taking the view that the Italian Republic had not fulfilled its obligations under Articles 4 and 8 to 10 of Regulation No 438/2001 and that the failings identified in the management and control systems were liable to lead to systemic irregularities, the Commission suspended, by Decision C(2008) 3340 of 1 July 2008, the interim payments from the ERDF for the Puglia ROP programme. The Commission set a three-month period for the Italian Republic to carry out checks and make the necessary corrections in order to ensure that only eligible expenditure was covered by the ERDF contribution.
In the course of an audit carried out in January 2009, the Commission found that the requirements laid down in that decision had not been complied with within the periods prescribed. The EU auditors unearthed a number of irregularities so far as concerned (i) the checks undertaken by the managing authority under Article 4 of Regulation No 438/2001 (‘the first-level checks’), (ii) the functioning of the paying authority and (iii) the checks carried out by the supervisory body under Article 10 of Regulation No 438/2001 (‘the second-level checks’). The Commission concluded that there was no reasonable assurance that the management and control systems of the Puglia ROP programme could effectively ensure that the expenditure declared, for the period from the start of the programming period to the date on which interim payments were suspended, was lawful, correct and accurate.
By a letter of 3 April 2009, the Commission informed the Italian authorities of its conclusions, telling them that it intended to propose a financial correction to the ERDF financial assistance at a rate of 10%, taking account of the expenditure that had, as at the date on which interim payments were suspended, been declared under the programme concerned. The Italian Republic objected to the application of that flat-rate correction and requested that the suspension of interim payments be lifted. Pursuant to Article 39(2) of Regulation No 1260/1999, a hearing was held on 30 September 2009.
By the decision at issue, the Commission reduced the financial assistance granted from the ERDF to the Puglia ROP programme for the period 2000-2006, applying a flat-rate 10% correction to expenditure certified up to the date on which interim payments were suspended. Under Article 1 of that decision, the assistance allocated under the ERDF was reduced by EUR 79335741.11.
Proceedings before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 5 March 2010, the Italian Republic brought an action for annulment of the decision at issue.
In support of its action, the Italian Republic put forward four pleas in law. The first and second pleas alleged distortion of the facts and infringement of Article 39(2)(c) and (3) of Regulation No 1260/1999 as regards the first-level checks, the functioning of the paying authority and the second-level checks. By its third plea, the Italian Republic alleged failure to state the reasons and infringement of Article 39(2) and (3) of Regulation No 1260/1999. The fourth plea alleged infringement of Article 12 of Regulation No 1260/1999 and of the first paragraph of Article 4 of Regulation No 438/2001 and lack of competence on the part of the Commission.
By the judgment under appeal, the General Court dismissed the Italian Republic’s action.
Forms of order sought by the parties
The Italian Republic claims that the Court should:
—
set aside the judgment under appeal;
—
annul the decision at issue, pursuant to Article 61 of the Statute of the Court of Justice of the European Union, and
—
order the Commission to pay the costs.
The Commission contends that the Court should dismiss the appeal and order the Italian Republic to pay the costs.
The appeal
The Italian Republic has put forward three grounds of appeal.
First ground of appeal
Arguments of the parties
By its first ground of appeal, the Italian Republic submits that, in paragraph 37 and paragraph 50 et seq. of the judgment under appeal, the General Court disregarded the adversarial principle and the obligation to state the grounds for its judgment in so far as it examined together the first and second pleas relating to the efficacy and reliability of, on the one hand, the first-level checks carried out by the managing authority and the paying authority and, on the other, the second-level checks undertaken by the supervisory body.
The Italian Republic maintains that, by virtue of the adversarial principle, the General Court was obliged to examine those two pleas in law separately since they entailed different questions of fact which related to the work of separate bodies and to very different irregularities, which had been identified in the decision at issue. Moreover, in examining those two pleas together, the General Court automatically transferred to one of those pleas the reasoning applied to the other.
The Italian Republic argues that, in examining the first and second pleas together, the General Court also infringed its obligation to state the grounds for its decisions. It failed to explain in a manner as thorough as was the case of the originating application the reasons why it considered unfounded the arguments which the Italian Republic had put forward to challenge each of the irregularities that formed, as a whole, the basis for the decision at issue.
The Commission disputes the merits of the appellant’s arguments.
Findings of the Court
According to the Court’s case-law, the adversarial principle entails, as a general rule, the parties to proceedings being given an opportunity to state their views on the facts and documents on which a judicial decision will be based, and to discuss the evidence and observations submitted to the court and the points of law which the court has raised of its own motion and on which it proposes to base its decision (judgments in Commission v Ireland and Others, C‑89/08 P, EU:C:2009:742, paragraphs 52 and 55, and Review of M v EMEA, C‑197/09 RX‑II, EU:C:2009:804, paragraph 41).
In that regard, the Court finds that the Italian Republic had the opportunity properly to state its view before the General Court on the irregularities identified in the decision at issue so far as concerns the first-level checks, the functioning of the paying authority and the second-level checks. Furthermore, it is clear, in particular from paragraphs 40, 48 and 60 to 66 of the judgment under appeal, that the General Court also took into account the arguments which the Italian Republic put forward to deny that those irregularities actually existed.
As regards the obligation to state the grounds, the General Court cannot be criticised for having failed to address all the details of the arguments put forward by the Italian Republic to challenge the irregularities identified in the decision at issue. It is settled case-law that the duty incumbent upon the General Court under Article 36 and the first paragraph of Article 53 of the Statute of the Court of Justice to state reasons for its judgments does not require the General Court to provide an account that follows exhaustively and one by one all the arguments articulated by the parties to the case. The reasoning may also be implicit, on condition that it enables the persons concerned to understand the grounds of the General Court’s judgment and provides the Court of Justice with sufficient information to exercise its powers of review on appeal (judgments in Coop de France bétail et viande and Others v Commission, C‑101/07 P and C‑110/07 P, EU:C:2008:741, paragraph 75 and the case-law cited; A2A v Commission, C‑318/09 P, EU:C:2011:856, paragraph 97; and France v Commission, C‑559/12 P, EU:C:2014:217, paragraph 86).
In the present case, the reasoning in paragraphs 69 to 77 and 79 to 92 of the judgment under appeal is such as (i) to enable the Italian Republic to understand the reasons why the General Court rejected all the arguments that it put forward to deny that there were delays in the performance of the first- and second-level checks, that the proposed corrections could not be relied on and that the paying authority was not functioning properly and (ii) to enable the Court to exercise its power of review. The General Court also explained, in paragraphs 60 to 63 of the judgment under appeal, the reasons which prompted it not to rule upon the alleged non-existence of each of the specific irregularities which the EU auditors had identified, in January 2009, in connection with the first- and second-level checks. Accordingly, the Court must also reject as unfounded the argument that the General Court infringed its obligation to state the grounds for its decision.
As regards the objection that the General Court applied the same reasoning to different questions of law and of fact, it must be stated that that objection is based on an obvious misreading of the judgment under appeal. Contrary to what is maintained by the Italian Republic, the General Court undertook a detailed and separate assessment of (i) the questions of fact and of law relating to the first-level checks (paragraphs 69 to 71 and 79 to 81 of the judgment under appeal), (ii) the questions relating to the second-level checks (paragraphs 72 to 77 and 82 to 87 of that judgment) and (iii) the questions pertaining to the paying authority (paragraphs 88 to 92 of the judgment).
The first ground of appeal must therefore be rejected as unfounded.
Second and third grounds of appeal
Arguments of the parties
Despite the somewhat unstructured nature of the reasoning, the second ground of appeal may be understood as being divided into four parts.
By the first part of this ground of appeal, the Italian Republic maintains that the General Court, in paragraphs 40, 63 and 88 to 93 of the judgment under appeal, distorted the facts and evidence before it. The Italian Republic submits that, as a result of the distortion affecting those paragraphs of the judgment under appeal, the General Court also infringed Article 39 of Regulation No 1260/1999, Article 9 of Regulation No 438/2001 and the principles of proportionality and partnership.
In the second part of this ground of appeal, the Italian Republic argues that the General Court erred in holding, in paragraphs 60 to 63 of the judgment under appeal, that it was not necessary to examine the evidence produced to support the assertion that the irregularities identified by the EU auditors in a sample of first-level checks that was audited in January 2009 did not actually exist. The Italian Republic argues that it follows from point 40 of the grounds of the decision at issue, which emphasises the fact that the Italian authorities had not corrected those irregularities, that the Commission in fact took them into account in the decision at issue. Moreover, the General Court itself, in paragraphs 78 to 81 of the judgment under appeal, took those alleged irregularities into account in finding that the first-level checks could not be relied on.
The Italian Republic submits that in the absence of any proof of the existence of the specific irregularities relating to the first-level checks, which were identified by the Commission in January 2009, the General Court should have found that the decision at issue infringed Article 39(2) and (3) of Regulation No 1260/1999 and, in particular, that the 10% flat-rate correction was manifestly disproportionate.
By the third part of the second ground of appeal, the Italian Republic maintains that the decision at issue is contrary to the principles of proportionality and partnership, which are entrenched in Article 39 of Regulation No 1260/1999, inasmuch as that decision imposes a 10% flat-rate correction also in respect of irregularities relating to awards of additional works or of engineering services carried out, although the Italian authorities had proposed flat-rate corrections of 25% in respect of those irregularities. Thus, the General Court was not entitled merely to state, in paragraph 60 of the judgment under appeal, that those corrections had been taken into consideration by the Commission in the calculation of the final reduction in the ERDF assistance.
Finally, by the fourth part of this ground of appeal, the Italian Republic pleads infringement of Article 4 of Regulation No 438/2001 and of the principles relating to the burden of proof.
The third ground of appeal may be understood as being divided into four parts.
The first part of this ground of appeal alleges that paragraphs 72 to 74 of the judgment under appeal are vitiated by a distortion of the facts and evidence. The Italian Republic submits that the consequence of that distortion is that the General Court also infringed Article 39 of Regulation No 1260/1999, the principles of proportionality and partnership and Article 10 of Regulation No 438/2001.
By the second part of this ground of appeal, the Italian Republic argues that the General Court infringed Article 10 of Regulation No 438/2001 in holding that the second-level checks had to have reached the rate of checking provided for in that article before the winding-up of the programme concerned. It maintains that it follows from the very wording of Article 10 — which provides that the second-level checks are to cover at least 5% of the certified expenditure ‘before the winding-up of each assistance’ — that the system of second-level checks must be evaluated above all at the time of such winding-up.
Furthermore, in the framework of the third part of this ground of appeal, the Italian Republic takes issue with the General Court for having held, in paragraphs 84 to 86 of the judgment under appeal, that the argument that the corrections arising from the second-level checks amounted to EUR 59186909, rather than to EUR 30950978.33, was ineffective because the Commission had taken all the corrections into account in its determination of the total amount of EUR 95672043.08 for corrections arising from the first and second-level checks.
The fourth part of the third ground of appeal concerns an infringement of the principles relating to the burden of proof.
The Commission contends that the second and third grounds of appeal are inadmissible since, given that they amount to no more than a restatement of the arguments raised before the General Court, they in fact seek a second assessment of the substance of the case, this time by the Court of Justice. In any event, these grounds of appeal are, in the Commission’s view, wholly unfounded.
Findings of the Court
– Admissibility of the second and third grounds of appeal
It should be recalled that, according to settled case-law, it follows from the second subparagraph of Article 256(1) TFEU, the first paragraph of Article 58 of the Statute of the Court of Justice and Article 168(1)(d) of the Rules of Procedure of the Court of Justice that an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside and also the legal arguments specifically advanced in support of the appeal (see, inter alia, judgments in Spain v Commission, C‑197/13 P, EU:C:2014:2157, paragraph 43, and Ezz and Others v Council, C‑220/14 P, EU:C:2015:147, paragraph 111 and the case-law cited). In this regard, Article 169(2) of the Rules of Procedure specifies that the pleas in law and legal arguments relied on must identify precisely those points in the grounds of the decision of the General Court which are contested.
Accordingly, an appeal which merely repeats or reproduces verbatim the pleas in law and arguments previously submitted to the General Court does not satisfy the requirements to state reasons under those provisions. However, the points of law examined at first instance may be argued again in the course of an appeal, provided that the appellant challenges the interpretation or application of EU law by the General Court. Indeed, if an appellant could not thus base his appeal on pleas in law and arguments already relied on before the General Court, an appeal would be deprived of part of its purpose (see, to that effect, judgments in Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraphs 46 and 47, and Spain v Commission, C‑197/13 P, EU:C:2014:2157, paragraphs 44 and 45 and the case-law cited).
As regards the objection to admissibility raised by the Commission, it should be noted that, by its second and third grounds of appeal, the Italian Republic does not seek a mere re-examination of the action brought before the General Court, but challenges findings made by the latter in specific paragraphs of the judgment under appeal, which it considers to be vitiated both by a distortion of the facts and evidence and by other errors of law. Thus, contrary to what has been argued by the Commission, the second and third grounds of appeal do not simply repeat arguments already made at first instance but are in fact directed against a substantial part of the reasoning of the judgment under appeal and thus enable the Court to carry out its review.
The Commission’s objection to admissibility must accordingly be rejected.
As regards the infringement of Article 4 of Regulation No 438/2001, which is mentioned in the fourth part of the second ground of appeal, and the infringement of the principles relating to the burden of proof, which is mentioned both in the fourth part of the second ground of appeal and in the fourth part of the third ground of appeal, it should be observed that, although the Italian Republic refers to those errors of law in the title preceding the arguments relating to its second and third grounds of appeal, those arguments do not contain any particulars as to the paragraphs of the judgment under appeal that are allegedly vitiated by those errors of law, nor any reasoning intended to establish in what respect the General Court made such errors. Those parts of the second and third grounds of appeal are therefore inadmissible.
As regards the third part of the third ground of appeal, although the Italian Republic criticises the findings made in paragraphs 84 to 86 of the judgment under appeal on a ground other than distortion of the facts, it should be noted that it nevertheless does not indicate the principle or rule of law which the General Court is said to have infringed in holding that the legality of the decision at issue was not affected by any error that the Commission may have made with regard to the identification of certain corrections proposed by the Italian authorities as corrections arising from the second-level checks, given that the Commission had taken account of all those corrections in the decision at issue.
Accordingly, the fourth part of the second ground of appeal, the third part of the third ground of appeal, in so far as it does not allege distortion of the facts, and the fourth part of the third ground of appeal, must be rejected as inadmissible.
Moreover, as regards the arguments whereby the Italian Republic criticises the General Court on the ground that the latter distorted the clear sense of a letter of 15 June 2009, the Court notes that the appellant does not identify the paragraphs of the judgment under appeal that are concerned by its criticisms. Those arguments must also be rejected as inadmissible.
– Substance of the first part of the second ground of appeal and of the first and third parts of the third ground of appeal
By the first part of the second ground of appeal and the first and third parts of the third ground of appeal, which it is appropriate to consider together, the Italian Republic maintains that the findings in paragraphs 40, 63, 72 to 74, 84 to 86 and 88 to 93 of the judgment under appeal show that its action was not properly understood and are vitiated by distortion of the facts and evidence. The Italian Republic submits that, as a result of that distortion, the General Court also infringed Article 39 of Regulation No 1260/1999, Articles 9 and 10 of Regulation No 438/2001, and the principles of proportionality and partnership.
It should be recalled that it follows from the second subparagraph of Article 256(1) TFEU and from the first paragraph of Article 58 of the Statute of the Court of Justice that the General Court has exclusive jurisdiction to find the facts, except where the substantive inaccuracy of its findings is apparent from the documents submitted to it, and to assess those facts (see judgment in Commission v Aalberts Industries and Others, C‑287/11 P, EU:C:2013:445, paragraph 47 and the case-law cited). That assessment thus does not, save where the clear sense of the evidence has been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice (see judgments in Lafarge v Commission, C‑413/08 P, EU:C:2010:346, paragraph 15, and Activision Blizzard Germany v Commission, C‑260/09 P, EU:C:2011:62, paragraph 51 and the case-law cited).
There is such distortion where, without recourse to new evidence, the assessment of the existing evidence is clearly incorrect (judgment in Comitato Venezia vuole vivere and Others v Commission, C‑71/09 P, C‑73/09 P and C‑76/09 P, EU:C:2011:368, paragraph 153 and the case-law cited). However, such distortion must be obvious from the documents on the Court’s file, without there being any need to carry out a new assessment of the facts and the evidence (judgment in General Motors v Commission, C‑551/03 P, EU:C:2006:229, paragraph 54). Moreover, where an appellant alleges distortion of the evidence by the General Court, he must indicate precisely the evidence alleged to have been distorted by that Court and show the errors of appraisal which, in his view, led to that distortion (see, to that effect, Aalborg Portland and Others v Commission, C‑204/00 P, C‑205/00 P, C‑211/00 P, C‑213/00 P, C‑217/00 P and C‑219/00 P, EU:C:2004:6, paragraph 50, and PepsiCo v Grupo Promer Mon Graphic, C‑281/10 P, EU:C:2011:679, paragraph 78).
The Court finds that the arguments directed against paragraphs 40, 63 and 72 of the judgment under appeal are based on a clear misreading of that judgment. As regards paragraphs 40 and 72, there are no grounds for maintaining that the General Court misconstrued the originating application by proceeding on the basis that the Italian Republic was not challenging any of the irregularities identified in a sample of first- and second-level checks which was audited in January 2009 or that it was challenging only some of them. On the contrary, it is clear from paragraphs 60 to 64 of the judgment under appeal that the General Court did indeed take account of the fact that the Italian Republic was challenging all those irregularities.
Contrary to the Italian Republic’s assertion, it cannot be inferred from paragraph 63 of the judgment under appeal that, according to the General Court, the decision at issue is not founded on those irregularities. The General Court in fact expressly stated in paragraph 63 of that judgment, read in conjunction with paragraph 58 thereof, that the specific irregularities identified by the EU auditors in January 2009 formed ‘one of the complaints’ made in respect of the functioning of the management and control system established for the Puglia ROP programme.
As regards the findings made in paragraphs 73 and 74, 84 to 86 and 88 to 93 of the judgment under appeal, it must be stated that the Italian Republic has not established in what respect the findings of the General Court amount to a distortion of the clear sense of the documents to which the Italian Republic refers.
Consequently, all the arguments alleging distortion of the facts and evidence must be rejected as in part inadmissible and in part unfounded.
That being so, the Court must also reject the arguments alleging infringement of Article 39 of Regulation No 1260/1999, Articles 9 and 10 of Regulation No 438/2001 and the principles of proportionality and partnership, which the Italian Republic has based on the allegations of distortion advanced in respect of paragraphs 40, 63, 72 to 74 and 88 to 93 of the judgment under appeal.
Accordingly, the first part of the second ground of appeal and the first and third parts of the third ground of appeal must be rejected as in part inadmissible and in part unfounded.
– Substance of the second part of the third ground of appeal
By the second part of the third ground of appeal, the Italian Republic complains that the General Court, in paragraph 76 of the judgment under appeal, misinterpreted Article 10 of Regulation No 438/2001 in holding that, in order to dispel the doubts regarding the reliability of the management and control system in question, it was not sufficient to establish that the rate of checking provided for by Article 10 would be reached by the time the ERDF assistance for the Puglia ROP programme was wound up.
In that regard, it is sufficient to note that it is clear from the very wording of Article 10(2) of Regulation No 438/2001 — which provides that Member States are to seek to spread the implementation of the checks to be carried out before the winding-up of each assistance evenly over the period concerned — that the second-level checks must be operational throughout the whole period of the assistance concerned and not only at the time of its winding-up.
The second part of the third ground of appeal must therefore be rejected as unfounded.
– Substance of the second part of the second ground of appeal
By the second part of the second ground of appeal, the Italian Republic takes issue with the findings in paragraphs 60 to 63 of the judgment under appeal. It argues that, since the decision at issue was founded also on the irregularities identified by the EU auditors in a sample of first-level checks which was audited in January 2009, the General Court could not rule on the legality of that decision — from the point of view of Article 39(2) and (3) of Regulation No 1260/1999 and the principle of proportionality — without having examined the arguments whereby the Italian Republic disputed the existence of those irregularities. It adds that, in paragraphs 78 to 81 of the judgment under appeal, the General Court itself took those irregularities into account for the purpose of finding that the first-level checks could not be relied on.
In that regard, reference should be made to the settled case-law concerning the European Agricultural Guidance and Guarantee Fund (EAGGF), according to which, since the Member State concerned is best placed to collect and verify the data required for the clearance of EAGGF accounts, the Commission, for the purpose of proving an infringement of the rules on the common organisation of the agricultural markets, is not required to show exhaustively that the checks carried out by the national authorities were inadequate or that the figures they have transmitted are irregular, but must rather produce evidence of its serious and reasonable doubt regarding such checks or figures (see, to that effect, judgments in Greece v Commission, C‑300/02, EU:C:2005:103, paragraphs 34 and 36 and the case-law cited, and Denmark v Commission, C‑417/12 P, EU:C:2014:2288, paragraphs 80 and 81).
The Member State, for its part, cannot rebut the findings that underpin such evidence of the Commission’s serious and reasonable doubt unless it substantiates its own assertions with evidence of a reliable and operational supervisory system. If it is not able to show that the Commission’s findings are inaccurate, the latter amount to evidence liable to give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and inspection procedures (see judgment in Denmark v Commission, C‑417/12 P, EU:C:2014:2288, paragraph 82 and the case-law cited).
Consequently, it is for the Member State concerned to adduce the most detailed and comprehensive evidence that its checks have been carried out and its figures are accurate and, as the case may be, that the Commission’s assertions are incorrect (judgments in Greece v Commission, C‑300/02, EU:C:2005:103, paragraph 36 and the case-law cited, and Denmark v Commission, C‑417/12 P, EU:C:2014:2288, paragraph 83).
The principles stemming from that line of authority also apply mutatis mutandis so far as the ERDF is concerned, a point which was not disputed by the Italian Republic at the hearing before the Court of Justice. In view of the structure of the management and control systems established in Article 38(1) of Regulation No 1260/1999, under which the Member States are to take responsibility in the first instance for the financial control of ERDF assistance, the Member States are in fact best placed to collect and verify the data relating to that assistance.
In the present case, the Italian Republic objects to the fact that the General Court did not take into consideration the matters which it advanced to dispute the existence of the irregularities identified by the EU auditors in a sample of first- and second-level checks which was audited in January 2009. In that regard, it should be noted that, according to the findings made by the General Court and set out in paragraph 63 of the judgment under appeal, those specific irregularities represented only one of the complaints made with regard to the functioning of the management and control system established for the Puglia ROP programme and the decision at issue was also based on ‘other failings’ in that system which were liable to give rise to serious and reasonable doubts as to whether that system was reliable and rational.
It follows from the examination of the first part of the second ground of appeal and the first to third parts of the third ground of appeal, which reached the conclusions set out in paragraphs 58 and 61 of the present judgment, that the General Court did not err in law in rejecting all the arguments deployed by the Italian Republic to challenge the findings underpinning those other shortcomings in the management and control system established for the Puglia ROP programme, which resulted from delays in carrying out the first-level checks, from the fact that the proposed corrections could not be relied on and from the fact that the paying authority was not functioning properly.
Thus, the General Court did not depart from the case-law referred to in paragraphs 63 to 65 of the present judgment when it held, in paragraph 63 of the judgment under appeal, that it was not necessary to rule on the existence (denied by the Italian authorities) of the specific irregularities identified by the EU auditors in January 2009.
It should be added that, in its appeal, the Italian Republic does not object to paragraphs 109 to 118 of the judgment under appeal, in which the General Court concluded that the flat-rate correction applied was proportionate, basing its conclusion on the shortcomings of the management and control system that were related to delays in carrying out the checks, the fact that the proposed corrections could not be relied on and the fact that the paying authority was not functioning properly, all of which were liable to give rise to serious and reasonable doubts as to whether that system was reliable and rational.
As regards the complaint that, in paragraphs 78 to 81 of the judgment under appeal, the General Court itself took into account the specific irregularities identified in a sample of first-level checks that was audited in January 2009, it should be noted that the considerations set out in those paragraphs do not concern those specific irregularities but rather the doubts relating to the approach taken by the Italian authorities with regard to financial corrections.
Thus, the General Court cannot be criticised for taking into account, in paragraphs 78 to 81 of the judgment under appeal, the findings made by the Commission concerning the reliability of the financial corrections proposed by the Italian authorities, after concluding, in paragraphs 60 to 63 of that judgment, that there was no need to rule on whether the irregularities identified by the EU auditors in an audited sample in January 2009 actually existed.
The second part of the second ground of appeal must therefore be rejected as unfounded.
– Substance of the third part of the second ground of appeal
By the third part of its second ground of appeal, the Italian Republic challenges the finding in paragraph 60 of the judgment under appeal on the ground that it is contrary to the principles of proportionality and partnership, entrenched in Article 39 of Regulation No 1260/1999, to impose a flat-rate correction of 10% when the Italian authorities had proposed flat-rate corrections of 25% in respect of irregularities relating to awards of additional works or of engineering services, which had been identified by the EU auditors in January 2009.
In that regard, the Court notes that those corrections proposed by the Italian authorities concern only some of the specific irregularities identified by the EU auditors in January 2009. As is clear from paragraph 69 of the present judgment, the General Court did not make an error of law in holding that the alleged non-existence of those specific irregularities did not affect the legality of the decision at issue. That being so, the General Court did not infringe the principles mentioned in the previous paragraph when, in paragraphs 60 and 62 of the judgment under appeal, it found that the arguments concerning those corrections — corrections which had been taken into account by the Commission in the calculation of the final amount of the reduction in the ERDF assistance — were ineffective for the purposes of the claim for annulment of the decision at issue.
The third part of the second ground of appeal must therefore be rejected as unfounded.
It follows from all the above considerations that the appeal must be dismissed in its entirety as in part inadmissible and in part unfounded.
Costs
Under Article 138(1) of the Rules of Procedure of the Court of Justice, which applies to appeal proceedings by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Italian Republic has been unsuccessful in its submissions, the latter must be ordered to pay the costs.
On those grounds, the Court (Fifth Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders the Italian Republic to pay the costs.
[Signatures]
( * ) Language of the case: Italian. |
JUDGMENT OF THE COURT (Fifth Chamber)
21 January 2016 ( *1 )
‛Reference for a preliminary ruling — Customs union — Community Customs Code — Article 29(1)(d) — Determination of the customs value — Regulation (EEC) No 2454/93 — Article 143(1)(h) — Definition of ‘related persons’ for the purposes of determining the customs value — Kinship relationship between the buyer, a natural person, and the director of the company which sold the goods’
In Case C‑430/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Augstākā tiesa (Supreme Court, Latvia), made by decision of 12 September 2014, received at the Court on 19 September 2014, in the proceedings
Valsts ieņēmumu dienests
v
Artūrs Stretinskis,
THE COURT (Fifth Chamber),
composed of J.L. da Cruz Vilaça, President of the Chamber, F. Biltgen, A. Borg Barthet (Rapporteur), E. Levits and M. Berger, Judges,
Advocate General: P. Mengozzi,
Registrar: A. Calot Escobar,
after considering the observations submitted on behalf of:
—
the Latvian Government, by I. Kalniņš and I. Ņesterova, acting as Agents,
—
the European Commission, by A. Sauka and L. Grønfeldt, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 15 October 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 143(1)(h) of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code (OJ 1993 L 253, p. 1), as amended by Commission Regulation (EC) No 46/1999 of 8 January 1999 (OJ 1999 L 10, p. 1) (‘Regulation No 2454/93’).
The request has been made in proceedings between the Valsts ieņēmumu dienests (national revenue authority) and Mr Stretinskis concerning the determination of the customs value of goods imported from the United States of America for release for free circulation in the territory of the European Union.
Legal context
The Customs Code
Title II of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), as amended by Regulation (EC) No 82/97 of the European Parliament and of the Council of 19 December 1996 (OJ 1997 L 17, p. 1) (‘the Customs Code’), includes Chapter 3 entitled ‘Value of goods for customs purposes’, consisting of Articles 28 to 36 of that Code.
Under Article 29(1) and (2) of the Customs Code:
‘1. The customs value of imported goods shall be the transaction value, that is, the price actually paid or payable for the goods when sold for export to the customs territory of the Community, adjusted, where necessary, in accordance with Articles 32 and 33, provided:
…
(d)
that the buyer and seller are not related, or, where the buyer and seller are related, that the transaction value is acceptable for customs purposes under paragraph 2.
(a)
In determining whether the transaction value is acceptable for the purposes of paragraph 1, the fact that the buyer and the seller are related shall not in itself be sufficient grounds for regarding the transaction value as unacceptable. Where necessary, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted provided that the relationship did not influence the price. If, in the light of information provided by the declarant or otherwise, the customs authorities have grounds for considering that the relationship influenced the price, they shall communicate their grounds to the declarant and he shall be given a reasonable opportunity to respond. If the declarant so requests, the communication of the grounds shall be in writing.
(b)
In a sale between related persons, the transaction value shall be accepted and the goods valued in accordance with paragraph 1 wherever the declarant demonstrates that such value closely approximates to one of the following occurring at or about the same time:
(i)
the transaction value in sales, between buyers and sellers who are not related in any particular case, of identical or similar goods for export to the Community;
(ii)
the customs value of identical or similar goods, as determined under Article 30(2)(c);
(iii)
the customs value of identical or similar goods, as determined under Article 30(2)(d).
In applying the foregoing tests, due account shall be taken of demonstrated differences in commercial levels, quantity levels, the elements enumerated in Article 32 and costs incurred by the seller in sales in which he and the buyer are not related and where such costs are not incurred by the seller in sales in which he and the buyer are related.
(c)
The tests set forth in subparagraph (b) are to be used at the initiative of the declarant and only for comparison purposes. Substitute values may not be established under the said subparagraph.’
Article 30 of that code provides:
‘1. Where the customs value cannot be determined under Article 29, it is to be determined by proceeding sequentially through subparagraphs (a), (b), (c) and (d) of paragraph 2 to the first subparagraph under which it can be determined …
2. The customs value as determined under this Article shall be:
(a)
the transaction value of identical goods sold for export to the Community and exported at or about the same time as the goods being valued;
(b)
the transaction value of similar goods sold for export to the Community and exported at or about the same time as the goods being valued;
(c)
the value based on the unit price at which the imported goods for identical or similar imported goods are sold within the Community in the greatest aggregate quantity to persons not related to the sellers;
(d)
the computed value, consisting of the sum of:
—
the cost or value of materials and fabrication or other processing employed in producing the imported goods;
—
an amount for profit and general expenses equal to that usually reflected in sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to the Community,
—
the cost or value of the items referred to in Article 32 (1) (e).
…’
Article 31 of that code provides:
‘1. Where the customs value of imported goods cannot be determined under Articles 29 or 30, it shall be determined, on the basis of data available in the Community, using reasonable means consistent with the principles and general provisions of:
—
the agreement on implementation of Article VII of the General Agreement on Tariffs and Trade of 1994,
—
Article VII of the General Agreement on Tariffs and Trade of 1994,
and
—
the provisions of this chapter.
…’
Regulation No 2454/93
Article 143(1) of Regulation No 2454/93 provides:
‘For the purposes of Title II, Chapter 3 of the [Customs] Code and of this Title, persons shall be deemed to be related only if:
(a)
they are officers or directors of one another’s businesses;
(b)
they are legally recognised partners in business;
(c)
they are employer and employee;
(d)
any person directly or indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares of both of them;
(e)
one of them directly or indirectly controls the other;
(f)
both of them are directly or indirectly controlled by a third person;
(g)
together they directly or indirectly control a third person; or
(h)
they are members of the same family. Persons shall be deemed to be members of the same family only if they stand in any of the following relationships to one another:
…
—
brother and sister (whether by whole or half blood) ...
…’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Between 2008 and 2010, Mr Stretinskis imported from the United States second-hand clothing for release for free circulation in the territory of the European Union. In the single administrative documents which he completed for this purpose, Mr Stretinskis calculated the customs value of those goods in accordance with the transaction value method, relying on the total cost of the goods as it appeared on the invoices of Latcars LLC and Dexter Plus LLC (referred to jointly as ‘the companies which sold the goods’) and the cost of transporting the goods by sea.
After examining the documents submitted by Mr Stretinskis and carrying out an inspection at his business premises, the national revenue authority expressed doubts as to the accuracy of the values declared, on the ground, in particular, that the director of the companies which sold the goods was Mr Stretinskis’ brother. Taking the view that they are related persons for the purposes of Article 143(1)(h) of Regulation No 2454/93, the national revenue authority, by a decision of 22 July 2010, recalculated the customs value of the goods on the basis of Article 31 of the Customs Code.
Mr Stretinskis brought an action for the annulment of that decision before the administrative court with jurisdiction at first instance. That action was dismissed by that court.
Hearing the case on appeal, the administrative court with jurisdiction upheld Mr Stretinskis’ action. That court held, in particular, that the national revenue authority’s doubts as to the accuracy of the declared customs values of the goods concerned were not sufficiently substantiated, as the existence of a kinship relationship, for the purposes of Article 143(1)(h) of Regulation No 2453/93, could be recognised, in circumstances such as those in the dispute in the main proceedings, only if Mr Stretinskis’ brother was the owner of the companies which sold the goods, which that authority failed to determine.
That authority lodged an appeal on a point of law against that judgment, claiming, in particular, that the administrative court with jurisdiction to hear the appeal ought to have taken the view that Mr Stretinskis and the director of the companies which sold the goods were related persons, for the purposes of Article 143(1)(h) of Regulation No 2453/93.
Taking the view that the resolution of the case in the main proceedings depends on the interpretation of EU law, the Augstākā tiesa (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Must Article 143(1)(h) of Regulation No 2454/93 be interpreted as referring not only to situations in which the parties to the transaction are exclusively natural persons, but also to situations in which there is a family or kinship relationship between a director of one of the parties (a legal person) and the other party to the transaction (a natural person) or a director of that party (in the case of a legal person)?
(2)
If the answer is affirmative, must the judicial body hearing the matter carry out an in-depth examination of the circumstances of the case in relation to the actual influence of the natural person concerned over the legal person?’
Consideration of the questions referred
By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 143(1)(h) of Regulation No 2454/93 must be interpreted as meaning that a buyer, who is a natural person, and a seller, which is a legal person whose director is the brother of that buyer, must be regarded as being related persons, within the meaning of Article 29(1)(d) of the Customs Code.
The Court points out, at the outset, that, under Article 29(1) of that code, the customs value of imported goods is, in principle, to be made up of their transaction value, that is, the price actually paid or payable for them when sold for export to the customs territory of the European Union.
However, it follows from Article 29(1)(d) and (2) of that code that, where the buyer and seller are related, the transaction value is to be accepted only provided that the relationship did not influence the sale price.
In that regard, Article 143(1) of Regulation No 2454/93 lists, restrictively, the types of cases in which it is appropriate to consider that persons are related for the purposes of the application of Article 29 of the Customs Code.
In particular, under Article 143(1)(h) of Regulation No 2454/93, persons who are members of the same family are deemed to be related. Under that provision, which is also worded restrictively, persons are deemed to be members of the same family ‘only if they stand in [one] … of the … relationships [listed].’ Amongst those is the relationship between brother and sister.
Admittedly, it follows from the wording of Article 143(1)(h) of Regulation No 2454/93 that the relationships covered by that provision link natural persons, whereas, in the case in the main proceedings, the seller of the goods concerned is a legal person.
The Court notes, however, that Article 143(1)(h) of Regulation No 2454/93 is an implementing provision of Title II, Chapter 3 of the Customs Code, entitled ‘Value of the goods for customs purposes’, which includes Article 29 of that code.
Consequently, Article 143(1)(h) of Regulation No 2454/93 must be interpreted as taking account of the general scheme of those provisions and the objective pursued by them.
In that regard, it should be borne in mind that, according to settled case-law of the Court, the objective of the EU legislation on customs valuation is to introduce a fair, uniform and neutral system excluding the use of arbitrary or fictitious customs values (judgment in Christodoulou and Others, C‑116/12, EU:C:2013:825, paragraph 36 and the case-law cited).
It should also be noted that, in accordance with Article 29 of the Customs Code, the customs value of imported goods is, in principle, to be made up of their transaction value, Article 29(1)(d) and (2) have the objective of ensuring that the customs value reflects the real economic value of imported goods and is not determined arbitrarily or fictitiously (see, to that effect, judgments in Mitsui & Co. Deutschland, C‑256/07, EU:C:2009:167, paragraph 20, and Christodoulou and Others, C‑116/12, EU:C:2013:825, paragraphs 39 and 40). To that end, customs authorities are entitled to examine the price indicated by the person making the declaration and to reject it if they consider that the latter has been influenced by the relationships which exist between the parties to the transaction (judgment in Carboni e derivati, C‑263/06, EU:C:2008:128, paragraph 37).
In that respect, Article 143(1) of Regulation No 2454/93 lists, in accordance with Article 29(2)(a) of the Customs Code, situations in which the sales price of the goods concerned is capable of being influenced by the relationships existing between the parties to the transaction.
Under Article 143(1)(h) of that regulation, that is the case, in particular, where those parties are members of the same family.
The likelihood of persons in a kinship relationship being able to influence the sales prices of imported goods similarly exists where the seller is a legal person within which the buyer’s kin has the power to influence the sales price for the buyer’s benefit.
In those circumstances, and having regard to the objectives pursued by the EU legislation on customs valuation, as set out in paragraphs 22 and 23 of the present judgment, to rule out, from the outset, that a buyer and a seller may be regarded as being related persons, within the meaning of Article 143(1)(h) of Regulation No 2454/93, on the ground that one of the parties to the sales contract is a legal person, would undermine the effectiveness of Article 29(1)(d) of the Customs Code. In that case, the revenue authorities would be denied the possibility of examining, pursuant to Article 29(2)(a) of the Customs Code, the circumstances specific to the sale concerned, even though there are reasons for supposing that the transaction value of the imported goods may have been influenced by a kinship relationship between the buyer and a member of the legal person which sold the goods.
Accordingly, it is appropriate to consider that, where, in circumstances such as those in the case in the main proceedings, a natural person, acting within a legal person, has the power to influence the sales price of imported goods for the benefit of a buyer to whom he is related, the capacity of the seller as a legal person does not prevent the buyer and seller of those goods from being regarded as being related, within the meaning of Article 29(1)(d) of the Customs Code.
For the purposes of assessing whether the buyer’s kin has such power over the legal person which sold the goods, the functions carried out by him within that legal person, or, as the case may be, the fact that he is the sole person to carry out an activity within that legal person are relevant factors which the revenue authorities must take into account.
It is therefore for the competent revenue authorities, in accordance with Article 29(2)(a) of the Customs Code, to examine, if necessary, the specific circumstances of the sale concerned and to accept the transaction value provided that relationships, such as those at issue in the main proceedings, have not influenced the sales price of the imported goods.
Having regard to all of the foregoing considerations, the answer to the questions referred is that Article 143(1)(h) of Regulation No 2454/93 must be interpreted as meaning that a buyer, who is a natural person, and a seller, which is a legal person, within which a kin of that buyer actually has the power to influence the sales price of goods for the benefit of that buyer, must be regarded as being related persons within the meaning of Article 29(1)(d) of the Customs Code.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
Article 143(1)(h) of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code, as amended by Commission Regulation (EC) No 46/1999 of 8 January 1999, must be interpreted as meaning that a buyer, who is a natural person, and a seller, which is a legal person, within which a kin of that buyer actually has the power to influence the sales price of goods for the benefit of that buyer, must be regarded as being related persons within the meaning of Article 29(1)(d) of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 82/97 of the European Parliament and of the Council of 19 December 1996.
[Signatures]
( *1 ) Language of the case: Latvian. |
JUDGMENT OF THE COURT (Grand Chamber)
6 October 2015 ( * )
‛Reference for a preliminary ruling — Personal data — Protection of individuals with regard to the processing of such data — Charter of Fundamental Rights of the European Union — Articles 7, 8 and 47 — Directive 95/46/EC — Articles 25 and 28 — Transfer of personal data to third countries — Decision 2000/520/EC — Transfer of personal data to the United States — Inadequate level of protection — Validity — Complaint by an individual whose data has been transferred from the European Union to the United States — Powers of the national supervisory authorities’
In Case C‑362/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the High Court (Ireland), made by decision of 17 July 2014, received at the Court on 25 July 2014, in the proceedings
Maximillian Schrems
v
Data Protection Commissioner,
joined party:
Digital Rights Ireland Ltd,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts, Vice-President, A. Tizzano, R. Silva de Lapuerta, T. von Danwitz (Rapporteur), S. Rodin and K. Jürimäe, Presidents of Chambers, A. Rosas, E. Juhász, A. Borg Barthet, J. Malenovský, D. Šváby, M. Berger, F. Biltgen and C. Lycourgos, Judges,
Advocate General: Y. Bot,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 24 March 2015,
after considering the observations submitted on behalf of:
—
Mr Schrems, by N. Travers, Senior Counsel, P. O’Shea, Barrister-at-Law, G. Rudden, Solicitor, and H. Hofmann, Rechtsanwalt,
—
the Data Protection Commissioner, by P. McDermott, Barrister-at-Law, S. More O’Ferrall and D. Young, Solicitors,
—
Digital Rights Ireland Ltd, by F. Crehan, Barrister-at-Law, and S. McGarr and E. McGarr, Solicitors,
—
Ireland, by A. Joyce, B. Counihan and E. Creedon, acting as Agents, and D. Fennelly, Barrister-at-Law,
—
the Belgian Government, by J.-C. Halleux and C. Pochet, acting as Agents,
—
the Czech Government, by M. Smolek and J. Vláčil, acting as Agents,
—
the Italian Government, by G. Palmieri, acting as Agent, and P. Gentili, avvocato dello Stato,
—
the Austrian Government, by G. Hesse and G. Kunnert, acting as Agents,
—
the Polish Government, by M. Kamejsza, M. Pawlicka and B. Majczyna, acting as Agents,
—
the Slovenian Government, by A. Grum and V. Klemenc, acting as Agents,
—
the United Kingdom Government, by L. Christie and J. Beeko, acting as Agents, and J. Holmes, Barrister,
—
the European Parliament, by D. Moore, A. Caiola and M. Pencheva, acting as Agents,
—
the European Commission, by B. Schima, B. Martenczuk, B. Smulders and J. Vondung, acting as Agents,
—
the European Data Protection Supervisor (EDPS), by C. Docksey, A. Buchta and V. Pérez Asinari, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 23 September 2015,
gives the following
Judgment
This request for a preliminary ruling relates to the interpretation, in the light of Articles 7, 8 and 47 of the Charter of Fundamental Rights of the European Union (‘the Charter’), of Articles 25(6) and 28 of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ 1995 L 281, p. 31), as amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003 (OJ 2003 L 284, p. 1) (‘Directive 95/46’), and, in essence, to the validity of Commission Decision 2000/520/EC of 26 July 2000 pursuant to Directive 95/46 on the adequacy of the protection provided by the safe harbour privacy principles and related frequently asked questions issued by the US Department of Commerce (OJ 2000 L 215, p. 7).
The request has been made in proceedings between Mr Schrems and the Data Protection Commissioner (‘the Commissioner’) concerning the latter’s refusal to investigate a complaint made by Mr Schrems regarding the fact that Facebook Ireland Ltd (‘Facebook Ireland’) transfers the personal data of its users to the United States of America and keeps it on servers located in that country.
Legal context
Directive 95/46
Recitals 2, 10, 56, 57, 60, 62 and 63 in the preamble to Directive 95/46 are worded as follows:
‘(2)
... data-processing systems are designed to serve man; … they must, whatever the nationality or residence of natural persons, respect their fundamental rights and freedoms, notably the right to privacy, and contribute to … the well-being of individuals;
…
(10)
… the object of the national laws on the processing of personal data is to protect fundamental rights and freedoms, notably the right to privacy, which is recognised both in Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms[, signed in Rome on 4 November 1950,] and in the general principles of Community law; …, for that reason, the approximation of those laws must not result in any lessening of the protection they afford but must, on the contrary, seek to ensure a high level of protection in the Community;
…
(56)
… cross-border flows of personal data are necessary to the expansion of international trade; … the protection of individuals guaranteed in the Community by this Directive does not stand in the way of transfers of personal data to third countries which ensure an adequate level of protection; … the adequacy of the level of protection afforded by a third country must be assessed in the light of all the circumstances surrounding the transfer operation or set of transfer operations;
(57)
… on the other hand, the transfer of personal data to a third country which does not ensure an adequate level of protection must be prohibited;
…
(60)
… in any event, transfers to third countries may be effected only in full compliance with the provisions adopted by the Member States pursuant to this Directive, and in particular Article 8 thereof;
…
(62)
… the establishment in Member States of supervisory authorities, exercising their functions with complete independence, is an essential component of the protection of individuals with regard to the processing of personal data;
(63)
… such authorities must have the necessary means to perform their duties, including powers of investigation and intervention, particularly in cases of complaints from individuals, and powers to engage in legal proceedings; ...’
Articles 1, 2, 25, 26, 28 and 31 of Directive 95/46 provide:
‘Article 1
Object of the Directive
1. In accordance with this Directive, Member States shall protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data.
...
Article 2
Definitions
For the purposes of this Directive:
(a)
“personal data” shall mean any information relating to an identified or identifiable natural person (“data subject”); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity;
(b)
“processing of personal data” (“processing”) shall mean any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organisation, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction;
...
(d)
“controller” shall mean the natural or legal person, public authority, agency or any other body which alone or jointly with others determines the purposes and means of the processing of personal data; where the purposes and means of processing are determined by national or Community laws or regulations, the controller or the specific criteria for his nomination may be designated by national or Community law;
...
Article 25
Principles
1. The Member States shall provide that the transfer to a third country of personal data which are undergoing processing or are intended for processing after transfer may take place only if, without prejudice to compliance with the national provisions adopted pursuant to the other provisions of this Directive, the third country in question ensures an adequate level of protection.
2. The adequacy of the level of protection afforded by a third country shall be assessed in the light of all the circumstances surrounding a data transfer operation or set of data transfer operations; particular consideration shall be given to the nature of the data, the purpose and duration of the proposed processing operation or operations, the country of origin and country of final destination, the rules of law, both general and sectoral, in force in the third country in question and the professional rules and security measures which are complied with in that country.
3. The Member States and the Commission shall inform each other of cases where they consider that a third country does not ensure an adequate level of protection within the meaning of paragraph 2.
4. Where the Commission finds, under the procedure provided for in Article 31(2), that a third country does not ensure an adequate level of protection within the meaning of paragraph 2 of this Article, Member States shall take the measures necessary to prevent any transfer of data of the same type to the third country in question.
5. At the appropriate time, the Commission shall enter into negotiations with a view to remedying the situation resulting from the finding made pursuant to paragraph 4.
6. The Commission may find, in accordance with the procedure referred to in Article 31(2), that a third country ensures an adequate level of protection within the meaning of paragraph 2 of this Article, by reason of its domestic law or of the international commitments it has entered into, particularly upon conclusion of the negotiations referred to in paragraph 5, for the protection of the private lives and basic freedoms and rights of individuals.
Member States shall take the measures necessary to comply with the Commission’s decision.
Article 26
Derogations
1. By way of derogation from Article 25 and save where otherwise provided by domestic law governing particular cases, Member States shall provide that a transfer or a set of transfers of personal data to a third country which does not ensure an adequate level of protection within the meaning of Article 25(2) may take place on condition that:
(a)
the data subject has given his consent unambiguously to the proposed transfer; or
(b)
the transfer is necessary for the performance of a contract between the data subject and the controller or the implementation of precontractual measures taken in response to the data subject’s request; or
(c)
the transfer is necessary for the conclusion or performance of a contract concluded in the interest of the data subject between the controller and a third party; or
(d)
the transfer is necessary or legally required on important public interest grounds, or for the establishment, exercise or defence of legal claims; or
(e)
the transfer is necessary in order to protect the vital interests of the data subject; or
(f)
the transfer is made from a register which according to laws or regulations is intended to provide information to the public and which is open to consultation either by the public in general or by any person who can demonstrate legitimate interest, to the extent that the conditions laid down in law for consultation are fulfilled in the particular case.
2. Without prejudice to paragraph 1, a Member State may authorise a transfer or a set of transfers of personal data to a third country which does not ensure an adequate level of protection within the meaning of Article 25(2), where the controller adduces adequate safeguards with respect to the protection of the privacy and fundamental rights and freedoms of individuals and as regards the exercise of the corresponding rights; such safeguards may in particular result from appropriate contractual clauses.
3. The Member State shall inform the Commission and the other Member States of the authorisations it grants pursuant to paragraph 2.
If a Member State or the Commission objects on justified grounds involving the protection of the privacy and fundamental rights and freedoms of individuals, the Commission shall take appropriate measures in accordance with the procedure laid down in Article 31(2).
Member States shall take the necessary measures to comply with the Commission’s decision.
...
Article 28
Supervisory authority
1. Each Member State shall provide that one or more public authorities are responsible for monitoring the application within its territory of the provisions adopted by the Member States pursuant to this Directive.
These authorities shall act with complete independence in exercising the functions entrusted to them.
2. Each Member State shall provide that the supervisory authorities are consulted when drawing up administrative measures or regulations relating to the protection of individuals’ rights and freedoms with regard to the processing of personal data.
3. Each authority shall in particular be endowed with:
—
investigative powers, such as powers of access to data forming the subject-matter of processing operations and powers to collect all the information necessary for the performance of its supervisory duties,
—
effective powers of intervention, such as, for example, that of delivering opinions before processing operations are carried out, in accordance with Article 20, and ensuring appropriate publication of such opinions, of ordering the blocking, erasure or destruction of data, of imposing a temporary or definitive ban on processing, of warning or admonishing the controller, or that of referring the matter to national parliaments or other political institutions,
—
the power to engage in legal proceedings where the national provisions adopted pursuant to this Directive have been violated or to bring these violations to the attention of the judicial authorities.
Decisions by the supervisory authority which give rise to complaints may be appealed against through the courts.
4. Each supervisory authority shall hear claims lodged by any person, or by an association representing that person, concerning the protection of his rights and freedoms in regard to the processing of personal data. The person concerned shall be informed of the outcome of the claim.
Each supervisory authority shall, in particular, hear claims for checks on the lawfulness of data processing lodged by any person when the national provisions adopted pursuant to Article 13 of this Directive apply. The person shall at any rate be informed that a check has taken place.
...
6. Each supervisory authority is competent, whatever the national law applicable to the processing in question, to exercise, on the territory of its own Member State, the powers conferred on it in accordance with paragraph 3. Each authority may be requested to exercise its powers by an authority of another Member State.
...
Article 31
...
2. Where reference is made to this Article, Articles 4 and 7 of [Council] Decision 1999/468/EC [of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (OJ 1999 L 184, p. 23)] shall apply, having regard to the provisions of Article 8 thereof.
...’
Decision 2000/520
Decision 2000/520 was adopted by the Commission on the basis of Article 25(6) of Directive 95/46.
Recitals 2, 5 and 8 in the preamble to that decision are worded as follows:
‘(2)
The Commission may find that a third country ensures an adequate level of protection. In that case personal data may be transferred from the Member States without additional guarantees being necessary.
…
(5)
The adequate level of protection for the transfer of data from the Community to the United States recognised by this Decision, should be attained if organisations comply with the safe harbour privacy principles for the protection of personal data transferred from a Member State to the United States (hereinafter “the Principles”) and the frequently asked questions (hereinafter “the FAQs”) providing guidance for the implementation of the Principles issued by the Government of the United States on 21 July 2000. Furthermore the organisations should publicly disclose their privacy policies and be subject to the jurisdiction of the Federal Trade Commission (FTC) under Section 5 of the Federal Trade Commission Act which prohibits unfair or deceptive acts or practices in or affecting commerce, or that of another statutory body that will effectively ensure compliance with the Principles implemented in accordance with the FAQs.
…
(8)
In the interests of transparency and in order to safeguard the ability of the competent authorities in the Member States to ensure the protection of individuals as regards the processing of their personal data, it is necessary to specify in this Decision the exceptional circumstances in which the suspension of specific data flows should be justified, notwithstanding the finding of adequate protection.’
Articles 1 to 4 of Decision 2000/520 provide:
‘Article 1
1. For the purposes of Article 25(2) of Directive 95/46/EC, for all the activities falling within the scope of that Directive, the “Safe Harbour Privacy Principles” (hereinafter “the Principles”), as set out in Annex I to this Decision, implemented in accordance with the guidance provided by the frequently asked questions (hereinafter “the FAQs”) issued by the US Department of Commerce on 21 July 2000 as set out in Annex II to this Decision are considered to ensure an adequate level of protection for personal data transferred from the Community to organisations established in the United States, having regard to the following documents issued by the US Department of Commerce:
(a)
the safe harbour enforcement overview set out in Annex III;
(b)
a memorandum on damages for breaches of privacy and explicit authorisations in US law set out in Annex IV;
(c)
a letter from the Federal Trade Commission set out in Annex V;
(d)
a letter from the US Department of Transportation set out in Annex VI.
2. In relation to each transfer of data the following conditions shall be met:
(a)
the organisation receiving the data has unambiguously and publicly disclosed its commitment to comply with the Principles implemented in accordance with the FAQs; and
(b)
the organisation is subject to the statutory powers of a government body in the United States listed in Annex VII to this Decision which is empowered to investigate complaints and to obtain relief against unfair or deceptive practices as well as redress for individuals, irrespective of their country of residence or nationality, in case of non-compliance with the Principles implemented in accordance with the FAQs.
3. The conditions set out in paragraph 2 are considered to be met for each organisation that self-certifies its adherence to the Principles implemented in accordance with the FAQs from the date on which the organisation notifies to the US Department of Commerce (or its designee) the public disclosure of the commitment referred to in paragraph 2(a) and the identity of the government body referred to in paragraph 2(b).
Article 2
This Decision concerns only the adequacy of protection provided in the United States under the Principles implemented in accordance with the FAQs with a view to meeting the requirements of Article 25(1) of Directive 95/46/EC and does not affect the application of other provisions of that Directive that pertain to the processing of personal data within the Member States, in particular Article 4 thereof.
Article 3
1. Without prejudice to their powers to take action to ensure compliance with national provisions adopted pursuant to provisions other than Article 25 of Directive 95/46/EC, the competent authorities in Member States may exercise their existing powers to suspend data flows to an organisation that has self-certified its adherence to the Principles implemented in accordance with the FAQs in order to protect individuals with regard to the processing of their personal data in cases where:
(a)
the government body in the United States referred to in Annex VII to this Decision or an independent recourse mechanism within the meaning of letter (a) of the Enforcement Principle set out in Annex I to this Decision has determined that the organisation is violating the Principles implemented in accordance with the FAQs; or
(b)
there is a substantial likelihood that the Principles are being violated; there is a reasonable basis for believing that the enforcement mechanism concerned is not taking or will not take adequate and timely steps to settle the case at issue; the continuing transfer would create an imminent risk of grave harm to data subjects; and the competent authorities in the Member State have made reasonable efforts under the circumstances to provide the organisation with notice and an opportunity to respond.
The suspension shall cease as soon as compliance with the Principles implemented in accordance with the FAQs is assured and the competent authorities concerned in the Community are notified thereof.
2. Member States shall inform the Commission without delay when measures are adopted on the basis of paragraph 1.
3. The Member States and the Commission shall also inform each other of cases where the action of bodies responsible for ensuring compliance with the Principles implemented in accordance with the FAQs in the United States fails to secure such compliance.
4. If the information collected under paragraphs 1, 2 and 3 provides evidence that any body responsible for ensuring compliance with the Principles implemented in accordance with the FAQs in the United States is not effectively fulfilling its role, the Commission shall inform the US Department of Commerce and, if necessary, present draft measures in accordance with the procedure referred to in Article 31 of Directive 95/46/EC with a view to reversing or suspending the present Decision or limiting its scope.
Article 4
1. This Decision may be adapted at any time in the light of experience with its implementation and/or if the level of protection provided by the Principles and the FAQs is overtaken by the requirements of US legislation.
The Commission shall in any case evaluate the implementation of the present Decision on the basis of available information three years after its notification to the Member States and report any pertinent findings to the Committee established under Article 31 of Directive 95/46/EC, including any evidence that could affect the evaluation that the provisions set out in Article 1 of this Decision provide adequate protection within the meaning of Article 25 of Directive 95/46/EC and any evidence that the present Decision is being implemented in a discriminatory way.
2. The Commission shall, if necessary, present draft measures in accordance with the procedure referred to in Article 31 of Directive 95/46/EC.’
Annex I to Decision 2000/520 is worded as follows:
‘Safe Harbour Privacy Principles
issued by the US Department of Commerce on 21 July 2000
... the Department of Commerce is issuing this document and Frequently Asked Questions (“the Principles”) under its statutory authority to foster, promote, and develop international commerce. The Principles were developed in consultation with industry and the general public to facilitate trade and commerce between the United States and European Union. They are intended for use solely by US organisations receiving personal data from the European Union for the purpose of qualifying for the safe harbour and the presumption of “adequacy” it creates. Because the Principles were solely designed to serve this specific purpose, their adoption for other purposes may be inappropriate. …
Decisions by organisations to qualify for the safe harbour are entirely voluntary, and organisations may qualify for the safe harbour in different ways. ...
Adherence to these Principles may be limited: (a) to the extent necessary to meet national security, public interest, or law enforcement requirements; (b) by statute, government regulation, or case-law that create conflicting obligations or explicit authorisations, provided that, in exercising any such authorisation, an organisation can demonstrate that its non-compliance with the Principles is limited to the extent necessary to meet the overriding legitimate interests furthered by such authorisation; or (c) if the effect of the Directive [or] Member State law is to allow exceptions or derogations, provided such exceptions or derogations are applied in comparable contexts. Consistent with the goal of enhancing privacy protection, organisations should strive to implement these Principles fully and transparently, including indicating in their privacy policies where exceptions to the Principles permitted by (b) above will apply on a regular basis. For the same reason, where the option is allowable under the Principles and/or US law, organisations are expected to opt for the higher protection where possible.
...’
Annex II to Decision 2000/520 reads as follows:
‘Frequently Asked Questions (FAQs)
...
FAQ 6 — Self-Certification
Q:
How does an organisation self-certify that it adheres to the Safe Harbour Principles?
A:
Safe harbour benefits are assured from the date on which an organisation self-certifies to the Department of Commerce (or its designee) its adherence to the Principles in accordance with the guidance set forth below.
To self-certify for the safe harbour, organisations can provide to the Department of Commerce (or its designee) a letter, signed by a corporate officer on behalf of the organisation that is joining the safe harbour, that contains at least the following information:
1.
name of organisation, mailing address, e-mail address, telephone and fax numbers;
2.
description of the activities of the organisation with respect to personal information received from the [European Union]; and
3.
description of the organisation’s privacy policy for such personal information, including: (a) where the privacy policy is available for viewing by the public, (b) its effective date of implementation, (c) a contact office for the handling of complaints, access requests, and any other issues arising under the safe harbour, (d) the specific statutory body that has jurisdiction to hear any claims against the organisation regarding possible unfair or deceptive practices and violations of laws or regulations governing privacy (and that is listed in the annex to the Principles), (e) name of any privacy programmes in which the organisation is a member, (f) method of verification (e.g. in-house, third party) …, and (g) the independent recourse mechanism that is available to investigate unresolved complaints.
Where the organisation wishes its safe harbour benefits to cover human resources information transferred from the [European Union] for use in the context of the employment relationship, it may do so where there is a statutory body with jurisdiction to hear claims against the organisation arising out of human resources information that is listed in the annex to the Principles. ...
The Department (or its designee) will maintain a list of all organisations that file such letters, thereby assuring the availability of safe harbour benefits, and will update such list on the basis of annual letters and notifications received pursuant to FAQ 11. ...
...
FAQ 11 — Dispute Resolution and Enforcement
Q:
How should the dispute resolution requirements of the Enforcement Principle be implemented, and how will an organisation’s persistent failure to comply with the Principles be handled?
A:
The Enforcement Principle sets out the requirements for safe harbour enforcement. How to meet the requirements of point (b) of the Principle is set out in the FAQ on verification (FAQ 7). This FAQ 11 addresses points (a) and (c), both of which require independent recourse mechanisms. These mechanisms may take different forms, but they must meet the Enforcement Principle’s requirements. Organisations may satisfy the requirements through the following: (1) compliance with private sector developed privacy programmes that incorporate the Safe Harbour Principles into their rules and that include effective enforcement mechanisms of the type described in the Enforcement Principle; (2) compliance with legal or regulatory supervisory authorities that provide for handling of individual complaints and dispute resolution; or (3) commitment to cooperate with data protection authorities located in the European Union or their authorised representatives. This list is intended to be illustrative and not limiting. The private sector may design other mechanisms to provide enforcement, so long as they meet the requirements of the Enforcement Principle and the FAQs. Please note that the Enforcement Principle’s requirements are additional to the requirements set forth in paragraph 3 of the introduction to the Principles that self-regulatory efforts must be enforceable under Article 5 of the Federal Trade Commission Act or similar statute.
Recourse Mechanisms
Consumers should be encouraged to raise any complaints they may have with the relevant organisation before proceeding to independent recourse mechanisms. ...
...
FTC Action
The FTC has committed to reviewing on a priority basis referrals received from privacy self-regulatory organisations, such as BBBOnline and TRUSTe, and EU Member States alleging non-compliance with the Safe Harbour Principles to determine whether Section 5 of the FTC Act prohibiting unfair or deceptive acts or practices in commerce has been violated. ...
…’
Annex IV to Decision 2000/520 states:
‘Damages for Breaches of Privacy, Legal Authorisations and Mergers and Takeovers in US Law
This responds to the request by the European Commission for clarification of US law with respect to (a) claims for damages for breaches of privacy, (b) “explicit authorisations” in US law for the use of personal information in a manner inconsistent with the safe harbour principles, and (c) the effect of mergers and takeovers on obligations undertaken pursuant to the safe harbour principles.
...
B. Explicit Legal Authorisations
The safe harbour principles contain an exception where statute, regulation or case-law create “conflicting obligations or explicit authorisations, provided that, in exercising any such authorisation, an organisation can demonstrate that its non-compliance with the principles is limited to the extent necessary to meet the overriding legitimate interests further[ed] by such authorisation”. Clearly, where US law imposes a conflicting obligation, US organisations whether in the safe harbour or not must comply with the law. As for explicit authorisations, while the safe harbour principles are intended to bridge the differences between the US and European regimes for privacy protection, we owe deference to the legislative prerogatives of our elected lawmakers. The limited exception from strict adherence to the safe harbour principles seeks to strike a balance to accommodate the legitimate interests on each side.
The exception is limited to cases where there is an explicit authorisation. Therefore, as a threshold matter, the relevant statute, regulation or court decision must affirmatively authorise the particular conduct by safe harbour organisations ... In other words, the exception would not apply where the law is silent. In addition, the exception would apply only if the explicit authorisation conflicts with adherence to the safe harbour principles. Even then, the exception “is limited to the extent necessary to meet the overriding legitimate interests furthered by such authorisation”. By way of illustration, where the law simply authorises a company to provide personal information to government authorities, the exception would not apply. Conversely, where the law specifically authorises the company to provide personal information to government agencies without the individual’s consent, this would constitute an “explicit authorisation” to act in a manner that conflicts with the safe harbour principles. Alternatively, specific exceptions from affirmative requirements to provide notice and consent would fall within the exception (since it would be the equivalent of a specific authorisation to disclose the information without notice and consent). For example, a statute which authorises doctors to provide their patients’ medical records to health officials without the patients’ prior consent might permit an exception from the notice and choice principles. This authorisation would not permit a doctor to provide the same medical records to health maintenance organisations or commercial pharmaceutical research laboratories, which would be beyond the scope of the purposes authorised by the law and therefore beyond the scope of the exception ... The legal authority in question can be a “stand alone” authorisation to do specific things with personal information, but, as the examples below illustrate, it is likely to be an exception to a broader law which proscribes the collection, use, or disclosure of personal information.
...’
Communication COM(2013) 846 final
On 27 November 2013 the Commission adopted the communication to the European Parliament and the Council entitled ‘Rebuilding Trust in EU-US Data Flows’ (COM(2013) 846 final) (‘Communication COM(2013) 846 final’). The communication was accompanied by the ‘Report on the Findings by the EU Co-chairs of the ad hoc EU-US Working Group on Data Protection’, also dated 27 November 2013. That report was drawn up, as stated in point 1 thereof, in cooperation with the United States after the existence in that country of a number of surveillance programmes involving the large-scale collection and processing of personal data had been revealed. The report contained inter alia a detailed analysis of United States law as regards, in particular, the legal bases authorising the existence of surveillance programmes and the collection and processing of personal data by United States authorities.
In point 1 of Communication COM(2013) 846 final, the Commission stated that ‘[c]ommercial exchanges are addressed by Decision [2000/520]’, adding that ‘[t]his Decision provides a legal basis for transfers of personal data from the [European Union] to companies established in the [United States] which have adhered to the Safe Harbour Privacy Principles’. In addition, the Commission underlined in point 1 the increasing relevance of personal data flows, owing in particular to the development of the digital economy which has indeed ‘led to exponential growth in the quantity, quality, diversity and nature of data processing activities’.
In point 2 of that communication, the Commission observed that ‘concerns about the level of protection of personal data of [Union] citizens transferred to the [United States] under the Safe Harbour scheme have grown’ and that ‘[t]he voluntary and declaratory nature of the scheme has sharpened focus on its transparency and enforcement’.
It further stated in point 2 that ‘[t]he personal data of [Union] citizens sent to the [United States] under the Safe Harbour may be accessed and further processed by US authorities in a way incompatible with the grounds on which the data was originally collected in the [European Union] and the purposes for which it was transferred to the [United States]’ and that ‘[a] majority of the US internet companies that appear to be more directly concerned by [the surveillance] programmes are certified under the Safe Harbour scheme’.
In point 3.2 of Communication COM(2013) 846 final, the Commission noted a number of weaknesses in the application of Decision 2000/520. It stated, first, that some certified United States companies did not comply with the principles referred to in Article 1(1) of Decision 2000/520 (‘the safe harbour principles’) and that improvements had to be made to that decision regarding ‘structural shortcomings related to transparency and enforcement, the substantive Safe Harbour principles and the operation of the national security exception’. It observed, secondly, that ‘Safe Harbour also acts as a conduit for the transfer of the personal data of EU citizens from the [European Union] to the [United States] by companies required to surrender data to US intelligence agencies under the US intelligence collection programmes’.
The Commission concluded in point 3.2 that whilst, ‘[g]iven the weaknesses identified, the current implementation of Safe Harbour cannot be maintained, ... its revocation would[, however,] adversely affect the interests of member companies in the [European Union] and in the [United States]’. Finally, the Commission added in that point that it would ‘engage with the US authorities to discuss the shortcomings identified’.
Communication COM(2013) 847 final
On the same date, 27 November 2013, the Commission adopted the communication to the European Parliament and the Council on the Functioning of the Safe Harbour from the Perspective of EU Citizens and Companies Established in the [European Union] (COM(2013) 847 final) (‘Communication COM(2013) 847 final’). As is clear from point 1 thereof, that communication was based inter alia on information received in the ad hoc EU-US Working Group and followed two Commission assessment reports published in 2002 and 2004 respectively.
Point 1 of Communication COM(2013) 847 final explains that the functioning of Decision 2000/520 ‘relies on commitments and self-certification of adhering companies’, adding that ‘[s]igning up to these arrangements is voluntary, but the rules are binding for those who sign up’.
In addition, it is apparent from point 2.2 of Communication COM(2013) 847 final that, as at 26 September 2013, 3246 companies, falling within many industry and services sectors, were certified. Those companies mainly provided services in the EU internal market, in particular in the internet sector, and some of them were EU companies which had subsidiaries in the United States. Some of those companies processed the data of their employees in Europe which was transferred to the United States for human resource purposes.
The Commission stated in point 2.2 that ‘[a]ny gap in transparency or in enforcement on the US side results in responsibility being shifted to European data protection authorities and to the companies which use the scheme’.
It is apparent, in particular, from points 3 to 5 and 8 of Communication COM(2013) 847 final that, in practice, a significant number of certified companies did not comply, or did not comply fully, with the safe harbour principles.
In addition, the Commission stated in point 7 of Communication COM(2013) 847 final that ‘all companies involved in the PRISM programme [a large-scale intelligence collection programme], and which grant access to US authorities to data stored and processed in the [United States], appear to be Safe Harbour certified’ and that ‘[t]his has made the Safe Harbour scheme one of the conduits through which access is given to US intelligence authorities to collecting personal data initially processed in the [European Union]’. In that regard, the Commission noted in point 7.1 of that communication that ‘a number of legal bases under US law allow large-scale collection and processing of personal data that is stored or otherwise processed [by] companies based in the [United States]’ and that ‘[t]he large-scale nature of these programmes may result in data transferred under Safe Harbour being accessed and further processed by US authorities beyond what is strictly necessary and proportionate to the protection of national security as foreseen under the exception provided in [Decision 2000/520]’.
In point 7.2 of Communication COM(2013) 847 final, headed ‘Limitations and redress possibilities’, the Commission noted that ‘safeguards that are provided under US law are mostly available to US citizens or legal residents’ and that, ‘[m]oreover, there are no opportunities for either EU or US data subjects to obtain access, rectification or erasure of data, or administrative or judicial redress with regard to collection and further processing of their personal data taking place under the US surveillance programmes’.
According to point 8 of Communication COM(2013) 847 final, the certified companies included ‘[w]eb companies such as Google, Facebook, Microsoft, Apple, Yahoo’, which had ‘hundreds of millions of clients in Europe’ and transferred personal data to the United States for processing.
The Commission concluded in point 8 that ‘the large-scale access by intelligence agencies to data transferred to the [United States] by Safe Harbour certified companies raises additional serious questions regarding the continuity of data protection rights of Europeans when their data is transferred to the [United States]’.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Mr Schrems, an Austrian national residing in Austria, has been a user of the Facebook social network (‘Facebook’) since 2008.
Any person residing in the European Union who wishes to use Facebook is required to conclude, at the time of his registration, a contract with Facebook Ireland, a subsidiary of Facebook Inc. which is itself established in the United States. Some or all of the personal data of Facebook Ireland’s users who reside in the European Union is transferred to servers belonging to Facebook Inc. that are located in the United States, where it undergoes processing.
On 25 June 2013 Mr Schrems made a complaint to the Commissioner by which he in essence asked the latter to exercise his statutory powers by prohibiting Facebook Ireland from transferring his personal data to the United States. He contended in his complaint that the law and practice in force in that country did not ensure adequate protection of the personal data held in its territory against the surveillance activities that were engaged in there by the public authorities. Mr Schrems referred in this regard to the revelations made by Edward Snowden concerning the activities of the United States intelligence services, in particular those of the National Security Agency (‘the NSA’).
Since the Commissioner took the view that he was not required to investigate the matters raised by Mr Schrems in the complaint, he rejected it as unfounded. The Commissioner considered that there was no evidence that Mr Schrems’ personal data had been accessed by the NSA. He added that the allegations raised by Mr Schrems in his complaint could not be profitably put forward since any question of the adequacy of data protection in the United States had to be determined in accordance with Decision 2000/520 and the Commission had found in that decision that the United States ensured an adequate level of protection.
Mr Schrems brought an action before the High Court challenging the decision at issue in the main proceedings. After considering the evidence adduced by the parties to the main proceedings, the High Court found that the electronic surveillance and interception of personal data transferred from the European Union to the United States serve necessary and indispensable objectives in the public interest. However, it added that the revelations made by Edward Snowden had demonstrated a ‘significant over-reach’ on the part of the NSA and other federal agencies.
According to the High Court, Union citizens have no effective right to be heard. Oversight of the intelligence services’ actions is carried out within the framework of an ex parte and secret procedure. Once the personal data has been transferred to the United States, it is capable of being accessed by the NSA and other federal agencies, such as the Federal Bureau of Investigation (FBI), in the course of the indiscriminate surveillance and interception carried out by them on a large scale.
The High Court stated that Irish law precludes the transfer of personal data outside national territory save where the third country ensures an adequate level of protection for privacy and fundamental rights and freedoms. The importance of the rights to privacy and to inviolability of the dwelling, which are guaranteed by the Irish Constitution, requires that any interference with those rights be proportionate and in accordance with the law.
The High Court held that the mass and undifferentiated accessing of personal data is clearly contrary to the principle of proportionality and the fundamental values protected by the Irish Constitution. In order for interception of electronic communications to be regarded as consistent with the Irish Constitution, it would be necessary to demonstrate that the interception is targeted, that the surveillance of certain persons or groups of persons is objectively justified in the interests of national security or the suppression of crime and that there are appropriate and verifiable safeguards. Thus, according to the High Court, if the main proceedings were to be disposed of on the basis of Irish law alone, it would then have to be found that, given the existence of a serious doubt as to whether the United States ensures an adequate level of protection of personal data, the Commissioner should have proceeded to investigate the matters raised by Mr Schrems in his complaint and that the Commissioner was wrong in rejecting the complaint.
However, the High Court considers that this case concerns the implementation of EU law as referred to in Article 51 of the Charter and that the legality of the decision at issue in the main proceedings must therefore be assessed in the light of EU law. According to the High Court, Decision 2000/520 does not satisfy the requirements flowing both from Articles 7 and 8 of the Charter and from the principles set out by the Court of Justice in the judgment in Digital Rights Ireland and Others (C‑293/12 and C‑594/12, EU:C:2014:238). The right to respect for private life, guaranteed by Article 7 of the Charter and by the core values common to the traditions of the Member States, would be rendered meaningless if the State authorities were authorised to access electronic communications on a casual and generalised basis without any objective justification based on considerations of national security or the prevention of crime that are specific to the individual concerned and without those practices being accompanied by appropriate and verifiable safeguards.
The High Court further observes that in his action Mr Schrems in reality raises the legality of the safe harbour regime which was established by Decision 2000/520 and gives rise to the decision at issue in the main proceedings. Thus, even though Mr Schrems has not formally contested the validity of either Directive 95/46 or Decision 2000/520, the question is raised, according to the High Court, as to whether, on account of Article 25(6) of Directive 95/46, the Commissioner was bound by the Commission’s finding in Decision 2000/520 that the United States ensures an adequate level of protection or whether Article 8 of the Charter authorised the Commissioner to break free, if appropriate, from such a finding.
In those circumstances the High Court decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Whether in the course of determining a complaint which has been made to an independent office holder who has been vested by statute with the functions of administering and enforcing data protection legislation that personal data is being transferred to another third country (in this case, the United States of America) the laws and practices of which, it is claimed, do not contain adequate protections for the data subject, that office holder is absolutely bound by the Community finding to the contrary contained in [Decision 2000/520] having regard to Article 7, Article 8 and Article 47 of [the Charter], the provisions of Article 25(6) of Directive [95/46] notwithstanding?
(2)
Or, alternatively, may and/or must the office holder conduct his or her own investigation of the matter in the light of factual developments in the meantime since that Commission decision was first published?’
Consideration of the questions referred
By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether and to what extent Article 25(6) of Directive 95/46, read in the light of Articles 7, 8 and 47 of the Charter, must be interpreted as meaning that a decision adopted pursuant to that provision, such as Decision 2000/520, by which the Commission finds that a third country ensures an adequate level of protection, prevents a supervisory authority of a Member State, within the meaning of Article 28 of that directive, from being able to examine the claim of a person concerning the protection of his rights and freedoms in regard to the processing of personal data relating to him which has been transferred from a Member State to that third country when that person contends that the law and practices in force in the third country do not ensure an adequate level of protection.
The powers of the national supervisory authorities, within the meaning of Article 28 of Directive 95/46, when the Commission has adopted a decision pursuant to Article 25(6) of that directive
It should be recalled first of all that the provisions of Directive 95/46, inasmuch as they govern the processing of personal data liable to infringe fundamental freedoms, in particular the right to respect for private life, must necessarily be interpreted in the light of the fundamental rights guaranteed by the Charter (see judgments in Österreichischer Rundfunk and Others, C‑465/00, C‑138/01 and C‑139/01, EU:C:2003:294, paragraph 68; Google Spain and Google, C‑131/12, EU:C:2014:317, paragraph 68; and Ryneš, C‑212/13, EU:C:2014:2428, paragraph 29).
It is apparent from Article 1 of Directive 95/46 and recitals 2 and 10 in its preamble that that directive seeks to ensure not only effective and complete protection of the fundamental rights and freedoms of natural persons, in particular the fundamental right to respect for private life with regard to the processing of personal data, but also a high level of protection of those fundamental rights and freedoms. The importance of both the fundamental right to respect for private life, guaranteed by Article 7 of the Charter, and the fundamental right to the protection of personal data, guaranteed by Article 8 thereof, is, moreover, emphasised in the case-law of the Court (see judgments in Rijkeboer, C‑553/07, EU:C:2009:293, paragraph 47; Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 53; and Google Spain and Google, C‑131/12, EU:C:2014:317, paragraphs, 53, 66, 74 and the case-law cited).
As regards the powers available to the national supervisory authorities in respect of transfers of personal data to third countries, it should be noted that Article 28(1) of Directive 95/46 requires Member States to set up one or more public authorities responsible for monitoring, with complete independence, compliance with EU rules on the protection of individuals with regard to the processing of such data. In addition, that requirement derives from the primary law of the European Union, in particular Article 8(3) of the Charter and Article 16(2) TFEU (see, to this effect, judgments in Commission v Austria, C‑614/10, EU:C:2012:631, paragraph 36, and Commission v Hungary, C‑288/12, EU:C:2014:237, paragraph 47).
The guarantee of the independence of national supervisory authorities is intended to ensure the effectiveness and reliability of the monitoring of compliance with the provisions concerning protection of individuals with regard to the processing of personal data and must be interpreted in the light of that aim. It was established in order to strengthen the protection of individuals and bodies affected by the decisions of those authorities. The establishment in Member States of independent supervisory authorities is therefore, as stated in recital 62 in the preamble to Directive 95/46, an essential component of the protection of individuals with regard to the processing of personal data (see judgments in Commission v Germany, C‑518/07, EU:C:2010:125, paragraph 25, and Commission v Hungary, C‑288/12, EU:C:2014:237, paragraph 48 and the case-law cited).
In order to guarantee that protection, the national supervisory authorities must, in particular, ensure a fair balance between, on the one hand, observance of the fundamental right to privacy and, on the other hand, the interests requiring free movement of personal data (see, to this effect, judgments in Commission v Germany, C‑518/07, EU:C:2010:125, paragraph 24, and Commission v Hungary, C‑288/12, EU:C:2014:237, paragraph 51).
The national supervisory authorities have a wide range of powers for that purpose. Those powers, listed on a non-exhaustive basis in Article 28(3) of Directive 95/46, constitute necessary means to perform their duties, as stated in recital 63 in the preamble to the directive. Thus, those authorities possess, in particular, investigative powers, such as the power to collect all the information necessary for the performance of their supervisory duties, effective powers of intervention, such as that of imposing a temporary or definitive ban on processing of data, and the power to engage in legal proceedings.
It is, admittedly, apparent from Article 28(1) and (6) of Directive 95/46 that the powers of the national supervisory authorities concern processing of personal data carried out on the territory of their own Member State, so that they do not have powers on the basis of Article 28 in respect of processing of such data carried out in a third country.
However, the operation consisting in having personal data transferred from a Member State to a third country constitutes, in itself, processing of personal data within the meaning of Article 2(b) of Directive 95/46 (see, to this effect, judgment in Parliament v Council and Commission, C‑317/04 and C‑318/04, EU:C:2006:346, paragraph 56) carried out in a Member State. That provision defines ‘processing of personal data’ as ‘any operation or set of operations which is performed upon personal data, whether or not by automatic means’ and mentions, by way of example, ‘disclosure by transmission, dissemination or otherwise making available’.
Recital 60 in the preamble to Directive 95/46 states that transfers of personal data to third countries may be effected only in full compliance with the provisions adopted by the Member States pursuant to the directive. In that regard, Chapter IV of the directive, in which Articles 25 and 26 appear, has set up a regime intended to ensure that the Member States oversee transfers of personal data to third countries. That regime is complementary to the general regime set up by Chapter II of the directive laying down the general rules on the lawfulness of the processing of personal data (see, to this effect, judgment in Lindqvist, C‑101/01, EU:C:2003:596, paragraph 63).
As, in accordance with Article 8(3) of the Charter and Article 28 of Directive 95/46, the national supervisory authorities are responsible for monitoring compliance with the EU rules concerning the protection of individuals with regard to the processing of personal data, each of them is therefore vested with the power to check whether a transfer of personal data from its own Member State to a third country complies with the requirements laid down by Directive 95/46.
Whilst acknowledging, in recital 56 in its preamble, that transfers of personal data from the Member States to third countries are necessary for the expansion of international trade, Directive 95/46 lays down as a principle, in Article 25(1), that such transfers may take place only if the third country ensures an adequate level of protection.
Furthermore, recital 57 states that transfers of personal data to third countries not ensuring an adequate level of protection must be prohibited.
In order to control transfers of personal data to third countries according to the level of protection accorded to it in each of those countries, Article 25 of Directive 95/46 imposes a series of obligations on the Member States and the Commission. It is apparent, in particular, from that article that the finding that a third country does or does not ensure an adequate level of protection may, as the Advocate General has observed in point 86 of his Opinion, be made either by the Member States or by the Commission.
The Commission may adopt, on the basis of Article 25(6) of Directive 95/46, a decision finding that a third country ensures an adequate level of protection. In accordance with the second subparagraph of that provision, such a decision is addressed to the Member States, who must take the measures necessary to comply with it. Pursuant to the fourth paragraph of Article 288 TFEU, it is binding on all the Member States to which it is addressed and is therefore binding on all their organs (see, to this effect, judgments in Albako Margarinefabrik, 249/85, EU:C:1987:245, paragraph 17, and Mediaset, C‑69/13, EU:C:2014:71, paragraph 23) in so far as it has the effect of authorising transfers of personal data from the Member States to the third country covered by it.
Thus, until such time as the Commission decision is declared invalid by the Court, the Member States and their organs, which include their independent supervisory authorities, admittedly cannot adopt measures contrary to that decision, such as acts intended to determine with binding effect that the third country covered by it does not ensure an adequate level of protection. Measures of the EU institutions are in principle presumed to be lawful and accordingly produce legal effects until such time as they are withdrawn, annulled in an action for annulment or declared invalid following a reference for a preliminary ruling or a plea of illegality (judgment in Commission v Greece, C‑475/01, EU:C:2004:585, paragraph 18 and the case-law cited).
However, a Commission decision adopted pursuant to Article 25(6) of Directive 95/46, such as Decision 2000/520, cannot prevent persons whose personal data has been or could be transferred to a third country from lodging with the national supervisory authorities a claim, within the meaning of Article 28(4) of that directive, concerning the protection of their rights and freedoms in regard to the processing of that data. Likewise, as the Advocate General has observed in particular in points 61, 93 and 116 of his Opinion, a decision of that nature cannot eliminate or reduce the powers expressly accorded to the national supervisory authorities by Article 8(3) of the Charter and Article 28 of the directive.
Neither Article 8(3) of the Charter nor Article 28 of Directive 95/46 excludes from the national supervisory authorities’ sphere of competence the oversight of transfers of personal data to third countries which have been the subject of a Commission decision pursuant to Article 25(6) of Directive 95/46.
In particular, the first subparagraph of Article 28(4) of Directive 95/46, under which the national supervisory authorities are to hear ‘claims lodged by any person … concerning the protection of his rights and freedoms in regard to the processing of personal data’, does not provide for any exception in this regard where the Commission has adopted a decision pursuant to Article 25(6) of that directive.
Furthermore, it would be contrary to the system set up by Directive 95/46 and to the objective of Articles 25 and 28 thereof for a Commission decision adopted pursuant to Article 25(6) to have the effect of preventing a national supervisory authority from examining a person’s claim concerning the protection of his rights and freedoms in regard to the processing of his personal data which has been or could be transferred from a Member State to the third country covered by that decision.
On the contrary, Article 28 of Directive 95/46 applies, by its very nature, to any processing of personal data. Thus, even if the Commission has adopted a decision pursuant to Article 25(6) of that directive, the national supervisory authorities, when hearing a claim lodged by a person concerning the protection of his rights and freedoms in regard to the processing of personal data relating to him, must be able to examine, with complete independence, whether the transfer of that data complies with the requirements laid down by the directive.
If that were not so, persons whose personal data has been or could be transferred to the third country concerned would be denied the right, guaranteed by Article 8(1) and (3) of the Charter, to lodge with the national supervisory authorities a claim for the purpose of protecting their fundamental rights (see, by analogy, judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 68).
A claim, within the meaning of Article 28(4) of Directive 95/46, by which a person whose personal data has been or could be transferred to a third country contends, as in the main proceedings, that, notwithstanding what the Commission has found in a decision adopted pursuant to Article 25(6) of that directive, the law and practices of that country do not ensure an adequate level of protection must be understood as concerning, in essence, whether that decision is compatible with the protection of the privacy and of the fundamental rights and freedoms of individuals.
In this connection, the Court’s settled case-law should be recalled according to which the European Union is a union based on the rule of law in which all acts of its institutions are subject to review of their compatibility with, in particular, the Treaties, general principles of law and fundamental rights (see, to this effect, judgments in Commission and Others v Kadi, C‑584/10 P, C‑593/10 P and C‑595/10 P, EU:C:2013:518, paragraph 66; Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraph 91; and Telefónica v Commission, C‑274/12 P, EU:C:2013:852, paragraph 56). Commission decisions adopted pursuant to Article 25(6) of Directive 95/46 cannot therefore escape such review.
That said, the Court alone has jurisdiction to declare that an EU act, such as a Commission decision adopted pursuant to Article 25(6) of Directive 95/46, is invalid, the exclusivity of that jurisdiction having the purpose of guaranteeing legal certainty by ensuring that EU law is applied uniformly (see judgments in Melki and Abdeli, C‑188/10 and C‑189/10, EU:C:2010:363, paragraph 54, and CIVAD, C‑533/10, EU:C:2012:347, paragraph 40).
Whilst the national courts are admittedly entitled to consider the validity of an EU act, such as a Commission decision adopted pursuant to Article 25(6) of Directive 95/46, they are not, however, endowed with the power to declare such an act invalid themselves (see, to this effect, judgments in Foto-Frost, 314/85, EU:C:1987:452, paragraphs 15 to 20, and IATA and ELFAA, C‑344/04, EU:C:2006:10, paragraph 27). A fortiori, when the national supervisory authorities examine a claim, within the meaning of Article 28(4) of that directive, concerning the compatibility of a Commission decision adopted pursuant to Article 25(6) of the directive with the protection of the privacy and of the fundamental rights and freedoms of individuals, they are not entitled to declare that decision invalid themselves.
Having regard to those considerations, where a person whose personal data has been or could be transferred to a third country which has been the subject of a Commission decision pursuant to Article 25(6) of Directive 95/46 lodges with a national supervisory authority a claim concerning the protection of his rights and freedoms in regard to the processing of that data and contests, in bringing the claim, as in the main proceedings, the compatibility of that decision with the protection of the privacy and of the fundamental rights and freedoms of individuals, it is incumbent upon the national supervisory authority to examine the claim with all due diligence.
In a situation where the national supervisory authority comes to the conclusion that the arguments put forward in support of such a claim are unfounded and therefore rejects it, the person who lodged the claim must, as is apparent from the second subparagraph of Article 28(3) of Directive 95/46, read in the light of Article 47 of the Charter, have access to judicial remedies enabling him to challenge such a decision adversely affecting him before the national courts. Having regard to the case-law cited in paragraphs 61 and 62 of the present judgment, those courts must stay proceedings and make a reference to the Court for a preliminary ruling on validity where they consider that one or more grounds for invalidity put forward by the parties or, as the case may be, raised by them of their own motion are well founded (see, to this effect, judgment in T & L Sugars and Sidul Açúcares v Commission, C‑456/13 P, EU:C:2015:284, paragraph 48 and the case-law cited).
In the converse situation, where the national supervisory authority considers that the objections advanced by the person who has lodged with it a claim concerning the protection of his rights and freedoms in regard to the processing of his personal data are well founded, that authority must, in accordance with the third indent of the first subparagraph of Article 28(3) of Directive 95/46, read in the light in particular of Article 8(3) of the Charter, be able to engage in legal proceedings. It is incumbent upon the national legislature to provide for legal remedies enabling the national supervisory authority concerned to put forward the objections which it considers well founded before the national courts in order for them, if they share its doubts as to the validity of the Commission decision, to make a reference for a preliminary ruling for the purpose of examination of the decision’s validity.
Having regard to the foregoing considerations, the answer to the questions referred is that Article 25(6) of Directive 95/46, read in the light of Articles 7, 8 and 47 of the Charter, must be interpreted as meaning that a decision adopted pursuant to that provision, such as Decision 2000/520, by which the Commission finds that a third country ensures an adequate level of protection, does not prevent a supervisory authority of a Member State, within the meaning of Article 28 of that directive, from examining the claim of a person concerning the protection of his rights and freedoms in regard to the processing of personal data relating to him which has been transferred from a Member State to that third country when that person contends that the law and practices in force in the third country do not ensure an adequate level of protection.
The validity of Decision 2000/520
As is apparent from the referring court’s explanations relating to the questions submitted, Mr Schrems contends in the main proceedings that United States law and practice do not ensure an adequate level of protection within the meaning of Article 25 of Directive 95/46. As the Advocate General has observed in points 123 and 124 of his Opinion, Mr Schrems expresses doubts, which the referring court indeed seems essentially to share, concerning the validity of Decision 2000/520. In such circumstances, having regard to what has been held in paragraphs 60 to 63 of the present judgment and in order to give the referring court a full answer, it should be examined whether that decision complies with the requirements stemming from Directive 95/46 read in the light of the Charter.
The requirements stemming from Article 25(6) of Directive 95/46
As has already been pointed out in paragraphs 48 and 49 of the present judgment, Article 25(1) of Directive 95/46 prohibits transfers of personal data to a third country not ensuring an adequate level of protection.
However, for the purpose of overseeing such transfers, the first subparagraph of Article 25(6) of Directive 95/46 provides that the Commission ‘may find … that a third country ensures an adequate level of protection within the meaning of paragraph 2 of this Article, by reason of its domestic law or of the international commitments it has entered into …, for the protection of the private lives and basic freedoms and rights of individuals’.
It is true that neither Article 25(2) of Directive 95/46 nor any other provision of the directive contains a definition of the concept of an adequate level of protection. In particular, Article 25(2) does no more than state that the adequacy of the level of protection afforded by a third country ‘shall be assessed in the light of all the circumstances surrounding a data transfer operation or set of data transfer operations’ and lists, on a non-exhaustive basis, the circumstances to which consideration must be given when carrying out such an assessment.
However, first, as is apparent from the very wording of Article 25(6) of Directive 95/46, that provision requires that a third country ‘ensures’ an adequate level of protection by reason of its domestic law or its international commitments. Secondly, according to the same provision, the adequacy of the protection ensured by the third country is assessed ‘for the protection of the private lives and basic freedoms and rights of individuals’.
Thus, Article 25(6) of Directive 95/46 implements the express obligation laid down in Article 8(1) of the Charter to protect personal data and, as the Advocate General has observed in point 139 of his Opinion, is intended to ensure that the high level of that protection continues where personal data is transferred to a third country.
The word ‘adequate’ in Article 25(6) of Directive 95/46 admittedly signifies that a third country cannot be required to ensure a level of protection identical to that guaranteed in the EU legal order. However, as the Advocate General has observed in point 141 of his Opinion, the term ‘adequate level of protection’ must be understood as requiring the third country in fact to ensure, by reason of its domestic law or its international commitments, a level of protection of fundamental rights and freedoms that is essentially equivalent to that guaranteed within the European Union by virtue of Directive 95/46 read in the light of the Charter. If there were no such requirement, the objective referred to in the previous paragraph of the present judgment would be disregarded. Furthermore, the high level of protection guaranteed by Directive 95/46 read in the light of the Charter could easily be circumvented by transfers of personal data from the European Union to third countries for the purpose of being processed in those countries.
It is clear from the express wording of Article 25(6) of Directive 95/46 that it is the legal order of the third country covered by the Commission decision that must ensure an adequate level of protection. Even though the means to which that third country has recourse, in this connection, for the purpose of ensuring such a level of protection may differ from those employed within the European Union in order to ensure that the requirements stemming from Directive 95/46 read in the light of the Charter are complied with, those means must nevertheless prove, in practice, effective in order to ensure protection essentially equivalent to that guaranteed within the European Union.
Accordingly, when examining the level of protection afforded by a third country, the Commission is obliged to assess the content of the applicable rules in that country resulting from its domestic law or international commitments and the practice designed to ensure compliance with those rules, since it must, under Article 25(2) of Directive 95/46, take account of all the circumstances surrounding a transfer of personal data to a third country.
Also, in the light of the fact that the level of protection ensured by a third country is liable to change, it is incumbent upon the Commission, after it has adopted a decision pursuant to Article 25(6) of Directive 95/46, to check periodically whether the finding relating to the adequacy of the level of protection ensured by the third country in question is still factually and legally justified. Such a check is required, in any event, when evidence gives rise to a doubt in that regard.
Moreover, as the Advocate General has stated in points 134 and 135 of his Opinion, when the validity of a Commission decision adopted pursuant to Article 25(6) of Directive 95/46 is examined, account must also be taken of the circumstances that have arisen after that decision’s adoption.
In this regard, it must be stated that, in view of, first, the important role played by the protection of personal data in the light of the fundamental right to respect for private life and, secondly, the large number of persons whose fundamental rights are liable to be infringed where personal data is transferred to a third country not ensuring an adequate level of protection, the Commission’s discretion as to the adequacy of the level of protection ensured by a third country is reduced, with the result that review of the requirements stemming from Article 25 of Directive 95/46, read in the light of the Charter, should be strict (see, by analogy, judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraphs 47 and 48).
Article 1 of Decision 2000/520
The Commission found in Article 1(1) of Decision 2000/520 that the principles set out in Annex I thereto, implemented in accordance with the guidance provided by the FAQs set out in Annex II, ensure an adequate level of protection for personal data transferred from the European Union to organisations established in the United States. It is apparent from that provision that both those principles and the FAQs were issued by the United States Department of Commerce.
An organisation adheres to the safe harbour principles on the basis of a system of self-certification, as is apparent from Article 1(2) and (3) of Decision 2000/520, read in conjunction with FAQ 6 set out in Annex II thereto.
Whilst recourse by a third country to a system of self-certification is not in itself contrary to the requirement laid down in Article 25(6) of Directive 95/46 that the third country concerned must ensure an adequate level of protection ‘by reason of its domestic law or … international commitments’, the reliability of such a system, in the light of that requirement, is founded essentially on the establishment of effective detection and supervision mechanisms enabling any infringements of the rules ensuring the protection of fundamental rights, in particular the right to respect for private life and the right to protection of personal data, to be identified and punished in practice.
In the present instance, by virtue of the second paragraph of Annex I to Decision 2000/520, the safe harbour principles are ‘intended for use solely by US organisations receiving personal data from the European Union for the purpose of qualifying for the safe harbour and the presumption of “adequacy” it creates’. Those principles are therefore applicable solely to self-certified United States organisations receiving personal data from the European Union, and United States public authorities are not required to comply with them.
Moreover, Decision 2000/520, pursuant to Article 2 thereof, ‘concerns only the adequacy of protection provided in the United States under the [safe harbour principles] implemented in accordance with the FAQs with a view to meeting the requirements of Article 25(1) of Directive [95/46]’, without, however, containing sufficient findings regarding the measures by which the United States ensures an adequate level of protection, within the meaning of Article 25(6) of that directive, by reason of its domestic law or its international commitments.
In addition, under the fourth paragraph of Annex I to Decision 2000/520, the applicability of the safe harbour principles may be limited, in particular, ‘to the extent necessary to meet national security, public interest, or law enforcement requirements’ and ‘by statute, government regulation, or case-law that create conflicting obligations or explicit authorisations, provided that, in exercising any such authorisation, an organisation can demonstrate that its non-compliance with the Principles is limited to the extent necessary to meet the overriding legitimate interests furthered by such authorisation’.
In this connection, Decision 2000/520 states in Part B of Annex IV, with regard to the limits to which the safe harbour principles’ applicability is subject, that, ‘[c]learly, where US law imposes a conflicting obligation, US organisations whether in the safe harbour or not must comply with the law’.
Thus, Decision 2000/520 lays down that ‘national security, public interest, or law enforcement requirements’ have primacy over the safe harbour principles, primacy pursuant to which self-certified United States organisations receiving personal data from the European Union are bound to disregard those principles without limitation where they conflict with those requirements and therefore prove incompatible with them.
In the light of the general nature of the derogation set out in the fourth paragraph of Annex I to Decision 2000/520, that decision thus enables interference, founded on national security and public interest requirements or on domestic legislation of the United States, with the fundamental rights of the persons whose personal data is or could be transferred from the European Union to the United States. To establish the existence of an interference with the fundamental right to respect for private life, it does not matter whether the information in question relating to private life is sensitive or whether the persons concerned have suffered any adverse consequences on account of that interference (judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 33 and the case-law cited).
In addition, Decision 2000/520 does not contain any finding regarding the existence, in the United States, of rules adopted by the State intended to limit any interference with the fundamental rights of the persons whose data is transferred from the European Union to the United States, interference which the State entities of that country would be authorised to engage in when they pursue legitimate objectives, such as national security.
Nor does Decision 2000/520 refer to the existence of effective legal protection against interference of that kind. As the Advocate General has observed in points 204 to 206 of his Opinion, procedures before the Federal Trade Commission — the powers of which, described in particular in FAQ 11 set out in Annex II to that decision, are limited to commercial disputes — and the private dispute resolution mechanisms concern compliance by the United States undertakings with the safe harbour principles and cannot be applied in disputes relating to the legality of interference with fundamental rights that results from measures originating from the State.
Moreover, the foregoing analysis of Decision 2000/520 is borne out by the Commission’s own assessment of the situation resulting from the implementation of that decision. Particularly in points 2 and 3.2 of Communication COM(2013) 846 final and in points 7.1, 7.2 and 8 of Communication COM(2013) 847 final, the content of which is set out in paragraphs 13 to 16 and paragraphs 22, 23 and 25 of the present judgment respectively, the Commission found that the United States authorities were able to access the personal data transferred from the Member States to the United States and process it in a way incompatible, in particular, with the purposes for which it was transferred, beyond what was strictly necessary and proportionate to the protection of national security. Also, the Commission noted that the data subjects had no administrative or judicial means of redress enabling, in particular, the data relating to them to be accessed and, as the case may be, rectified or erased.
As regards the level of protection of fundamental rights and freedoms that is guaranteed within the European Union, EU legislation involving interference with the fundamental rights guaranteed by Articles 7 and 8 of the Charter must, according to the Court’s settled case-law, lay down clear and precise rules governing the scope and application of a measure and imposing minimum safeguards, so that the persons whose personal data is concerned have sufficient guarantees enabling their data to be effectively protected against the risk of abuse and against any unlawful access and use of that data. The need for such safeguards is all the greater where personal data is subjected to automatic processing and where there is a significant risk of unlawful access to that data (judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraphs 54 and 55 and the case-law cited).
Furthermore and above all, protection of the fundamental right to respect for private life at EU level requires derogations and limitations in relation to the protection of personal data to apply only in so far as is strictly necessary (judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 52 and the case-law cited).
Legislation is not limited to what is strictly necessary where it authorises, on a generalised basis, storage of all the personal data of all the persons whose data has been transferred from the European Union to the United States without any differentiation, limitation or exception being made in the light of the objective pursued and without an objective criterion being laid down by which to determine the limits of the access of the public authorities to the data, and of its subsequent use, for purposes which are specific, strictly restricted and capable of justifying the interference which both access to that data and its use entail (see, to this effect, concerning Directive 2006/24/EC of the European Parliament and of the Council of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/58/EC (OJ 2006 L 105, p. 54), judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraphs 57 to 61).
In particular, legislation permitting the public authorities to have access on a generalised basis to the content of electronic communications must be regarded as compromising the essence of the fundamental right to respect for private life, as guaranteed by Article 7 of the Charter (see, to this effect, judgment in Digital Rights Ireland and Others, C‑293/12 and C‑594/12, EU:C:2014:238, paragraph 39).
Likewise, legislation not providing for any possibility for an individual to pursue legal remedies in order to have access to personal data relating to him, or to obtain the rectification or erasure of such data, does not respect the essence of the fundamental right to effective judicial protection, as enshrined in Article 47 of the Charter. The first paragraph of Article 47 of the Charter requires everyone whose rights and freedoms guaranteed by the law of the European Union are violated to have the right to an effective remedy before a tribunal in compliance with the conditions laid down in that article. The very existence of effective judicial review designed to ensure compliance with provisions of EU law is inherent in the existence of the rule of law (see, to this effect, judgments in Les Verts v Parliament, 294/83, EU:C:1986:166, paragraph 23; Johnston, 222/84, EU:C:1986:206, paragraphs 18 and 19; Heylens and Others, 222/86, EU:C:1987:442, paragraph 14; and UGT-Rioja and Others, C‑428/06 to C‑434/06, EU:C:2008:488, paragraph 80).
As has been found in particular in paragraphs 71, 73 and 74 of the present judgment, in order for the Commission to adopt a decision pursuant to Article 25(6) of Directive 95/46, it must find, duly stating reasons, that the third country concerned in fact ensures, by reason of its domestic law or its international commitments, a level of protection of fundamental rights essentially equivalent to that guaranteed in the EU legal order, a level that is apparent in particular from the preceding paragraphs of the present judgment.
However, the Commission did not state, in Decision 2000/520, that the United States in fact ‘ensures’ an adequate level of protection by reason of its domestic law or its international commitments.
Consequently, without there being any need to examine the content of the safe harbour principles, it is to be concluded that Article 1 of Decision 2000/520 fails to comply with the requirements laid down in Article 25(6) of Directive 95/46, read in the light of the Charter, and that it is accordingly invalid.
Article 3 of Decision 2000/520
It is apparent from the considerations set out in paragraphs 53, 57 and 63 of the present judgment that, under Article 28 of Directive 95/46, read in the light in particular of Article 8 of the Charter, the national supervisory authorities must be able to examine, with complete independence, any claim concerning the protection of a person’s rights and freedoms in regard to the processing of personal data relating to him. That is in particular the case where, in bringing such a claim, that person raises questions regarding the compatibility of a Commission decision adopted pursuant to Article 25(6) of that directive with the protection of the privacy and of the fundamental rights and freedoms of individuals.
However, the first subparagraph of Article 3(1) of Decision 2000/520 lays down specific rules regarding the powers available to the national supervisory authorities in the light of a Commission finding relating to an adequate level of protection, within the meaning of Article 25 of Directive 95/46.
Under that provision, the national supervisory authorities may, ‘[w]ithout prejudice to their powers to take action to ensure compliance with national provisions adopted pursuant to provisions other than Article 25 of Directive [95/46], … suspend data flows to an organisation that has self-certified its adherence to the [principles of Decision 2000/520]’, under restrictive conditions establishing a high threshold for intervention. Whilst that provision is without prejudice to the powers of those authorities to take action to ensure compliance with national provisions adopted pursuant to Directive 95/46, it excludes, on the other hand, the possibility of them taking action to ensure compliance with Article 25 of that directive.
The first subparagraph of Article 3(1) of Decision 2000/520 must therefore be understood as denying the national supervisory authorities the powers which they derive from Article 28 of Directive 95/46, where a person, in bringing a claim under that provision, puts forward matters that may call into question whether a Commission decision that has found, on the basis of Article 25(6) of the directive, that a third country ensures an adequate level of protection is compatible with the protection of the privacy and of the fundamental rights and freedoms of individuals.
The implementing power granted by the EU legislature to the Commission in Article 25(6) of Directive 95/46 does not confer upon it competence to restrict the national supervisory authorities’ powers referred to in the previous paragraph of the present judgment.
That being so, it must be held that, in adopting Article 3 of Decision 2000/520, the Commission exceeded the power which is conferred upon it in Article 25(6) of Directive 95/46, read in the light of the Charter, and that Article 3 of the decision is therefore invalid.
As Articles 1 and 3 of Decision 2000/520 are inseparable from Articles 2 and 4 of that decision and the annexes thereto, their invalidity affects the validity of the decision in its entirety.
Having regard to all the foregoing considerations, it is to be concluded that Decision 2000/520 is invalid.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Grand Chamber) hereby rules:
1.
Article 25(6) of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data as amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003, read in the light of Articles 7, 8 and 47 of the Charter of Fundamental Rights of the European Union, must be interpreted as meaning that a decision adopted pursuant to that provision, such as Commission Decision 2000/520/EC of 26 July 2000 pursuant to Directive 95/46 on the adequacy of the protection provided by the safe harbour privacy principles and related frequently asked questions issued by the US Department of Commerce, by which the European Commission finds that a third country ensures an adequate level of protection, does not prevent a supervisory authority of a Member State, within the meaning of Article 28 of that directive as amended, from examining the claim of a person concerning the protection of his rights and freedoms in regard to the processing of personal data relating to him which has been transferred from a Member State to that third country when that person contends that the law and practices in force in the third country do not ensure an adequate level of protection.
2.
Decision 2000/520 is invalid.
[Signatures]
( * ) Language of the case: English. |
JUDGMENT OF THE COURT (Second Chamber)
2 September 2015 ( *1 )
‛Reference for a preliminary ruling — Status of third-country nationals who are long-term residents — Directive 2003/109/EC — National legislation — Issue and renewal of a residence permit — Condition — Obligatory financial contribution — Amount eight times higher than that for obtaining a national identity card — Infringement of the principles of Directive 2003/109/EC’
In Case C‑309/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunale amministrativo regionale per il Lazio (Italy), made by decision of 17 December 2013, received at the Court on 30 June 2014, in the proceedings
Confederazione Generale Italiana del Lavoro (CGIL),
Istituto Nazionale Confederale Assistenza (INCA)
v
Presidenza del Consiglio dei Ministri,
Ministero dell’Interno,
Ministero dell’Economia e delle Finanze,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta (Rapporteur), President of the Chamber, J.‑C. Bonichot, A. Arabadjiev, J.L. da Cruz Vilaça and C. Lycourgos, Judges,
Advocate General: Y. Bot,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 16 April 2015,
after considering the observations submitted on behalf of:
—
the Confederazione Generale Italiana del Lavoro (CGIL), by V. Angiolini, L. Formilan and L. Santini, avvocati,
—
the Istituto Nazionale Confederale Assistenza (INCA), by V. Angiolini, L. Formilan and L. Santini, avvocati,
—
the Italian Government, by G. Palmieri, acting as Agent, and G. Palatiello, avvocato dello Stato,
—
the French Government, by F.-X. Bréchot and D. Colas, acting as Agents,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the European Commission, by M. Condou-Durande and A. Aresu, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Council Directive 2003/109/EC of 25 November 2003 concerning the status of third-country nationals who are long-term residents (OJ 2004 L 16, p. 44), as amended by Directive 2011/51/EU of the European Parliament and of the Council of 11 May 2011 (OJ 2011 L 132, p. 1), (‘Directive 2003/109’).
The request has been made in proceedings between the Confederazione Generale Italiana del Lavoro (‘CGIL’) and the Istituto Nazionale Confederale Assistenza (‘INCA’), on the one hand, and the Presidenza del Consiglio dei Ministri (Office of the Italian Prime Minister), the Ministero dell’Interno (Ministry of the Interior) and the Ministero dell’Economia e delle Finanze (Ministry of the Economy and Finance), on the other hand, seeking annulment of a decree adopted by those two ministries, on 6 October 2011, concerning the fee for the issue and renewal of a residence permit (GURI (Official Gazette) No 304 of 31 December 2011) (‘the ‘2011 decree’), and also annulment of any preparatory, consequent or connected act.
Legal context
EU law
Recitals 9, 10 and 18 in the preamble to Directive 2003/109 state:
‘(9)
Economic considerations should not be a ground for refusing to grant long-term resident status and shall not be considered as interfering with the relevant conditions.
(10)
A set of rules governing the procedures for the examination of application for long-term resident status should be laid down. Those procedures should be effective and manageable, taking account of the normal workload of the Member States’ administrations, as well as being transparent and fair, in order to offer appropriate legal certainty to those concerned. They should not constitute a means of hindering the exercise of the right of residence.
...
(18)
Establishing the conditions subject to which the right to reside in another Member State may be acquired by third-country nationals who are long-term residents should contribute to the effective attainment of an internal market as an area in which the free movement of persons is ensured. It could also constitute a major factor of mobility, notably on the Union’s employment market.’
Under the heading ‘Long-term resident’s [EU] residence permit’, Article 8(2) of that directive provides:
‘Member States shall issue a long-term resident’s [EU] residence permit to long-term residents. The permit shall be valid at least for five years; it shall, upon application if required, be automatically renewable on expiry.’
Article 19 of Directive 2003/109, headed ‘Examination of applications and issue of a residence permit’, provides:
‘...
2. If the conditions provided for in Articles 14, 15 and 16 are met, then, subject to the provisions relating to public policy, public security and public health in Articles 17 and 18, the second Member State shall issue the long-term resident with a renewable residence permit. This residence permit shall, upon application, if required, be renewable on expiry. The second Member State shall inform the first Member State of its decision.
3 The second Member State shall issue members of the long-term resident’s family with renewable residence permits valid for the same period as the permit issued to the long-term resident.’
Italian law
Article 5(2b) of Legislative Decree No 286/1998, of 25 July 1998, consolidating the provisions regulating immigration and the rules relating to the status of foreign nationals (Ordinary Supplement to GURI No 191 of 18 August 1998), inserted into that legislative decree by Article 1(22)(b) of Law No 94 of 15 July 2009 on public security (Ordinary Supplement to GURI No 170 of 24 July 2009), provides:
‘The application for the issue and renewal of the residence permit shall be subject to the payment of a fee, the amount of which shall be set at a minimum of EUR 80 and a maximum of EUR 200 by joint decree of the Ministry of the Economy and Finance and of the Ministry of the Interior, which shall also lay down the conditions for the payment and the arrangements for the implementation of the provision set out in Article 14a(2) of [Legislative Decree No 286/1998]. Payment of a fee shall not be required for the issue and renewal of a residence permit in respect of asylum, for an asylum application, for subsidiary protection, or for an authorisation to stay on humanitarian grounds.’
Article 14a of Legislative Decree No 286/1998 creates and regulates the Return Fund (‘Fondo rimpatri’) in the following terms:
‘1. A Return Fund shall be created, under the Ministry of the Interior, for the purpose of financing the costs of repatriating foreign nationals to their countries of origin or provenance.
2. Half of the proceeds received through the collection of the fee referred to in Article 5(2b) shall be paid into the fund referred to in paragraph 1 above, together with any funds provided by the European Union for the same fund. The remainder of the proceeds from the fee referred to in Article 5(2b) shall be allocated to the budget estimates of the Ministry of the Interior to cover the costs related to the investigative activities inherent in the issue and renewal of residence permits.’
The 2011 decree, adopted pursuant to Articles 5(2b) and 14a of Legislative Decree No 286/1998, sets out as follows the amounts of the fees payable for the issue and renewal of a residence permit:
‘(a)
EUR 80 for residence permits issued for a period longer than three months and shorter than or equal to one year;
(b)
EUR 100 for residence permits issued for a period longer than one year and shorter than or equal to two years;
(c)
EUR 200 for the issue of a long-term resident’s EC residence permit and for those seeking a residence permit within the meaning of Article 27(1)(a) of Legislative Decree No [286/1998] …’
Although the order for reference does not mention other national provisions establishing other amounts payable for the issue and renewal of residence permits, it appears from the observations submitted by the European Commission and by CGIL and INCA that under pre-existing Italian legislation, still in force, a total amount of EUR 73.50 must be paid for the issue and renewal of residence permits, regardless of the duration of the residence permit, in addition to the fees provided for by the 2011 decree.
In particular, it emerges from the Commission’s observations that, under Article 7v(1)(b) of Decree Law No 7 of 31 January 2005 concerning urgent provisions for university and research, heritage and cultural activities, the implementation of major strategic works, the mobility of civil servants and the simplification of formalities relating to stamp duties and registration charges, which was converted into law, with amendments, by Law No 43 of 31 March 2005, paper-based residence permits are to be replaced, at the time of the request for the first issue or renewal of those permits, by electronic residence permits in accordance with Council Regulation (EC) No 1030/2002 of 13 June 2002 laying down a uniform format for residence permits for third-country nationals (OJ 2002 L 157, p. 1), as from 1 January 2006.
In accordance with Article 1 of the Decree of the Minister for the Economy and Finance of 4 April 2006 fixing the amount of fees payable by applicants for electronic residence permits, the amount of those fees is fixed at EUR 27.50, including value added tax.
Pursuant to the single article of the Decree of the Minister for the Interior of 12 October 2005 fixing the amount chargeable to the applicant for the issue and renewal of permits and residence permits under the agreement concluded within the meaning of Article 39(4a) of Law No 3 of 16 December 2003, the cost of the service chargeable to the applicant for that type of procedure is set at EUR 30.
Finally, in accordance with Article 4, Part 1, of the tariff set out in Annex A to Decree No 642 of the President of the Republic of 26 October 1972 on stamp duty, in the version applicable to the main proceedings, the amount of the stamp duty for the issue or renewal of residence permits is set at a flat rate of EUR 16.
The dispute in the main proceedings and the question referred for a preliminary ruling
CGIL and INCA requested the Tribunale amministrativo regionale per il Lazio (Regional Administrative Court of Lazio) to annul the 2011 decree, arguing that the fee which must be paid, pursuant to that decree, for the issue and renewal of a residence permit to third-country nationals is unfair and/or disproportionate.
The referring court considered it appropriate to examine of its own motion whether the national rules which impose the payment of a fee for the issue of a residence permit by fixing, in particular, maximum amounts in the implementing legislation are compatible with the provisions of the relevant EU law.
In that regard, the referring court, relying on the judgment in Commission v Netherlands (C‑508/10, EU:C:2012:243), notes that the legislation of the Member State concerned will be compatible with the principles laid down by Directive 2003/109 only where the fees charged — which may, however, vary within a range of values — do not amount to, at their lowest value, a sum which would be inordinately high and therefore disproportionate in relation to the amount which nationals of that State have to pay for a similar document, such as a national identity card.
In particular, the referring court points out that, in the judgment in Commission v Netherlands (C‑508/10, EU:C:2012:243), the provisions of the legal order of the Kingdom of the Netherlands which laid down, as the lowest amount for the fee charged for issuing a residence permit, a sum equal to approximately seven times that charged for issuing a national identity card to a national of the Member State concerned were considered incompatible with the principles laid down in Directive 2003/109.
Given that the cost of issue of the national identity card in Italy is currently about EUR 10, according to the referring court, and given that the lowest amount set by the 2011 decree is EUR 80, with the result that the financial burden placed on a third-country national in order to be issued with a residence permit in Italy is approximately eight times greater, that court expresses doubts as to whether the national provisions at issue are compatible with the principles of Directive 2003/109, in the light of the judgment in Commission v Netherlands (C‑508/10, EU:C:2012:243).
In those circumstances, the Tribunale amministrativo regionale per il Lazio decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Do the principles laid down in … Directive 2003/109 … preclude rules of national law, such as those laid down in Article 5(2b) of Legislative Decree No 286/1998, in that they provide that “the application for the issue and renewal of the residence permit shall be subject to the payment of a fee, the amount of which shall be set at a minimum of EUR 80 and a maximum of EUR 200 by joint decree of the Ministry of the Economy and Finance and of the Ministry of the Interior which shall also lay down the conditions for the payment …”, thereby fixing a minimum amount for the fee equal to around eight times the charge for the issue of a national identity card?’
Consideration of the question referred
By its question, the referring court asks, in essence, whether Directive 2003/109 precludes national legislation, such as that at issue in the main proceedings, which requires third-country nationals, applying for the issue or renewal of a residence permit in the Member State concerned, to pay a fee which varies in amount between EUR 80 and EUR 200.
At the outset, it must be recalled that, as is apparent from recitals 4, 6 and 12 in the preamble to Directive 2003/109, the principal purpose of that directive is the integration of third-country nationals who are settled on a long-term basis in the Member States (judgment in Commission v Netherlands, C‑508/10, EU:C:2012:243, paragraph 66).
It is important to recall that the Court has already recognised that Member States may make the issue of residence permits pursuant to Directive 2003/109 subject to the payment of charges and that, in fixing the amount of those charges, they enjoy a margin of discretion (judgment in Commission v Netherlands, C‑508/10, EU:C:2012:243, paragraph 64).
However, the Court has stated that the discretion granted to Member States in that respect is not unlimited and that they may not apply national rules which are liable to jeopardise the achievement of the objectives pursued by Directive 2003/109 and, therefore, deprive it of its effectiveness (see judgment in Commission v Netherlands, C‑508/10, EU:C:2012:243, paragraph 65).
Moreover, in accordance with the principle of proportionality, which is one of the general principles of EU law, the measures taken to transpose Directive 2003/109 must be suitable for achieving the objectives of that provision and must not go beyond what is necessary to attain them (see, to that effect, judgment in Commission v Netherlands, C‑508/10, EU:C:2012:243, paragraph 75).
Therefore, while it is open to Member States to make the issue of residence permits under Directive 2003/109 subject to the levying of charges, nevertheless, in accordance with the principle of proportionality, the level at which those charges are set must not have either the object or the effect of creating an obstacle to the obtaining of the long-term resident status conferred by that directive, and also of other rights which stem from the granting of that status, since both the objective and the spirit of that directive would otherwise be undermined (see, to that effect, judgment in Commission v Netherlands, C‑508/10, EU:C:2012:243, paragraph 69).
In that connection, according to the order for reference the amount of the fee at issue in the main proceedings is EUR 80 for the issue and renewal of residence permits for a period longer than three months and up to one year, EUR 100 for the issue and renewal of residence permits for a period longer than one year and up to two years, and EUR 200 for the issue of long-term resident’s EU residence permits.
The financial impact of such a fee may be significant for certain third-country nationals meeting the conditions laid down by Directive 2003/109 for the granting of residence permits covered by that directive, especially since, given the duration of such permits, those nationals are obliged to seek the renewal of their permits somewhat frequently and the amount of that fee may be in addition to other fees provided for under pre-existing national legislation, with the result that, in such circumstances, the obligation to pay the fee at issue in the main proceedings could constitute an obstacle to the exercise by those third-country nationals of the rights conferred on them by that directive.
In that regard, it should be noted that the applicants in the main proceedings and the Commission pointed out — both in their observations and at the hearing — that, under pre-existing Italian legislation, which is still in force, a separate fee amounting to EUR 73.50 must be paid in any event, for both the issue and the renewal of the residence permits, irrespective of the duration of the residence permit in question, with that amount being in addition to the fee at issue in the main proceedings.
Furthermore, it appears from the order for reference that, in accordance with Article 14a of Legislative Decree No 286/1998, half of the proceeds generated by the collection of the fee at issue is earmarked to finance the return to their country of origin or provenance of third-country nationals discovered to be illegally present in Italy, this being a fact which the Italian Government confirmed at the hearing.
Accordingly, the Italian Government’s argument that the fee at issue in the main proceedings cannot be disproportionate because the proceeds from that fee are linked to the investigative activity necessary to verify whether the conditions governing the issue of residence permits in accordance with Directive 2003/109 have been satisfied cannot be accepted.
In the light of the foregoing, the answer to the question is that Directive 2003/109 precludes national legislation, such as that at issue in the main proceedings, which requires third-country nationals, when applying for the issue or renewal of a residence permit in the Member State concerned, to pay a fee which varies in amount between EUR 80 and EUR 200, inasmuch as such a fee is disproportionate in the light of the objective pursued by that directive and is liable to create an obstacle to the exercise of the rights conferred by that directive.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Second Chamber) hereby rules:
Council Directive 2003/109/EC of 25 November 2003 concerning the status of third-country nationals who are long-term residents, as amended by Directive 2011/51/EU of the European Parliament and of the Council of 11 May 2011, precludes national legislation, such as that at issue in the main proceedings, which requires third-country nationals, when applying for the issue or renewal of a residence permit in the Member State concerned, to pay a fee which varies in amount between EUR 80 and EUR 200, inasmuch as such a fee is disproportionate in the light of the objective pursued by that directive and is liable to create an obstacle to the exercise of the rights conferred by that directive.
[Signatures]
( *1 ) Language of the case: Italian. |
JUDGMENT OF THE GENERAL COURT (Second Chamber)
16 March 2016 ( *1 )
‛State aid — Excise duties — Partial remission of a tax debt in the context of an arrangement — Decision declaring the aid to be incompatible with the internal market and ordering its recovery — Rights of the defence — Procedural rights of the interested parties — Private creditor test — Burden of proof’
In Case T‑103/14,
Frucona Košice a.s., established in Košice (Slovakia), represented by K. Lasok QC, B. Hartnett, Barrister, O. Geiss, lawyer, and J. Holmes, Barrister,
applicant,
v
European Commission, represented by L. Armati, P.-J. Loewenthal and K. Walkerová, acting as Agents,
defendant,
APPLICATION for annulment of Commission Decision 2014/342/EU of 16 October 2013 on State aid No SA.18211 (C 25/2005) (ex NN 21/2005) granted by the Slovak Republic for Frucona Košice a.s. (OJ 2014 L 176, p. 38),
THE GENERAL COURT (Second Chamber),
composed of M.E. Martins Ribeiro, President, S. Gervasoni and L. Madise (Rapporteur), Judges,
Registrar: C. Heeren, Administrator,
having regard to the written procedure and further to the hearing on 8 September 2015,
gives the following
Judgment
Background to the dispute
The change in the applicant’s situation and the arrangement procedure
The applicant, Frucona Košice a.s., is a company incorporated under Slovak law which was active in, inter alia, the production of spirits and spirit-based beverages.
Between November 2002 and November 2003, the applicant benefited from several deferrals of payment of tax debts made up of excise duties for which it was liable. Those payment deferrals were granted to it after financial guarantees had been provided to its local tax office, namely the Košice IV office (‘the local tax office’).
On 25 February 2004, as a result of the financial difficulties facing it, the applicant was unable to pay the excise duties for which it was liable in respect of January 2004. Following a legislative change from 1 January 2004, the applicant could no longer obtain a deferral of the payment of those excise duties.
Consequently, the applicant’s licence to produce and process alcohol and spirits was revoked. Since then, it has restricted its activity to distributing, under the trade mark Frucona, spirits purchased from O.H., a company which, pursuant to an agreement with the applicant, produced those alcoholic beverages under licence in the latter’s spirit distilleries.
The applicant also found itself in a position of indebtedness within the terms of the zákon č. 328/1991 Zb. o konkurze a vyrovnaní (Slovak Law No 328/1991 on bankruptcy and arrangements with creditors).
On 8 March 2004, the applicant filed an application for the initiation of an arrangement procedure before the Krajský súd v Košiciach (Košice Regional Court) (Slovakia), proposing to its creditors to pay each of them 35% of the amount of the sum that it owed to them (‘the proposed arrangement’). The applicant’s total debt amounted to approximately 644.6 million Slovak koruna (SKK), approximately SKK 640.8 million of which represented a tax debt.
By decision of 29 April 2004, the Krajský súd v Košiciach authorised the initiation of the arrangement procedure.
On 9 July 2004, the applicant’s creditors, including the local tax office, accepted the proposed arrangement at an arrangement hearing. In the course of that arrangement procedure, the local tax office acted as a separate creditor, a status which it enjoyed as a result of the guarantees provided to it at the time of the deferrals of payment of the excise duties owed by the applicant (see paragraph 2 above).
Prior to 9 July 2004, the applicant states that it submitted to the local tax office, inter alia, an audit report drafted by an independent auditing company (‘the E report’), which was designed to enable that office to assess the respective advantages of the arrangement and bankruptcy.
On 21 June 2004, the Slovak tax authorities carried out an on-the-spot inspection at the applicant’s premises. During that inspection, the latter’s financial situation as at 17 June 2004 was determined.
By decision of 14 July 2004, the Krajský súd v Košiciach confirmed the arrangement. In accordance with that arrangement, 35% of the claim of the Slovak tax authorities was to be repaid, that is to say, an anticipated payment of approximately SKK 224.3 million.
By letter of 20 October 2004, the local tax office indicated to the applicant, inter alia, that the arrangement conditions, according to which a part of the tax debt did not have to be repaid, constituted indirect State aid, which was subject to the approval of the Commission of the European Communities.
On 17 December 2004, the applicant, inter alia, paid to the local tax office a sum of SKK 224.3 million, corresponding to 35% of its total tax debt. By decision of 30 December 2004, the Krajský súd v Košiciach declared the arrangement procedure to be terminated. On 18 August 2006, the Krajský súd v Košiciach reduced the amount to be paid to the local tax office to SKK 224.1 million.
Administrative procedure
On 15 October 2004, a complaint was lodged with the Commission concerning alleged unlawful State aid granted to the applicant.
By letter of 4 January 2005, the Slovak Republic informed the Commission, following the latter’s request for information, that the applicant may have been granted unlawful aid and asked it to approve that aid as rescue aid to a company in difficulties.
After receiving additional information, the Commission, by letter of 5 July 2005, notified the Slovak Republic of its decision to initiate the formal investigation procedure provided for in Article 88(2) EC with regard to the measure in question. That decision was published in the Official Journal of the European Union (OJ 2005 C 233, p. 47).
By letter of 10 October 2005, the Slovak Republic submitted its observations on the measure in question to the Commission. Likewise, by letter of 24 October 2005, the applicant sent its comments on the measure in question to the Commission. Those comments were forwarded to the Slovak Republic to allow it to respond, which it did by letter of 16 December 2005.
Initial decision
On 7 June 2006, the Commission adopted Decision 2007/254/EC on State aid C 25/2005 (ex NN 21/2005) implemented by the Slovak Republic for Frucona Košice a.s. (OJ 2007 L 112, p. 14; ‘the initial decision’). The operative part of that decision provided, in Article 1, that the State aid which the Slovak Republic had implemented for the applicant, amounting to SKK 416515990, was incompatible with the common market and ordered, in Article 2, the recovery of that aid.
Proceedings before the General Court and the Court of Justice
On 12 January 2007, the applicant brought an action before the General Court seeking annulment of the initial decision.
By judgment of 7 December 2010 in Frucona Košice v Commission (T‑11/07, ECR, EU:T:2010:498), the General Court dismissed that action as unfounded.
On appeal by the applicant pursuant to Article 56 of the Statute of the Court of Justice of the European Union, the Court of Justice, by judgment of 24 January 2013in Frucona Košice v Commission (C‑73/11 P, ECR, EU:C:2013:32), set aside the judgment in Frucona Košice v Commission, cited in paragraph 20 above (EU:T:2010:498). In the context of the assessment of the substance of the dispute at first instance, the Court of Justice held that, by failing to take into account, in the assessment of the private creditor test, the duration of the bankruptcy procedure, the Commission had committed a manifest error of assessment or, in so far as it had taken that factor into consideration, had failed to state to the requisite legal standard the reasons for the initial decision. Lastly, the Court of Justice referred the case back to the General Court for it to give judgment on the pleas raised before it on which it had not ruled.
Following the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), and in order to remedy the shortcomings identified by the Court of Justice, on 16 October 2013, the Commission adopted Decision 2014/342/EU on State aid No SA.18211 (C 25/2005) (ex NN 21/2005), granted by the Slovak Republic for Frucona Košice a.s. (OJ 2014 L 176, p. 38; ‘the contested decision’). Article 1 thereof states that the initial decision ‘is repealed’.
Subsequently, by reasoned order of 21 March 2014in Frucona Košice v Commission (T‑11/07 RENV, EU:T:2014:173), the General Court, seised in accordance with Article 117 of its Rules of Procedure of 2 May 1991by the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), found that there was no longer any need to rule on the action for annulment of the initial decision.
Contested decision
As mentioned in paragraph 22 above, the Commission adopted the contested decision, which replaced the initial decision, in order to remedy the defects affecting the latter, as identified by the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32) (recital 10 of the contested decision).
In the contested decision, the Commission took the view, in particular, that it was necessary to examine the question, whether, in essence by accepting the proposed arrangement and therefore the remission of 65% of its claim, the local tax office had behaved towards the applicant like a private creditor in a market economy. The Commission stated in that regard that the position of that office as the applicant’s creditor was unusually strong in so far as that office was in a legally and economically more advantageous position than the applicant’s private creditors. The local tax office held more than 99% of all claims registered and was a separate creditor whose claims could be satisfied at any time during the bankruptcy procedure from the sale of the secured assets (recital 80 of the contested decision).
In the first place, as regards the private creditor test, the Commission noted, in particular, that the applicability of that test depended on the Member State concerned having conferred, other than in its capacity as public authority, an economic advantage on an undertaking, and that, if a Member State relied on that test during the administrative procedure, it must, where there is doubt, establish unequivocally and on the basis of objective and verifiable evidence that the measure implemented fell to be ascribed to the State acting as a private market operator. It made reference in that regard to the judgment of 5 June 2012in Commission v EDF (C‑124/10 P, ECR, EU:C:2012:318, paragraphs 81 to 85) (recital 82 of the contested decision).
In recital 83 of the contested decision, the Commission observed as follows:
In the second place, having noted, in recital 84 of the contested decision, that ‘it is the [applicant] who argued that the measure [was] free of aid and submits the documents described above, in particular reports from two auditors’, the Commission determined whether the Slovak Republic had behaved, in relation to the applicant, like a private creditor.
To that end, the Commission, first, compared, with regard to the evidence submitted by the applicant, the arrangement procedure and the bankruptcy procedure (recitals 88 to 119 of the contested decision), secondly, compared the arrangement procedure and the tax execution procedure (recitals 120 to 127 of the contested decision) and, thirdly, assessed the other evidence produced by the Slovak authorities and the applicant (recitals 128 to 138 of the contested decision). In essence, the Commission considered that both the bankruptcy procedure and the tax execution procedure were, from the point of view of the local tax authorities, more advantageous alternatives compared to the proposed arrangement (recitals 119, 124 and 127 of the contested decision).
The Commission concluded, in recital 139 of the contested decision, that the private creditor test was not satisfied and that the Slovak Republic had conferred on the applicant an advantage that it would not have been able to obtain in market conditions. In recital 140 of that decision, the Commission concluded that the debt write-off agreed to by the local tax office under the arrangement constituted State aid within the meaning of Article 107(1) TFEU. Lastly, in recital 182 of that decision, the Commission concluded that that State aid was not compatible with the internal market.
The operative part of the contested decision comprises five articles.
Article 1 of the contested decision states that ‘[the initial] decision is repealed’ (see paragraph 22 above).
According to Article 2 of the contested decision, the State aid which the Slovak Republic implemented in favour of the applicant, totalling SKK 416515990, is incompatible with the internal market.
In Article 3 of the contested decision, the Commission orders the Slovak Republic to recover the aid in question unlawfully made available to the applicant, together with default interest.
According to Article 4 of the contested decision, the Slovak Republic is required to inform the Commission, within two months of notification of that decision, of the measures taken to comply with it.
In accordance with Article 5 of the contested decision, that decision is addressed to the Slovak Republic.
The applicant received a copy of the contested decision from the Slovak authorities on 24 October 2013.
On 14 June 2014, the contested decision was published in the Official Journal.
Procedure and forms of order sought
By application lodged at the Court Registry on 17 February 2014, the applicant brought the present action.
By separate document lodged at the Court Registry on 18 February 2014, the applicant submitted an application for interim measures seeking, in essence, to obtain the suspension of the operation of Article 3(1) and (2) and Article 4 of the contested decision. That application was rejected by order of the President of the Court of 6 May 2014 and the costs were reserved.
By separate document lodged at the Court Registry on 28 July 2014, the applicant submitted a new application for interim measures seeking, in essence, to obtain the suspension of the operation of Article 3(1) and (2) and Article 4 of the contested decision. That application was rejected by order of the President of the Court of 18 September 2014 and the costs were reserved.
On a proposal from the Judge-Rapporteur, the Court (Second Chamber) decided to open the oral part of the procedure and, by way of measures of organisation of procedure pursuant to Article 64 of the Rules of Procedure of 2 May 1991, requested the applicant to lodge certain documents and put to the Commission a question in writing. The parties complied with those requests within the prescribed period.
The parties presented oral argument and their answers to the questions put by the Court at the hearing on 8 September 2015.
The applicant claims that the Court should:
—
annul the contested decision;
—
order the Commission to pay the costs.
The Commission contends that the Court should:
—
dismiss the action;
—
order the applicant to pay the costs.
Law
The applicant puts forward four pleas in law in support of its action. In essence, these are based, first, on an infringement of the rights of the defence, secondly, on an error of law vitiating recital 83 of the contested decision, thirdly, on errors of fact and of law vitiating the conclusion that the bankruptcy procedure was more advantageous than the arrangement procedure and, fourthly, on errors of fact and of law vitiating the conclusion that the tax execution procedure was more advantageous than the arrangement procedure.
The first plea, alleging infringement of the rights of the defence
In the first plea, the applicant essentially alleges that the Commission infringed its rights of defence and the rights of defence of the Slovak Republic. It submits in particular that the Commission should have heard it on certain material in the file following the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), and on certain aspects of that judgment and should have heard the interested parties and the Slovak Republic on the legal assessments and the considerations set out in the contested decision. In the reply, the applicant adds that the present plea should be understood more broadly as challenging an infringement of essential procedural requirements, which the Court should examine of its own motion, since the Commission refused, when adopting the contested decision, to gather all the relevant information and referred, as it acknowledged in the defence, solely to the information at its disposal at the time of the adoption of the initial decision.
The Commission disputes the merits of all those arguments.
The Court will assess, in turn, the applicant’s claims relating to an infringement of the rights of the defence and an infringement of essential procedural requirements.
First of all, the applicant claims that there was an infringement of its rights of defence.
According to settled case-law, respect for the rights of the defence is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of EU law which must be guaranteed even in the absence of specific rules. That principle requires that the undertaking concerned be afforded the opportunity during the administrative procedure to make known in an effective manner its views on the truth and relevance of the facts, objections and circumstances put forward by the Commission (judgments of 10 July 1986in Belgium v Commission, 234/84, ECR, EU:C:1986:302, paragraph 27; 9 July 2008in Alitalia v Commission, T‑301/01, ECR, EU:T:2008:262, paragraph 169; 15 December 2009in EDF v Commission, T‑156/04, ECR, EU:T:2009:505, paragraph 101; and 12 May 2011in Région Nord-Pas-de-Calais and Communauté d’Agglomération du Douaisis v Commission, T‑267/08 and T‑279/08, ECR, EU:T:2011:209, paragraph 70).
However, the administrative procedure relating to State aid is initiated solely against the Member State concerned. The undertakings receiving aid are regarded solely as ‘interested parties’ in that procedure. They cannot themselves seek to engage in an adversarial debate with the Commission in the same way as is offered to the abovementioned Member State (judgments of 24 September 2002in Falck and Acciaierie di Bolzano v Commission, C‑74/00 P and C‑75/00 P, ECR, EU:C:2002:524, paragraphs 81 and 83; Alitalia v Commission, cited in paragraph 51 above, EU:T:2008:262, paragraph 170; and EDF v Commission, cited in paragraph 51 above, EU:T:2009:505, paragraph 102).
Thus, the case-law confers on the parties concerned essentially the role of information sources for the Commission in the administrative procedure instituted under Article 108(2) TFEU. It follows that, far from enjoying the same rights of defence as those which individuals against whom a procedure has been instituted are recognised as having, the parties concerned have only the right to be involved in the administrative procedure to the extent appropriate in the light of the circumstances of the case (see judgments in Alitalia v Commission, cited in paragraph 51 above, EU:T:2008:262, paragraph 172 and the case-law cited; EDF v Commission, cited in paragraph 51 above, EU:T:2009:505, paragraph 103 and the case-law cited; and Région Nord-Pas-de-Calais and Communauté d’Agglomération du Douaisis v Commission, cited in paragraph 51 above, EU:T:2011:209, paragraph 74 and the case-law cited).
It follows that the applicant cannot claim an infringement of its rights of defence, given that such rights are in no way conferred on it in the context of the administrative procedure relating to State aid. That conclusion is inevitable even if the Member State which granted the State aid and the applicant, as the recipient thereof, may have diverging interests in the context of such a procedure (see, to that effect, judgment in EDF v Commission, cited in paragraph 51 above, EU:T:2009:505, paragraph 104).
However, it is necessary to determine whether the applicant was involved in the administrative procedure to the extent appropriate in the light of the circumstances of the case (see, to that effect and by analogy, judgments in Alitalia v Commission, cited in paragraph 51 above, EU:T:2008:262, paragraph 173, and of 30 April 2014in Tisza Erőmű v Commission, T‑468/08, EU:T:2014:235, paragraph 206).
In that regard, first, it must be borne in mind that it is settled case-law that, in the context of an examination under Article 108(2) TFEU, the Commission is required to give notice to the parties concerned to submit their comments (see judgment of 8 May 2008in Ferriere Nord v Commission, C‑49/05 P, EU:C:2008:259, paragraph 68 and the case-law cited). With regard to that duty, the Court of Justice has ruled that the publication of a notice in the Official Journal is an appropriate means of notifying the persons concerned that the procedure is to be initiated, while also pointing out that the sole aim of this communication is to obtain from persons concerned all information required for the guidance of the Commission with regard to its future action (see judgment of 6 March 2003inWestdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission, T‑228/99 and T‑233/99, ECR, EU:T:2003:57, paragraph 124 and the case-law cited; judgment in Alitalia v Commission, cited in paragraph 51 above, EU:T:2008:262, paragraph 171).
In the present case, it is not disputed that, following the publication by the Commission of the decision to initiate the formal investigation procedure in the Official Journal, the applicant submitted observations by letter of 24 October 2005 and also submitted oral observations on 28 March 2006, that is to say prior to the adoption of the initial decision which the contested decision replaces. In addition, the applicant does not dispute the fact that it had, with the decision to initiate the formal procedure, sufficient knowledge of the relevant information and was able properly to submit its observations in that regard.
It follows that, during the formal investigation procedure which resulted in the adoption of the initial decision, the Commission did not infringe the applicant’s procedural rights, which, moreover, the applicant does not deny.
Nor is it disputed that the contested decision is based solely on the information available at the date of adoption of the initial decision, on which the applicant was able to submit its observations or which it itself provided in its observations. In particular, the applicant, whilst claiming that the Commission introduced new grounds and assessments in the contested decision, acknowledges however in the reply, and confirmed at the hearing in response to a question from the Court, formal note of which was taken in the minutes of the hearing, that the Commission had not taken into consideration any information other than that available to it at the time of the adoption of the initial decision.
Therefore, it must be held that the Commission was able to use that information with a view to the adoption of the contested decision without being required, contrary to what the applicant argues, to obtain once more the applicant’s observations on it.
Secondly, it should be added that, according to the case-law, the procedure for replacing an illegal measure may be resumed at the very point at which the illegality occurred, and the Commission is not required to recommence the procedure by going back further than that precise point (see, to that effect, judgments of 12 November 1998in Spain v Commission, C‑415/96, ECR, EU:C:1998:533, paragraph 31; 3 October 2000in Industrie des poudres sphériques v Council, C‑458/98 P, ECR, EU:C:2000:531, paragraph 82; and in Alitalia v Commission, cited in paragraph 51 above, EU:T:2008:262, paragraphs 99 and 142). That case-law relating to the replacement of a measure annulled by the Court also applies, in the absence of the Court’s annulment of the measure, when the author withdraws and replaces an illegal measure (see, to that effect, judgment in Région Nord-Pas-de-Calais and Communauté d’Agglomération du Douaisis v Commission, cited in paragraph 51 above, EU:T:2011:209, paragraph 83).
In the present case, it is common ground that, in the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32, paragraphs 101 to 103), the Court of Justice held that the Commission, in so far as it had failed to take account, in its assessment of the private creditor test, of the duration of the bankruptcy procedure, had committed a manifest error of assessment or that, in so far as that factor had been taken into consideration by the Commission, the latter had not set out sufficient reasons for its decision. However, it is in no way apparent from that judgment that the Court of Justice called into question the examination procedure in respect of the contested measure or indeed the accuracy of the basic data gathered during that procedure.
Moreover, it is also common ground that, as is apparent from recital 10 of the contested decision, the Commission adopted that decision in order to remedy the defects found by the Court of Justice which vitiated the initial decision. Thus, the contested decision contains, inter alia, an assessment of the duration of the bankruptcy procedure from the point of view of the private creditor test.
In those circumstances, in accordance with the case-law cited in paragraph 61 above, the Commission was in no way required to reopen the formal procedure and to obtain once more the applicant’s observations.
It follows that, by adopting the contested decision on the basis of the information gathered in the administrative procedure which led to the adoption of the initial decision and without obtaining once more the applicant’s observations, the Commission did not infringe the applicant’s right to be involved in that procedure.
None of the arguments put forward by the applicant is of such a kind as to disprove that conclusion.
First, the applicant criticises the Commission for not having given it the opportunity to comment on the new considerations set out in the contested decision, on the effect of the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), on the bankruptcy of L., a company operating in the same sector, and on certain paragraphs of the judgment in Frucona Košice v Commission, cited in paragraph 20 above (EU:T:2010:498). In the reply, it adds that the Commission failed to give the interested parties the opportunity to provide the information necessary in order to establish whether its interpretation of the law was applicable.
In that regard, first of all, it should be noted that, in paragraphs 141, 145, 146, 148, 177, 180, 181, 190, 191 and 198 of the judgment in Frucona Košice v Commission, cited in paragraph 20 above (EU:T:2010:498), cited by the applicant, the Court essentially noted the inadequacy of certain information and claims made by the applicant during the administrative procedure and the lack of any obligation on the part of the Commission to request additional information. Moreover, it is apparent from recital 117 of the contested decision that the applicant had not demonstrated the similarity between its own case and that of L.
The applicant’s line of argument thus amounts in essence to criticising the Commission for having failed to reopen the formal investigation procedure and for having failed to hear it on all the information which it had provided during the administrative procedure which led to the adoption of the initial decision and which was considered inadequate by the Court in the judgment in Frucona Košice v Commission, cited in paragraph 20 above (EU:T:2010:498), or by the Commission in the initial decision. That line of argument is at variance with the case-law cited in paragraph 52 above, according to which interested parties, including the recipient of the aid, cannot seek to engage in an adversarial debate with the Commission. If that line of argument were accepted, it would have precisely the effect of establishing such a debate.
Next, in so far as the applicant criticises the Commission for having failed to hear the interested parties with regard to the legal assessment and the considerations set out in the contested decision, it is important to note that it has already been held that neither the provisions on State aid nor the case-law require the Commission to hear the views of the recipient of State resources on its legal assessment of the measure in question or to inform the Member State concerned — or, a fortiori, the recipient of the aid — of its position before adopting its decision, where the interested parties and the Member State concerned have been given notice to submit their comments (judgments of 8 July 2004in Technische Glaswerke Ilmenau v Commission, T‑198/01, ECR, EU:T:2004:222, paragraph 198, and 1 July 2010in Nuova Terni Industrie Chimiche v Commission, T‑64/08, EU:T:2010:270, paragraph 168; see also, to that effect, judgment of 21 January 1999in Neue Maxhütte Stahlwerke and Lech-Stahlwerke v Commission, T‑129/95, T‑2/96 and T‑97/96, ECR, EU:T:1999:7, paragraphs 230 and 231). In the present case, it is common ground that the Commission placed the applicant in a position to submit its observations on the decision to initiate the formal procedure.
Lastly, on the same grounds, the Court must reject the applicant’s argument alleging that the Commission failed to hear it regarding the effect of the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), on its analysis.
Secondly, the applicant criticises the Commission for having failed to gather all the relevant information for the purpose of adopting the contested decision and for referring solely to the information at its disposal at the time of the adoption of the initial decision.
Admittedly, it must be noted that, as the applicant submits, the Court of Justice has held, inter alia, that, in the context of the review of the complex economic assessments made by the Commission in the field of State aid, the EU judicature must check whether the evidence relied on contains all the relevant information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it (judgment in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 76). It is also true that, according to the case-law cited by the applicant, where it appears that the private creditor test might be applicable, it is for the Commission to ask the Member State concerned to provide it with all the relevant information enabling it to determine whether the conditions for applying that test are satisfied (judgment of 21 March 2013in Commission v Buczek Automotive, C‑405/11 P, EU:C:2013:186, paragraph 33).
However, those considerations form part of the examination of the merits of a Commission decision on State aid. Thus, they were formulated in the examination of the grounds relied on in the appeal proceedings relating to the substance of the assessment by the General Court, of the pleas relating to the substantive legality of the decisions at issue and, more specifically, to the private creditor test. By contrast, the Court of Justice did not rule, in the judgments cited in paragraph 73 above, on the different question of the lawfulness of the procedure for adopting such a decision in the light, in particular, of the procedural rights of the recipient of the aid.
It follows that the applicant’s arguments summarised in paragraph 72 above relate to the substantive legality of the contested decision and cannot establish any infringement of its procedural rights. The same is true of the fact, even if proved, that the Commission’s initial examination was not reliable.
Thirdly, the applicant argues that, although the Member State concerned and the recipient of the aid have different roles at the time of the formal examination procedure, it is necessary to ensure that the recipient’s arguments are heard by other means when the Member State does not defend the recipient’s interests.
However, in the light of the case-law cited in paragraph 54 above, it must be held that the fact that the Member State concerned does not defend the interests of the recipient of the aid is not capable of altering the role of the recipient during the administrative procedure or the nature of its participation in that procedure, so as to confer on it, in respect of the rights of the defence, guarantees comparable to those of that Member State.
Moreover, as regards the right of the recipient of the aid to be involved in the procedure to the extent appropriate in the light of the circumstances of the case, it suffices to note that, in the present case, the applicant was afforded the opportunity to provide all the information which it considered relevant and useful following the publication of the decision to initiate the formal examination procedure in the Official Journal. It is unequivocally clear from the observations submitted by the applicant at that stage that it was aware of the fact that the Slovak authorities did not challenge the provisional conclusions in that decision as regards the classification of the measure in question as State aid. It was therefore, in any event, able to submit its observations notwithstanding the divergence of views.
It follows from the foregoing considerations that all the applicant’s arguments seeking in essence to prove that the Commission should have heard it following the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), must be dismissed. It also follows that it is not necessary to examine the argument alleging that, if it had been able to submit additional observations, the content of the contested decision might have been different.
In the second place, the applicant confirmed, in response to a question put to it by the Court at the hearing, that it also intended to rely on an infringement of the rights of defence of the Slovak Republic, which the Commission failed to hear following the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), and on the new questions raised in the contested decision.
According to the case-law, a breach of the rights of the defence is an irregularity committed against the holder of those rights (see judgment of 8 July 2004in JFE Engineering and Others v Commission, T‑67/00, T‑68/00, T‑71/00 and T‑78/00, ECR, EU:T:2004:221, paragraph 425 and the case-law cited), and which must therefore be raised by the Member State concerned itself (judgment in Nuova Terni Industrie Chimiche v Commission, cited in paragraph 70 above, EU:T:2010:270, paragraph 186; see also, to that effect, judgment in Technische Glaswerke Ilmenau v Commission, cited in paragraph 70 above, EU:T:2004:222, paragraph 203).
It follows that the applicant cannot rely on an alleged infringement of the Slovak Republic’s rights of defence.
Secondly, it is appropriate to examine the claim made in the reply that the present plea should be understood more broadly as challenging an infringement of essential procedural requirements, which the Court should examine of its own motion, since the Commission acknowledged in the defence that it had excluded from its analysis all information received after the procedure which led to the adoption of the initial decision.
In that regard, it should be observed that, admittedly, the infringement of essential procedural requirements within the meaning of Article 263 TFEU constitutes a ground involving a question of public policy, which must be raised by the EU judicature of its own motion (judgment of 13 December 2013in Hungary v Commission, T‑240/10, ECR, EU:T:2013:645, paragraph 70; see also, to that effect, judgments of 4 September 2014in Spain v Commission, C‑192/13 P, ECR, EU:C:2014:2156, paragraph 103, and 22 October 2014in Spain v Commission, C‑429/13 P, ECR, EU:C:2014:2310, paragraph 34).
However, a plea going to the substantive legality of the contested decision, which falls within the scope of infringement of the Treaties or of any rule of law relating to their application, within the meaning of Article 263 TFEU, can, in principle, be examined by the EU judicature only if it is raised by the applicant (judgments of 10 December 2013in Commission v Ireland and Others, C‑272/12 P, ECR, EU:C:2013:812, paragraph 28, and 20 March 2014in Rousse Industry v Commission, C‑271/13 P, EU:C:2014:175, paragraph 18; see also, to that effect, judgment of 2 April 1998in Commission v Sytraval and Brink’s France, C‑367/95 P, ECR, EU:C:1998:154, paragraph 67).
In the present case, it should be noted that, as is apparent from paragraphs 73 to 75 above, the question whether the Commission took into account all the information relevant for assessing the private creditor test falls within the assessment of the substance of the contested decision and not of any infringement of essential procedural requirements.
It follows that the Court must reject the applicant’s arguments alleging an infringement of essential procedural requirements, and there is no need to assess their admissibility in so far as they were put forward for the first time at the stage of the reply.
In the light of all the foregoing considerations, the first plea must be dismissed in its entirety.
The second plea, alleging an error of law vitiating recital 83 of the contested decision
In the second plea for annulment, the applicant submits that recital 83 of the contested decision is vitiated by an error of law on the ground, in essence, that the Commission wrongly inferred from the judgment in Commission v EDF, cited in paragraph 26 above (EU:C:2012:318, paragraphs 81 to 85), that the mere fact that a Member State does not comment on the aid at the material time or that it asks for that measure to be treated as rescue aid means that it must necessarily be State aid. In that regard, first, the applicant observes that the concept of State aid is an objective concept and that statements to which the Member State agrees may not be reliable and cannot be relied upon as against an interested party who disputes the classification of the measure at issue as State aid. Secondly, the issue of ascertaining the capacity in which the Slovak Republic acted in the present case does not arise, given that the latter could act only in its capacity as creditor. Therefore, the only issue which arises is whether, having regard, in particular, to the criteria laid down in paragraphs 70 to 73 of the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), the applicant would have clearly been unable to obtain the advantage at issue from a private creditor. Thirdly, the Commission has no evidence that the local tax office had not dealt with the tax debt at issue in its capacity as creditor, by seeking to optimise the amount which could be recovered. According to the applicant, only the decision of that office, and not the assessment of the Slovak authorities, as indicated in recital 83 of the contested decision, is relevant in that regard. Fourthly, the applicant argues that it is apparent from the case-law that the Commission errs in taking the view that it is for the Member State to rely on the private creditor test.
The Commission disputes the validity of those arguments on the ground, in essence, that recital 83 of the contested decision is consistent with the case-law relating to the applicability of the private creditor test and that, in any event, it examined the information at its disposal in order to assess whether the conditions relating to the application of that test had been satisfied in the present case. First, the Commission submits that, according to the case-law, the applicability of the private creditor test depends on the capacity in which the Member State concerned confers an economic advantage on an undertaking, it being for that State to plead and to establish unequivocally and on the basis of objective and verifiable evidence that it took its decision in its capacity as market operator and not as public authority. According to the Commission, if it were to be accepted that the recipient of aid could rely on the private creditor test, that case-law would, a fortiori, apply in the same way. Secondly, the applicant’s argument is based on the erroneous assumption that the private creditor test may be applied without first establishing its applicability, given the Member State’s intention to act as a private operator. In the present case, the Slovak Republic provided evidence tending to show that that test was not applicable. Thirdly, as regards the applicant’s arguments based on a divergence between the views of the Slovak authorities and those of the local tax office, the Commission observes that the Member State alone is party to the procedure for examining State aid.
As a preliminary point, it should be recalled that, according to Article 107(1) TFEU, save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, in so far as it affects trade between Member States, incompatible with the internal market.
The concept of aid embraces not only positive benefits, such as subsidies, but also measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect (judgments of 1 December 1998in Ecotrade, C‑200/97, ECR, EU:C:1998:579, paragraph 34; Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 69; and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 30).
However, the conditions which a measure must meet in order to be treated as ‘aid’ for the purposes of Article 107 TFEU are not met if the recipient undertaking could, in circumstances which correspond to normal market conditions, have obtained the same advantage as that which has been made available to it through State resources (judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 70, and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 31; see also, to that effect, judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 78 and the case-law cited).
When a public creditor grants payment facilities in respect of a debt payable to it by an undertaking that assessment is made, by applying, in principle, the private creditor test. That test, where applicable, is among the factors which the Commission is required to take into account for the purposes of establishing whether such aid exists (judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 71, and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 32; see also, to that effect, judgments of 29 April 1999in Spain v Commission, C‑342/96, ECR, EU:C:1999:210, paragraph 46, and 29 June 1999in DM Transport, C‑256/97, ECR, EU:C:1999:332, paragraph 24).
In that regard, it must be borne in mind that, in the context of the private investor in a market economy test, the Court of Justice has held that the applicability of that test ultimately depended on the Member State concerned having conferred, in its capacity as shareholder and not in its capacity as public authority, an economic advantage on an undertaking belonging to it (judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 81).
In a similar manner, the applicability of the private creditor test ultimately depends on the Member State concerned having conferred, other than in its capacity as public authority, an economic advantage on an undertaking (see, to that effect, judgment in EDF v Commission, cited in paragraph 51 above, EU:T:2009:505, paragraph 224). According to the case-law, when a public authority grants payment facilities in respect of a debt payable to it by an undertaking, its conduct must be compared with that of a private creditor who is seeking to obtain payment of sums owed to it by a debtor in financial difficulties (judgments of 11 July 2002 in HAMSA v Commission, T‑152/99, ECR, EU:T:2002:188, paragraph 167, and 17 May 2011in Buczek Automotive v Commission, T‑1/08, ECR, EU:T:2011:216, paragraph 70; see also, to that effect, judgments in Spain v Commission, cited in paragraph 94 above, EU:C:1999:210, paragraph 46, and DM Transport, cited in paragraph 94 above, EU:C:1999:332, paragraph 24). In such situations the private operator test and, therefore, the private creditor test is material because the conduct of the State is capable of being adopted, at least in principle, by a private operator acting with a view to profit (see, to that effect, judgment in EDF v Commission, cited in paragraph 51 above, EU:T:2009:505, paragraph 224).
In the context of the private investor in a market economy test, the Court of Justice has, moreover, held that, if a Member State relies on that test during the administrative procedure, it must, where there is doubt, establish unequivocally and on the basis of objective and verifiable evidence that the measure implemented falls to be ascribed to the State acting as shareholder (judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 82). That evidence must show clearly that, before or at the same time as conferring the economic advantage at issue, the Member State concerned took the decision to make an investment, by means of the measure actually implemented, in the public undertaking (see judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 83 and the case-law cited). In that regard, it may be necessary to produce evidence showing that the decision is based on economic evaluations comparable to those which, in the circumstances, a rational private investor in a situation as close as possible to that of the Member State would have had carried out, before making the investment, in order to determine its future profitability (judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 84). By contrast, economic evaluations made after the advantage was conferred, a retrospective finding that the investment made by the Member State concerned was actually profitable, or subsequent justifications of the course of action actually chosen do not suffice to show that, before or at the same time as conferring the advantage, the Member State took that decision as a shareholder (see judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 85 and the case-law cited).
According to that case-law, if the Member State concerned provides the Commission with the requisite evidence, it is for the Commission to carry out a global assessment, taking into account — in addition to the evidence provided by that Member State — any other relevant evidence enabling it to determine whether the Member State took the measure in question in its capacity as shareholder or as a public authority (see, to that effect, judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 86).
In the contested decision, the Commission noted that, in the decision to open the formal investigation procedure, it had raised doubts as to whether the Slovak Republic behaved in relation to the applicant as a private creditor (recital 78 of the contested decision). While noting that the conditions of the arrangement were identical for the private creditors and for the local tax office (recital 79 of the contested decision), the Commission observed that the position of that tax office as creditor was unusually strong. The Commission inferred from this that ‘it therefore need[ed] to be examined in detail whether the Tax Office [had] used all the means available to it to obtain the highest possible repayment of its receivables, as a market economy creditor would do’ (recital 80 of the contested decision).
To that end, the Commission inter alia recalled, in recitals 81 and 82 of the contested decision, the case-law relating to the application of the private creditor test, cited in essence in paragraphs 93 and 94 above, and to the applicability of that test, by analogy with the case-law cited in paragraphs 95 and 97 above. Thereafter, after stating as follows in recitals 83 and 84 of the contested decision, the Commission applied that test:
In the first place, it should be observed that it follows from the contested decision that, contrary to the reading suggested by the Commission in its written pleadings and at the hearing, the Commission essentially considered the private creditor test to be applicable. That reading is necessary in particular in the light of recitals 78 and 80 of the contested decision, as set out in paragraph 99 above. It is also necessary in the light of recital 84 of the contested decision, in which the Commission refers to the reliance on that test by the applicant itself, since the applicant submitted documents for that purpose, before the Commission decided to apply that test on the merits.
That reading of the contested decision is not called into question by recital 83 of the contested decision. The reference, in that recital, to the ‘case-law referred to above’ may, owing to its generality and its lack of precision, refer both to the case-law relating to the applicability of the private creditor test and to the case-law relating to the application of that test, set out in recitals 82 and 81 of the contested decision respectively. In other words, the Commission’s conclusion that ‘it therefore appears that the requirements of the case-law referred to above have not been complied with in this case and the disputed measure constitutes state aid’ may be construed as meaning not only that the private creditor test was not applicable, as the Commission at present claims, but also as meaning that, in view of the information provided by the Slovak Republic, the conditions of that test were not satisfied. Having regard to the considerations set out in paragraph 101 above, the latter reading is necessary, contrary to the position defended by the Commission.
Although it is true that, in recital 83 of the contested decision, the Commission could not draw, from the mere classification of the disputed measure as State aid by the Slovak Republic, the conclusion that that measure actually constituted such aid, the fact remains that it in any event assessed the merits of private creditor test and examined all the conditions that constitute State aid.
It follows that the present plea, directed at the conclusion that the disputed measure must be classified as State aid since the Slovak Republic had suggested that was the case, is ineffective. That conclusion is necessary without the need to examine the other arguments, summarised in paragraph 89 above, which the applicant raised in particular in response to the Commission’s arguments. Those arguments seek to establish the existence of an error of law vitiating recital 83 of the contested decision and do not have any impact on the fact that the error is of no effect.
It also follows that the Court cannot, as the Commission essentially invites it to do within the context of both the examination of the second plea and the examination of the third and fourth pleas, which relate to the application of the private creditor test, declare that test inapplicable in the present case. Such a finding would result in it substituting its assessment for that of the Commission.
According to the case-law, in reviewing the legality of acts under Article 263 TFEU, the Court has jurisdiction in actions brought on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the TFEU or of any rule of law relating to its application, or of misuse of powers. Article 264 TFEU provides that, if the action is well founded, the act concerned must be declared void. The Court cannot, therefore, under any circumstances substitute its own reasoning for that of the author of the contested act (see judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 89 and the case-law cited, and of 28 February 2013in Portugal v Commission, C‑246/11 P, EU:C:2013:118, paragraph 85 and the case-law cited).
In the second place, it is important to add that, even if recital 83 of the contested decision must be construed as meaning that, as it claims at present, the Commission rejected the applicability of the private creditor test in the present case, that recital is vitiated by an error of law, which is, however, ineffective as regards the lawfulness of the contested decision for the reasons set out in paragraphs 103 and 104 above and in paragraph 127 below.
In that regard, it should be observed that, by analogy with the case-law cited in paragraph 97 above, if a Member State relies on the private creditor test during the administrative procedure, it must, where there is doubt, establish unequivocally and on the basis of objective and verifiable evidence, such as that referred to in that paragraph, that the measure implemented falls to be ascribed to the State acting as a private operator.
It should be noted, however, that it does not follow from that case-law that, where the Member State concerned does not rely on the private creditor test and considers that the disputed measure constitutes State aid, the Commission may, on that ground alone, dispense with an examination of that test or consider it to be inapplicable. On the contrary, the private creditor test may be relied on by the recipient of the aid.
First of all, according to the case-law, when the Commission decides to initiate the formal investigation procedure, it is for the Member State concerned and the beneficiaries of the measure under consideration to put forward the arguments whereby they seek to show that the measure at issue either does not constitute aid or is aid compatible with the internal market, since the object of the formal procedure is specifically to ensure that the Commission is fully informed of all the facts of the case (see judgments of 28 November 2008in Hotel Cipriani and Others v Commission, T‑254/00, T‑270/00 and T‑277/00, ECR, EU:T:2008:537, paragraph 208 and the case-law cited, and 20 September 2011 in Regione autonoma della Sardegna and Others v Commission, T‑394/08, T‑408/08, T‑453/08 and T‑454/08, ECR, EU:T:2011:493, paragraph 246 and the case-law cited).
The private creditor test is not an exception which applies only if a Member State so requests, in situations characterised by all the constituent elements of State aid incompatible with the internal market, as laid down in Article 107(1) TFEU. It follows from paragraph 94 above that, where it is applicable, that test is among the factors which the Commission is required to take into account for the purposes of establishing the existence of such aid (see, by analogy, judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 103).
It follows that, besides the fact that, in the light of the case-law cited in paragraph 111 above, the possibility of relying on the private creditor test is in no way reserved solely for the Member State concerned, an interpretation of the case-law according to which the recipient of the aid is precluded from relying on the private creditor test on the sole ground that the Member State concerned neither relied on that test nor even disputed the classification of the disputed measure as State aid would be incompatible with the case-law set out in paragraph 110 above, according to which the beneficiary may put forward the arguments whereby he seeks to show that the measure at issue does not constitute State aid.
Next, in paragraph 61 of the judgment of 24 October 2013in Land Burgenland and Others v Commission (C‑214/12 P, C‑215/12 P and C‑223/12 P, ECR, EU:C:2013:682), the Court of Justice observed that, in that case, neither during the administrative procedure nor before the General Court had the authority which had granted an economic advantage, the Member State concerned or the recipient of the aid put forward any evidence showing that the disputed measure was based on economic evaluations carried out by that authority for the purposes of establishing its profitability, from which it may be inferred that, not only the Member State concerned, but also the recipient of aid, may rely on the private creditor test by proving, where appropriate, that the measure at issue was decided by that State in its capacity as market operator.
Lastly, it should be observed that the case-law set out in paragraphs 97 and 108 above must be read in the context of the circumstances of the case which gave rise to the judgment in Commission v EDF, cited in paragraph 26 above (EU:C:2012:318, paragraph 82), namely the reliance on the private investor in a market economy test by the Member State itself. Since the Court of Justice was not called upon to answer the question whether the recipient could rely on that test where the Member State concerned claimed that the disputed measure had to be classified as State aid, it cannot be inferred from that judgment that only that Member State can validly rely on that test.
Nevertheless, it must be observed that, like a Member State which relies on the private creditor test, where the recipient of the aid relies on the private creditor test, it must, in case of doubt, establish unequivocally and on the basis of objective and verifiable evidence that the measure implemented falls to be ascribed to that Member State acting as a market operator.
In the present case, it is true that the Slovak Republic did not rely on the private creditor test and suggested classifying the disputed measure as State aid. However, the applicant relied on that test during the formal investigation procedure and, as is apparent from recital 84 of the contested decision, submitted documents in support of that claim, in particular the reports from two auditors.
In those circumstances, having regard in particular to paragraph 112 above, the Commission cannot infer from the mere fact that the Member State considered that the contested measure constituted State aid and did not rely on the private creditor test that that test was inapplicable in the present case.
Moreover, having regard to the case-law set out in paragraphs 95, 97 and 98 above, it must be held that, since the applicant had relied on that test and had submitted documents for that purpose, it was for the Commission to establish whether those documents corresponded to the requirements laid down in that case-law and, if so, to carry out a global assessment, taking into account — in addition to the evidence provided — any other relevant evidence enabling it to determine whether the Member State at issue took the measure in question in its capacity as market operator or as a public authority. However, although it is true that, in recitals 47 and 107 of the contested decision, the Commission found that, contrary to what was claimed by the applicant, it was not established that the E report had been available to the local tax office before its acceptance of the arrangement, it must be stated that the Commission did not rule on the characteristics of those documents and did not carry out that global assessment for the purpose of determining the applicability of the test in the present case.
For the sake of completeness, it must in any event be noted that the judgment in Commission v EDF, cited in paragraph 26 above (EU:C:2012:318, paragraphs 81 to 85), which clarified the conditions for the applicability of the private investor in a market economy test and on which the Commission bases its claim that the private creditor test is not applicable in the present case, was delivered on 5 June 2012, that is to say one month before the hearing which took place on 5 July 2012in the case which gave rise to the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32). It is common ground, moreover, that, in the latter judgment, the Court of Justice took account of certain guidance in the judgment in Commission v EDF, cited in paragraph 26 above (EU:C:2012:318).
It is true that, in the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), the Court of Justice did not explicitly rule on the applicability of the private creditor test, as the Commission has essentially claimed. In addition, according to the information supplied by the Commission, that issue had not been addressed in the appeal.
However, it is common ground that, in paragraphs 68 to 91 and 100 to 104 of the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), the Court of Justice ruled on the merits of the assessment, by the General Court and by the Commission, of the conditions for applying the private creditor test in the judgment in Frucona Košice v Commission, cited in paragraph 20 above (EU:T:2010:498) and in the initial decision respectively.
The applicability of the private creditor test is a necessary pre-condition for its application, as is clear, moreover, from paragraph 71 of the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), in which the Court of Justice observed that that test, where applicable, is among the factors which the Commission is required to take into account for the purposes of establishing whether aid exists.
Therefore, since the Court of Justice went on to assess the conditions for applying the private creditor test, it must be held that it implicitly but necessarily considered that test to be applicable.
That conclusion is all the more compelling since, while, in the initial decision, the Commission had found that the conditions for applying the private creditor test were not satisfied and the General Court had dismissed on the merits the pleas and arguments directed against part of the reasoning underlying that finding, the Court of Justice — ruling after annulment of the judgment in Frucona Košice v Commission, cited in paragraph 20 above (EU:T:2010:498), on the dispute at first instance in accordance with the first paragraph of Article 61 of the Statute of the Court of Justice — essentially held that the assessment of that test in the initial decision was vitiated by a manifest error of assessment or, at the very least, by an inadequate statement of reasons (judgment in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraphs 101 to 103).
Moreover, the conclusion drawn in paragraph 123 above applies regardless of the fact that, according to the information supplied by the Commission, the applicability of the private creditor test had not been disputed in the case which gave rise to the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32). According to settled case-law, although the EU judicature must rule only on the application of the parties, whose task it is to define the scope of the dispute, it cannot be bound merely by the arguments relied upon by the parties in support of their claims, or else it might be forced, in some circumstances, to base its decision on erroneous legal considerations (orders of 27 September 2004in UER v M6 and Others, C‑470/02 P, EU:C:2004:565, paragraph 69; 13 June 2006in Mancini v Commission, C‑172/05 P, ECR-SC, EU:C:2006:393, paragraph 41; and judgment of 21 September 2010in Sweden and Others v API and Commission, C‑514/07 P, C‑528/07 P and C‑532/07 P, ECR, EU:C:2010:541, paragraph 65). It follows that, the Court of Justice could have found the private creditor test to be inapplicable, even in the absence of any dispute if it had wished to avoid basing its judgment, by which it essentially declared invalid part of the reasoning supporting the conclusion that the conditions for applying the private creditor test were not satisfied and presupposing the applicability of that test, on erroneous legal considerations. Since the Court of Justice did not do so, it must be considered that it intended to confirm the applicability of that test in the present case.
Therefore, if, as the Commission suggests, the applicability of the private creditor test to the circumstances of the present case now has to be dismissed, the force of res judicata attaching to the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), would be disregarded.
It follows that the Commission’s line of argument seeking to establish the inapplicability of the private creditor test cannot succeed. Therefore, in so far as recital 83 of the contested decision contains the conclusion that that test is inapplicable in the present case, the contested decision is vitiated by an error of law. However, since the Commission examined that test on the merits, that error is not, by itself, capable of justifying the annulment of the contested decision.
In the light of all the foregoing considerations, the second plea put forward by the applicant must be rejected as ineffective.
The third plea, alleging errors of fact and of law vitiating the conclusion that the bankruptcy procedure was more advantageous than the arrangement procedure
In the context of the third plea, the applicant disputes the Commission’s conclusion that a private creditor would have opted for the bankruptcy procedure and not for the arrangement. That plea is subdivided into six sets of arguments. The first is a general criticism of the Commission’s approach. The second relates to the assessment by the Commission of the proceeds from the sale of the applicant’s assets in the context of bankruptcy. The third to fifth relate to the duration of the bankruptcy procedure and the sixth relates to an error vitiating recital 92 of the contested decision.
Preliminary review of the case-law
Before examining the merits of the Commission’s comparative assessment of the bankruptcy and arrangement procedures in the light of the applicant’s arguments, it is appropriate to recall, at the outset, the relevant case-law relating to the application of the private creditor test, the allocation of the burden of proof that the conditions for applying that test have been fulfilled and the judicial review of the assessment of that test.
In the first place, as was observed in paragraphs 92 to 94 of this judgment, the concept of aid embraces measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking. However, the conditions which a measure must meet in order to be treated as ‘aid’ are not met if the recipient undertaking could, in circumstances which correspond to normal market conditions, have obtained the same advantage, that assessment being made, in principle, when a public creditor grants an undertaking payment facilities in respect of a debt, by applying the private creditor test to that public creditor.
Such payment facilities constitute State aid for the purposes of Article 107(1) TFEU where, taking account of the significance of the economic advantage thereby granted, the recipient undertaking would manifestly not have obtained comparable facilities from a private creditor who is in a situation as close as possible to that of the public creditor and is seeking to recover sums due to it by a debtor in financial difficulty (see judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 72 and the case-law cited, and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 46 and the case-law cited).
It is therefore for the Commission to carry out an overall assessment, taking into account all relevant evidence in the case enabling it to determine whether the recipient company would manifestly not have obtained comparable facilities from such a private creditor (judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 73, and in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 47; see also, by analogy, judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 86).
In that regard, all information liable to have a significant influence on the decision-making process of a normally prudent and diligent private creditor, who is in a situation as close as possible to that of the public creditor and is seeking to recover sums due to it by a debtor experiencing difficulty in making the payments, must be regarded as being relevant (judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 78, and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 54).
In addition, it is apparent from the case-law that, where, as in the present case, for the purposes of recovering the sums owed to it, a normally prudent and diligent private creditor in a situation as close as possible to that of the Slovak authorities would have had to choose between several procedures, it would have had to weigh up the advantages and disadvantages of each of those procedures in order to identify the more advantageous alternative (see, to that effect, judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraphs 79 and 80, and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 56).
That choice of the private creditor is influenced by number of factors, including the creditor’s status as the holder of a secured, preferential or ordinary claim, the nature and extent of any security it may hold, its assessment of the chances of the firm being restored to viability, as well as the amount it would receive in the event of liquidation (judgments in HAMSA v Commission, cited in paragraph 96 above, EU:T:2002:188, paragraph 168, and Buczek Automotive v Commission, cited in paragraph 96 above, EU:T:2011:216, paragraph 84; see also, to that effect, judgment in Rousse Industry v Commission, cited in paragraph 85 above, EU:C:2014:175, paragraph 61), as well as the risks of seeing its losses increase (see, to that effect, judgment of 12 September 2007in Olympiaki Aeroporia Ypiresies v Commission, T‑68/03, ECR, EU:T:2007:253, paragraph 283). The decision reached by the private creditor is also liable to be influenced significantly by the duration of the procedures, since it postpones the recovery of the sums due and might thus affect, in the case of lengthy procedures, inter alia, their value (judgment in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 81).
It follows that, in the present case, the Commission had to ascertain whether, in the light of those factors, for the purposes of recovering the sums owed to it, a normally prudent and diligent private creditor in a situation as close as possible to that of the Slovak authorities would manifestly not have accepted the proposed arrangement (see, to that effect, judgment in Buczek Automotive v Commission, cited in paragraph 96 above, EU:T:2011:216, paragraph 85). For that purpose, in order to identify the more advantageous alternative, it had to compare, on the basis of the interests of a private creditor, the advantages and disadvantages of each of those procedures (see, to that effect, judgment in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 57).
In the second place, as regards the determination of the burden of proof that the conditions for applying the private creditor test have been fulfilled, first, it should be recalled that, according to the case-law, when, in the context of the private creditor test, it carries out the overall assessment referred to in paragraph 133 above, the Commission is to take into account, in addition to the evidence provided by the Member State concerned, all other relevant evidence in the case (see, to that effect and by analogy, the case-law cited in paragraph 98 above). Thus, where it appears that the private creditor test might be applicable, it is for the Commission to ask that Member State to provide it with all the relevant information enabling it to determine whether the conditions for applying that test are satisfied (judgment in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 33).
It follows that the burden of proof that the conditions for applying the private creditor test have been fulfilled is borne by the Commission (see, to that effect, judgment in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 34). That applies all the more strongly where the contested decision is based not on a failure to produce evidence which had been requested by the Commission from the Member State concerned, but on the finding that a private creditor would not have behaved in the same way as the authorities of that Member State, a finding which presupposes that the Commission had all the relevant information necessary to draw up its decision (see, to that effect, judgment in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 35).
Secondly, it should be borne in mind that it is apparent from the case-law cited by the Commission that the Commission cannot be criticised for not taking into account matters of fact or of law which could have been submitted to it during the administrative procedure but which were not, since it is under no obligation to consider, of its own motion and by supposition, what information might have been submitted to it (judgment of 14 January 2004in Fleuren Compost v Commission, T‑109/01, ECR, EU:T:2004:4, paragraph 49; see also, to that effect, judgment in Commission v Sytraval and Brink’s France, cited in paragraph 85 above, EU:C:1998:154, paragraph 60).
However, the Commission is required, in the interests of sound administration of the fundamental rules of the Treaty relating to State aid, to conduct a diligent and impartial examination of the contested measures, so that it has at its disposal, when adopting the final decision, the most complete and reliable information possible for that purpose (judgment of 2 September 2010in Commission v Scott, C‑290/07 P, ECR, EU:C:2010:480, paragraph 90; see also, to that effect, judgment in Commission v Sytraval and Brink’s France, cited in paragraph 85 above, EU:C:1998:154, paragraph 62).
In addition, the legality of a decision concerning State aid is to be assessed in the light of the information available to the Commission when the decision was adopted (see judgment in Commission v Scott, cited in paragraph 141 above, EU:C:2010:480, paragraph 91 and the case-law cited).
In that regard, it is essentially apparent from the case-law that the Commission may ignore information which was not supplied to it during the administrative procedure where it may legitimately consider that it has more reliable information or that that information is not relevant (see, to that effect, judgment in Commission v Scott, cited in paragraph 141 above, EU:C:2010:480, paragraphs 95 to 98).
In the third place, it is important to note that the Commission’s examination of whether particular measures can be classified as State aid because the public authorities did not act in the same way as a private creditor requires a complex economic assessment (judgments of 22 November 2007in Spain vLenzing, C‑525/04 P, ECR, EU:C:2007:698, paragraph 59; in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 74; and in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 48).
In this connection, it must be observed that, when the European Union Courts review complex economic assessments made by the Commission in the field of State aid, it is not for those Courts to substitute their own economic assessment for that of the Commission (judgments in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 75, and Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 49; see also, to that effect, judgment in Commission v Scott, cited in paragraph 141 above, EU:C:2010:480, paragraphs 64 and 66 and the case-law cited).
Thus, it is settled case-law that, in so far as the Commission’s application of the test of a private creditor in a market economy involves complex economic appraisals, the Court’s review must be confined to verifying whether the Commission complied with the relevant rules governing procedure and the statement of reasons, whether the facts have been accurately stated and whether there has been any manifest error of assessment of those facts or a misuse of powers (see, to that effect, judgment in Spain v Lenzing, cited in paragraph 144 above, EU:C:2007:698, paragraphs 59 to 61).
However, the Court must not only establish whether the evidence put forward is factually accurate, reliable and consistent but must also determine whether that evidence contains all the relevant data that must be taken into consideration in appraising a complex situation and whether it is capable of substantiating the conclusions drawn from it (see judgments in Commission v Scott, cited in paragraph 141 above, EU:C:2010:480, paragraph 65 and the case-law cited, and in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 76 and the case-law cited; judgment in Commission v Buczek Automotive, cited in paragraph 73 above, EU:C:2013:186, paragraph 50).
The Court must examine, primarily, the merits of the contested decision in the light of the applicant’s arguments and of the principles recalled in the case-law mentioned above.
In that regard, it should be observed that, in recital 119 of the contested decision, the Commission concluded that a private creditor would not have accepted the proposed arrangement. That conclusion is based on an assessment of the likely amount which the local tax office would have been able to obtain in a bankruptcy procedure and of the duration of that procedure compared with the amount proposed under the arrangement.
Thus, the Commission essentially took the view that the likely amount which the local tax office would have been able to obtain in a bankruptcy procedure would have been considerably higher than that obtained under the arrangement. After having adjusted the assessments made in the E report, assessed the likely proceeds from a sale of the applicant’s assets in the context of bankruptcy and inferred the costs of such a procedure from the latter amount, the Commission took the view, in recitals 104 and 105 of the contested decision, that, in a bankruptcy procedure, the tax office would have been able to obtain an amount of SKK 356.7 million, that is to say SKK 132.4 million more than the amount proposed under the arrangement (SKK 224.3 million). In addition, the Commission added, in recital 106 of the contested decision, that, ‘even’ if the assessment method of the E report were to be adopted, the tax office would have been able to obtain, in a bankruptcy procedure, an amount of SKK 225.5 million, which is still higher than the amount obtained under the arrangement.
Moreover, as regards the duration of the bankruptcy procedure, first, the Commission considered, in recitals 109 to 112 of the contested decision, that that duration would not have influenced the decision of a private creditor in a significant way, given, in essence, that the local tax office as a secured creditor could have obtained satisfaction at any time of at least SKK 194 million owing to the sale of the non-current assets put forward as collateral. Secondly, in recitals 113 to 118 of the contested decision, the Commission nevertheless assessed (i) the likely duration of a bankruptcy procedure, considering that it would probably be shorter than the average duration of such a procedure, and (ii) its effect on the amount likely to be received by the creditor following such a procedure (SKK 356.7 million after deduction of the costs of the procedure); on the latter point, according to the Commission, owing to the size of the likely proceeds from the sale of the assets in question, even a duration of four to five years would play no significant role in the decision of the private creditor.
In essence and without prejudice to the merits of the assessments made by the Commission, it is thus apparent that, as the case-law cited in paragraphs 133 to 137 above requires, the Commission carried out an analysis of the advantages and disadvantages of the bankruptcy procedure compared with the arrangement procedure, taking into account in particular the likely proceeds from a sale of the applicant’s assets in the context of the first procedure and the effect of the likely duration of that procedure, as well as the local tax office’s status as a secured creditor.
However, the applicant essentially claims that that analysis is erroneous and not supported by sufficient evidence. In particular, first of all, it criticises the Commission’s general approach and contests recital 92 of the contested decision (first and sixth sets of arguments). It then challenges the Commission’s assessment of the likely proceeds from a sale of its assets in the context of a bankruptcy procedure (second set of arguments). Lastly, it contests the assessment of the likely duration of such a procedure and of its effect on the choice by a private creditor (third to fifth sets of arguments).
At the outset, it is necessary to examine the merits of the assessment (i) of the likely proceeds from a sale of the applicant’s assets upon bankruptcy and (ii) of the duration of such a procedure and its effect on the choice by a private creditor.
The merits of the assessment of the proceeds from the sale of the applicant’s assets in the context of bankruptcy (second set of arguments)
The applicant disputes the estimate of SKK 435 million as the proceeds from the sale of its assets in the context of bankruptcy. In essence, noting that the Commission had to assess that issue from the point of view of a private creditor and that it did not have the necessary experience or knowledge, the applicant submits that the Commission merely made estimates without having carried out an investigation into the probable benefits of a sale or having sought to obtain an expert opinion or other evidence supporting its estimate and that the Commission could not replace the liquidation factors in the E report with other factors unless it had obtained relevant evidence from a competent expert.
In particular, the applicant contests the Commission’s assessment of the proceeds from the sale of its non-current assets, its stocks and its short-term receivables in the context of bankruptcy.
First, the applicant observes that, by assessing the likely minimum proceeds from the sale of its non-current assets at SKK 194 million, whereas the E report applied a liquidation factor of 45%, the Commission applied an invented, arbitrary, irrational and unproven factor; it states that that amount is not consistent with an estimate of the proceeds from a sale during a bankruptcy procedure and that the amount of SKK 397 million put forward by the Slovak authorities was assessed on the basis of its accounts. Furthermore, the leasing by O.H. of its production assets does not allow any conclusion to be drawn as to the probable benefits from their sale in the event of bankruptcy and the Commission did not take into account the bankruptcy of L., which is still ongoing.
Secondly, as for the proceeds from the sale of its stocks, the applicant considers that a private creditor would have taken account of the implications of the revocation of its spirit licence on the sale of unfinished products which represented the majority of its stocks on 9 July 2004. Moreover, the applicant claims that the Commission wrongly, and without refuting the evidence referred to in recital 108 of the contested decision, assumes that the conditions of a bankruptcy sale would be the same as those under which it was able to sell off stocks during the arrangement procedure.
Thirdly, as regards the proceeds from the sale of its short-term receivables, the applicant takes the view that the Commission wrongly refused to carry out the second adjustment set out in the E report, without providing any reasons or evidence to challenge that adjustment. A private creditor would have carried out that adjustment in order to determine the likely recoverable value of the remaining receivables.
The Commission disputes the validity of all of those arguments put forward by the applicant. In essence, on the one hand, the Commission claims that it took into consideration and examined in detail the relevant available information and that it cannot be required to consider every expert report to be relevant or to request an expert’s opinion. On the other hand, the Commission claims that it came to the conclusion that the information in the E report was not reliable and that it made an adjustment to the liquidation factors contained in that report, in view of the information and evidence available to the local tax office at the material time. In the rejoinder, the Commission adds that its task is not itself to take the steps that a private creditor would have taken but to verify whether the public authority behaved like a private creditor.
In particular, first, in respect of the applicant’s non-current assets, the Commission takes the view that, in the absence of an explanation of the liquidation factor used by the E report, it was appropriate to take into consideration all the other information available relating to the value of those assets which a private creditor would have examined. Since it is for the applicant to establish that its claim relating to the logic of a private creditor is well founded, the Commission is not required to provide the correct liquidation factor, but to assess all the information available to determine whether the applicant’s claim is substantiated in a credible manner. In addition, in respect of the reference to O.H., the Commission states that, in recital 96 of the contested decision, it merely rejected the argument alleging that no buyer could be found. In addition, that reference illustrates the applicant’s tendency to focus on certain details without regard for the finding that, even taking into consideration the liquidation factors in the E report, the proceeds from the sale of its assets would have been higher than the amount proposed under the arrangement and that the unfavourable nature of the arrangement appears flagrant in the light of the Commission’s corrected estimates.
Secondly, as regards the applicant’s stocks, in the first place, the Commission observes that the contested decision rejects the liquidation factor in the E report, for which no explanation was provided, and bases the reasonable valuation of the proceeds from the sale of stocks on other available information, namely an indication by the applicant that it could obtain SKK 110 million from the sale of stocks and the actual changes in those stocks. A sale of stocks in those circumstances to finance the arrangement might be compared to the circumstances of a sale during bankruptcy; moreover, the applicant had already had its licence revoked at the time of that sale. In the second place, the sole purpose of recital 108 of the contested decision was to reject the reports produced as evidence.
Thirdly, in respect of the short-term receivables, the Commission considers that, while it was necessary to adjust their book value to reflect their actual value and to take into account irrecoverable or poor-quality claims, nothing justified a value below that which the applicant had itself expected to obtain from its debtors. Furthermore, the applicant still provides no justification for the second adjustment; according to the Commission, the fact that an undertaking is bankrupt does not alter the collectability of receivables from the debtors of that company.
For the purpose of examining the merits of the Commission’s assessment of the proceeds from the sale of the applicant’s assets during bankruptcy, it should be observed that that assessment is based, both in the E report and in the contested decision, on ‘liquidation factors’ which were applied to the applicant’s various assets.
As is apparent from recital 94 of the contested decision, such factors express the percentage share of the value of the assets obtained through the liquidation compared to their book value. Their purpose is to calculate the remaining value of assets sold in the liquidation proceedings, taking into account the nature of the sale; it is assumed that the value of the assets obtained through a liquidation sale is clearly lower than their book value, depending on the type of the assets. Neither the application of liquidation factors nor their definition is contested in the present case.
The estimate proposed in the E report and the estimate made by the Commission differ, however, in two respects. According to the Commission, that report did not constitute a credible basis for comparing the bankruptcy and arrangement procedures (recital 89 of the contested decision).
Whilst the E report took as its starting point the condition of the applicant’s assets on 31 March 2004, the Commission used the condition of those assets on 17 June 2004 (recitals 90 and 103 of the contested decision); the applicant does not dispute this. On the latter date, as is apparent from Table 5 which is found in the contested decision, the book values of the applicant’s various assets were as follows:
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non-current assets (land, buildings, machinery, intangible assets, financial assets): SKK 200 million;
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stocks: SKK 84 million;
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cash: SKK 161 million;
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short-term commercial receivables: SKK 63 million.
Moreover, the Commission stated that it could not accept the methodology used in the E report to assess the proceeds from a sale of the applicant’s assets in the context of a bankruptcy procedure (recital 93 of the contested decision). In particular, it stated that that report contained no explanation as to how the liquidation factors had been determined (recital 94 of the contested decision) and that the factors applied in that report to the non-current assets (45%), the stocks (20%) and the short-term receivables (20%, applied on 59% of the book value of those assets) had been assessed at too low levels (recitals 95, 98 and 101 of the contested decision).
In those circumstances, the Commission itself determined the relevant liquidation factors for estimating the likely proceeds from a sale of the applicant’s assets in the context of a bankruptcy procedure.
The applicant disputes that assessment. In order to examine its merits, it is appropriate, having regard to the parties’ arguments, to determine the importance of expert opinions in the Commission’s assessment before evaluating the Commission’s appraisals.
As a first step, with regard to expert opinions, first, it should be observed that, contrary to the applicant’s arguments, the Commission could reject the liquidation factors used by the E report.
According to the case-law, although the Commission may, if it so wishes, commission outside consultants, it must nevertheless assess their work (judgments of 16 September 2004in Valmont v Commission, T‑274/01, ECR, EU:T:2004:266, paragraph 72, and 13 September 2010in Greece and Others v Commission, T‑415/05, T‑416/05 and T‑423/05, ECR, EU:T:2010:386, paragraph 251). Only on the basis of its objective content may the Commission and the Court consider an expert report to be probative. A mere unsubstantiated statement in such a document does not make it possible to conclude that State aid exists (judgment in Valmont v Commission, EU:T:2004:266, paragraph 71).
In the present case, it must be found that the E report contains, as the Commission stated in the contested decision (see paragraph 168 above), no explanation regarding the liquidation factors used to determine the maximum possible proceeds from a sale of the applicant’s assets in the context of a bankruptcy procedure. It follows that, in the light of the case-law cited in paragraph 172 above, the liquidation factors used in that report cannot be regarded as probative.
In so far as the applicant claims in that regard that assessments such as those in the E report are based on experience and judgment, it is important to add that, in the light of the case-law cited in paragraph 172 above, such a claim is inadequate to establish the probative value of an expert report and to oblige the Commission to take account of the assessments which it contains.
Therefore, the Commission was right not to accept the methodology of the E report. It should however be noted that the Commission took account of the assessments found in that report at a subsidiary level for the purposes of a minimum assessment.
It also follows that all of the arguments which the applicant bases on the liquidation factors used in the E report, complaining that the Commission failed to use them or arguing that a private creditor would have taken account of them, must be rejected as unfounded.
Secondly, in so far as the applicant complains that the Commission did not request a new expert opinion, it should be observed that, according to the case-law, the complaint that the Commission failed to seek assistance from external experts when drafting the contested decision cannot succeed as such, since no provision of the Treaty or of EU legislation imposes any such obligation on the Commission (see, to that effect, judgments of 25 June 1998in British Airways and Others v Commission, T‑371/94 and T‑394/94, ECR, EU:T:1998:140, paragraph 72, and 16 March 2000in Astilleros Zamacona v Commission, T‑72/98, ECR, EU:T:2000:79, paragraph 55).
In so far as the applicant refers, in that context, to paragraphs 13, 14 and 20 to 28 of the judgment of 21 November 1991in Technische Universität München (C‑269/90, ECR, EU:C:1991:438), from which it infers that, even when it carries out a discretionary appraisal of the facts and evidence, the Commission has to equip itself with the relevant expertise, it is sufficient to note that, unlike the relevant legislation in the present case, the legislation applicable in the case which led to the judgment relied on by the applicant provided that the Commission was to consult, if necessary, a group of experts. It follows that, in the light of the case-law cited in paragraph 177 above, no consequence can be inferred from that judgment for the purpose of the present case.
As a second step, it is necessary, however, to assess the merits of the estimates made by the Commission. In particular, it should be noted in that regard that, although, as is apparent in essence from paragraph 177 above, the Commission is not required as a matter of principle to seek assistance from external experts when drafting the contested decision, the fact remains that it was for the Commission to determine whether a private creditor would manifestly not have accepted the proposed arrangement and that the Commission bore the burden of proof that the conditions for applying the private creditor test were not fulfilled in the present case (see paragraphs 132, 133, 137 and 139 above).
It is therefore appropriate to recall the main considerations expressed by the Commission in the contested decision and then to assess, in the light in particular of the case-law cited in paragraphs 145 to 147 above, whether those assessments are, as the applicant essentially claims, vitiated by manifest errors of assessment, whether they are substantiated to the requisite legal standard by the evidence in the file and whether the Commission took account of all the relevant information.
In the contested decision, the Commission evaluated the likely proceeds from a sale of the applicant’s assets at SKK 435 million, of which 194 were in respect of non-current assets, 43 in respect of stocks, 37 in respect of short-term receivables and 161 in respect of cash (Table 5 of the contested decision). The Commission thus applied liquidation factors amounting, for each of those asset items, to 97, 52, 59 and 100% respectively; the determination of the first three factors is contested in the present case.
More specifically, in the first place, the Commission assessed the likely proceeds from the sale of the applicant’s non-current assets in the context of a bankruptcy procedure to be SKK 194 million. That amount corresponds to the value of the assets put forward as collateral to the local tax office, as had been proposed by the applicant on the basis of assessments carried out by independent experts in 2003 or in 2004. In the Commission’s view, this kind of expert price should normally reflect the general value of the asset, a proxy expressing for what price the asset can be sold at a given moment. That value was established in order to ascertain the value of those assets as security (recital 95 of the contested decision). It is a minimum price, since the value of the applicant’s non-current assets had been assessed at SKK 397 million by the Slovak authorities, as is mentioned in the first footnote below Table 5 of the contested decision. In addition, in recital 96 of the contested decision, the Commission responded to the applicant’s claim that it would have been difficult to find a buyer, considering that there was an imminent interest from a competitor for the applicant’s production assets.
In the second place, as regards the applicant’s stocks, the Commission used a liquidation factor of 52% on the ground, in essence, that the applicant had been able to obtain SKK 110 million from the sale of its stocks in 2004, that factor corresponding to the proportion of that amount in relation to the book value of the stocks at the relevant time. The Commission added that, having regard to the applicant’s activity, it could be assumed that its stock comprised final or semi-finished products which could have been sold (recitals 98 and 99 of the contested decision).
In the third place, in respect of the applicant’s short-term receivables, the Commission used a liquidation factor of 59%. That corresponds to an adjustment applied, in the E report, to the book value of those receivables in order to reflect the unrecoverability or the low quality of certain receivables and, therefore, the actual value of the recoverable receivables. However, noting that, according to the information provided by the Slovak authorities, the value thus determined corresponded to enforceable receivables, the Commission did not apply another factor, unlike the E report which had made a second adjustment in respect of a liquidation factor of 20% (recitals 100 to 102 of the contested decision).
It is apparent from those points in the contested decision that the Commission determined the liquidation factors by way of inference from the evidence in the administrative file. Although it is true that those inferences are made on the basis of evidence put forward by the applicant or not contested by it, the fact remains that the Commission did not carry out any methodological or economic analysis and did not request, during the administrative procedure, additional information intended to verify and substantiate the conclusions which it had drawn from that evidence.
It should be observed that, in the present case, the evidence in the administrative file is not such as to substantiate, to the requisite legal standard and unequivocally, the conclusions drawn by the Commission for the purposes of the assessment, at SKK 435 million, of the proceeds from the sale of the applicant’s assets upon bankruptcy.
Thus, first, in respect of the assessment of the likely proceeds from the sale of its non-current assets, it should be observed that the applicant stated, in its observations on the decision to initiate the formal examination procedure, that the value of the assets put forward as collateral amounted to approximately SKK 194 million. It explained in that regard that that value was derived from independent evaluation reports prepared in 2003 and 2004 and that it could be verified in the local tax office decisions to defer payment of the taxes between 2000 and 2003. It also added that that amount did not automatically amount to the likely proceeds from a sale of the assets put forward as collateral in the context of bankruptcy and that, according to several independent evaluations, the maximum likely proceeds would be between 20 and 50% of that value.
In response to a measure of organisation of procedure, by which the Court had asked the applicant to produce the reports mentioned in paragraph 187 above, the applicant produced a report drawn up by Ms K. and 13 decisions to defer payment of the taxes drawn up for the purpose of providing security between July 2000 and September 2003.
For its part, in response to a written question put by the Court by way of a measure of organisation of procedure, the Commission stated that it had not sought, during the administrative procedure, the production of the reports mentioned in paragraph 187 above. However, it observed that it had available to it decisions to defer payment mentioned in paragraph 188 above and the conclusions of the inspection carried out at the applicant’s premises on 21 June 2004, as set out in a letter of the Slovak authorities which it annexed to its response. The Commission also claimed that, since the evaluation reports mentioned in paragraph 187 above had been ordered specifically in order to establish the value of the assets for the purposes of providing security, it could use the figure ascertained by the applicant. According to the Commission, when the value of an asset is established for the purposes of its use as collateral, the figure established must necessarily take into account what would happen if the guarantee were called.
It is true that the factors set out in paragraphs 188 and 189 above show that the parties essentially agree that the assessment of the value of the applicant’s non-current assets at SKK 194 million, put forward by the applicant itself, was intended for the provision of security for the benefit of the local tax office at the time of the deferral of payment of the taxes for which it was liable.
However, first of all, it is important to note that, notwithstanding the factors set out in paragraphs 188 and 189 above, the evidence in the file does not allow a determination of whether that assessment of the assets put forward as collateral reflects the book value of the non-current assets put forward as collateral, their market price or their sale price in the event of bankruptcy. The views of the parties differ on this point. Thus, even though, as is apparent from paragraph 187 above, the applicant questioned whether the amount of SKK 194 million would correspond to the proceeds from a sale of its non-current assets in the context of bankruptcy, the Commission merely presumed, in the contested decision and before the Court, that that amount should reflect the general value of the asset, a proxy expressing the price at which the asset can be sold at a given moment, including in the context of bankruptcy, without seeking to verify the purpose, method or reliability of the assessment on which it relied.
Next, although some of the decisions relating to the deferral of tax debts produced by the applicant include a quantification of the assets put forward as collateral with reference to assessments carried out in 2002, those decisions, taken together, do not make it possible, however, to accept the total amount of SKK 194 million. In particular, several of those decisions contain only a list of the assets put forward as collateral without, however, assessing their value.
In addition, the Slovak authorities’ letter mentioned in paragraph 189 above refers to the inspection which took place on 21 June 2004 at the applicant’s premises and sets out its results. It states that the applicant’s non-current assets amounted, as is apparent from an expert assessment, to SKK 200 million. However, even if it were the same assessment as that mentioned by the applicant, that letter does not contain any indication of the value of the non-current assets put forward as collateral. Nor does it state that the amount of SKK 194 million, which is not mentioned in that letter, corresponds to the likely proceeds from a sale of the applicant’s non-current assets in the context of bankruptcy.
In addition, it should be noted that, in the light of the evidence submitted by the parties, the assessment used by the Commission, which dates from the end of 2003 or from the beginning of 2004, is based on assessments carried out between 2000 and 2003 at the time of the deferrals of payment. The amount of SKK 194 million is therefore not evidenced, as the applicant observed at the hearing, by a contemporaneous assessment. As the applicant contends, the value of the assets put forward as collateral, in particular the value of the vehicles and machinery, depreciates with time.
Lastly, it is important to add that the liquidation factor applied by the Commission is particularly high, in that it corresponds to 97% of the book value of all the applicant’s non-current assets (194 out of SKK 200 million). However, as the applicant correctly submits, the circumstances of a bankruptcy sale reduce the value of an asset by comparison with a sale under normal trade conditions in which the seller can choose, inter alia, the time of the sale. Furthermore, the Commission itself observed, in recital 94 of the contested decision, that, using the liquidation factors, ‘it is assumed that the value of the assets obtained through a liquidation sale is usually lower than the book value, depending on the type of the assets’.
In the light of the considerations set out in paragraphs 191 to 195 above, the conclusion must be drawn that the evidence in the administrative file does not substantiate, to the requisite legal standard, the liquidation factor applied by the Commission for the purpose of assessing the proceeds from the sale of the applicant’s non-current assets.
Secondly, as regards the assessment of the proceeds from the applicant’s short-term receivables, it must be stated from the outset that the applicant does not contest the adjustment of 59% made by the Commission. That adjustment, deriving from the E report, is intended, according to the Commission, to reflect the unrecoverability or the low quality of certain receivables (see paragraph 184 above).
In that regard, without needing to rule on the question, which was not raised by the applicant, whether the Commission could, without contradicting itself, use the factor of 59% applied in the E report even though it considered that report to be unreliable, it should be noted that, in the absence of any explanation in that report and in the light of the applicant’s objections, neither the significance nor the merits of that factor can be considered to be established. Thus, whilst, according to the Commission, in essence, that factor makes it possible to determine the good quality short-term receivables which could be recovered or sold without loss upon bankruptcy, a second adjustment is necessary, in the applicant’s opinion, in order to take account of the circumstances of such a bankruptcy during which a recovery or sale of the short-term receivables would be made at a lower amount than their recoverable value and would involve costs, risks and delays.
There is nothing in the file to substantiate the Commission’s claim that the amount of the short-term receivables determined by application of the factor of 59% is recoverable in its entirety and would not be affected by the circumstances of a sale upon bankruptcy.
In those circumstances, it should be held that the evidence in the file does not establish, to the requisite legal standard, the liquidation factor of 59% applied by the Commission to the short-term receivables.
It follows from the above and, in particular, from the conclusions drawn in paragraphs 196 and 200 above that the evidence in the administrative file is not capable of substantiating, to the requisite legal standard, the Commission’s assessment of the likely proceeds from a sale of the non-current assets and short-term receivables in the context of bankruptcy. It is thus apparent that the Commission was not in possession, when the contested decision was adopted, of the necessary, most complete and reliable information possible for adopting that decision and that it should have sought, as the applicant essentially claims, to obtain additional information with a view to verifying and substantiating its conclusions.
It follows that, without there being any need to examine the merits of the Commission’s analysis of the proceeds from the sale of the applicant’s stocks, the evidence in the administrative file is not capable of establishing, to the requisite legal standard, the assessment, at SKK 435 million, of the proceeds from the sale of its various assets in the context of bankruptcy.
That finding is not called into question by the Commission’s arguments.
First, the Commission claims that, since it is not for it to prove that its analysis is correct, but for the applicant to demonstrate that its claim relating to the logic of a private creditor is well founded, the Commission is not required to provide the correct liquidation factor, but to assess all the information available to determine whether the applicant’s claim is substantiated in a credible manner.
However, it should be observed that that argument is at variance with the case-law set out in paragraph 139 above. In accordance with that case-law, the burden of proving that the conditions for applying the private creditor test have been fulfilled is borne by the Commission. The Commission cannot discharge that burden of proof merely by making, with regard to the assessment of the conditions for applying the private creditor test, mere assumptions which are not substantiated to the requisite legal standard.
In those circumstances, even if were the case, as the Commission observed at the hearing, that the application of the private creditor test entails a ‘shift’ in the burden of proof, in that it is for the Member State or the recipient of the measure to rebut the evidence put forward by the Commission and in the light of which the conditions for applying that test do not seem to have been met, it must be held that those mere unsubstantiated assumptions put forward by the Commission are insufficient to justify such a reversal of the burden of proof.
Secondly, the Commission makes reference, both in the contested decision and in its pleadings, to the fact that the proceeds from a sale of the non-current assets assessed at SKK 194 million are only a minimum price, given that the Slovak authorities had estimated the value of the assets put forward as collateral at SKK 397 million.
Besides the fact that that assessment by the Slovak authorities is contested by the applicant, it should be observed that, as the applicant asserts and as is apparent from recitals 22 and 122 of the contested decision, those authorities stated during the administrative procedure that the amount of SKK 397 million had been determined on the basis of the applicant’s accounts. In those circumstances, that amount cannot serve as a basis for the estimate of the proceeds from a sale of the applicant’s non-current assets in the context of bankruptcy. In addition, the Commission admitted, in response to a question put by the Court at the hearing, that it had no evidence as regards the veracity of that amount, with the result that it could not be used in the calculations. Moreover, it should be observed that that amount, which, according to the applicant, was assessed prior to the provision of security, no longer corresponds, in any event, to the applicant’s financial situation on 17 June 2004 which the Commission used as a basis for its assessment. On that date, the book value of the applicant’s non-current assets was SKK 200 million.
Thirdly, the Commission criticises the applicant’s tendency to focus on certain details of the contested decision without regard for the fact that, even taking into consideration the liquidation factors in the E report, the likely proceeds from the sale of the applicant’s assets would have been higher than the amount proposed under the arrangement and that the unfavourable nature of the arrangement is flagrant in the light of the Commission’s corrected estimates.
It should be observed that the Commission’s assessment of the likely proceeds from the sale of the applicant’s assets in the context of bankruptcy is not substantiated to the requisite legal standard by evidence (see paragraphs 201 and 202 above). It follows that the Commission wrongly claims that the attractiveness of the bankruptcy procedure in relation to the arrangement procedure is flagrant in the light of the estimates made on the basis of its own methodology. Moreover, whilst it is true that, even using the liquidation factors used in the E report, the proceeds from the sale of the applicant’s assets remain SKK 1.2 million higher than that obtained under the arrangement, the fact remains that that observation alone is not sufficient to establish that a private creditor would manifestly have preferred the bankruptcy procedure over the arrangement procedure. That conclusion also depends on the effect of the duration of the first procedure on the creditor’s choice (see paragraphs 222 to 234 below).
Fourthly, the Commission’s argument relating to O.H.’s interest for the applicant’s non-current assets, in so far as it has the sole purpose of showing that the applicant has not established the lack of a potential buyer, has no bearing on the appraisal of the merits of the assessment of the proceeds from the sale of its non-current assets.
Fifthly, it should be added that the Commission’s arguments relating to the applicant’s short-term receivables have been essentially dismissed in paragraphs 198 and 199 above.
In the light of the foregoing considerations, the Court must uphold the applicant’s arguments contesting the Commission’s assessment of the likely proceeds from a sale of its assets in the context of bankruptcy.
The merits of the assessment of the duration of a bankruptcy procedure and of its effect on the choice of the private creditor (third to fifth sets of arguments)
The applicant contests the Commission’s assessment of the duration of the bankruptcy procedure and of its effect on the private creditor’s choice.
In the first place, it considers that the view that the length of the bankruptcy procedure was irrelevant because of the privileged-creditor status of the local tax office is vitiated by the same error as that set out in the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32). It maintains that the fact that a person has the right to realise an asset immediately does not mean that that person can find a buyer immediately. Despite the L. example, the Commission neither examined that issue nor found that there was a potential buyer prepared to pay the likely proceeds from a sale as established by the Commission. Moreover, the likely proceeds from the sale of the secured assets is only SKK 90 million. In the reply, the applicant adds that, although the privileged-creditor status of the local tax office is of relevance, that element is not sufficient to justify the conclusion drawn by the Commission in recitals 110 to 112 of the contested decision, and it notes that the burden of proof rests on the Commission.
In the second place, the applicant disputes the Commission’s assessment of the possible duration of the bankruptcy procedure. The applicant considers that, having regard to the available evidence, that duration was not foreseeable with any degree of accuracy. Moreover, the example of the L. bankruptcy, relied on by the applicant as evidence of the difficulty in finding a buyer for its assets, was particularly relevant. Where it is informed of a relevant fact, it is for the Commission to carry out an appropriate investigation. In addition, the possibility of bringing a bankruptcy procedure to a rapid conclusion depends, not on the number of creditors, but on the ease with which the assets can be realised.
In the third place, the applicant disputes the validity of the assessment in recital 118 of the contested decision on the ground that, taking into account the correct amounts, namely SKK 225.5 million in respect of the probable result from a sale of its assets and SKK 90 million in respect of the immediate sale of the secured assets, it appears that the proposed arrangement was manifestly more attractive than the bankruptcy procedure.
The Commission disputes the merits of all those arguments.
In the first place, the Commission claims, first, that, while it is true that the existence of a right to realise an asset immediately does not mean that it is possible to find a buyer immediately, the applicant cannot criticise the Commission for having failed to establish that there was a buyer prepared to pay the price indicated by it, given that it is for the applicant to establish that the behaviour of the public creditor satisfies rational economic logic. The Commission adds that it is clear from recital 96 of the contested decision that the applicant’s non-current assets generated some interest. Furthermore, the Commission considers that, in the light of the information available to it, it had no reason to conclude that it was likely that the applicant was in the same situation as L. Secondly, according to the Commission, the applicant’s second argument reiterates arguments to which the Commission has already responded within the context of the second complaint. Thirdly, the Commission asserts that it did not repeat the error noted by the Court of Justice in the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), but, on the contrary, that it remedied the inadequate statement of reasons which had vitiated the initial decision. Having regard to the privileged-creditor status of the local tax office, the duration of a bankruptcy had no effect on the choice of the private creditor in the present case.
In the second place, first of all, the Commission observes that recitals 113 to 117 of the contested decision contain a subsidiary analysis to the main conclusion that the duration of the bankruptcy procedure would not have had any significant influence. Next, concerning the case of L., the Commission considers that the information presented at that stage by the applicant is unsubstantiated, late and, in any event, insufficient. Lastly, in addition to the fact that the applicant failed to explain why the number of creditors was not important for assessing the duration of the bankruptcy procedure, the Commission submits that the conclusion drawn in recital 117 of the contested decision is based on a series of factors.
In the third place, the Commission observes that it has already responded to the applicant’s arguments seeking to call into question its assessment of the foreseeable proceeds from the sale of the applicant’s assets in the event of bankruptcy. It adds that the applicant appears to acknowledge that a private creditor would take into account the fact that he would be able to realise secured assets immediately as a factor that enhances the attractiveness of the bankruptcy procedure.
In the present case, in recitals 109 to 112 of the contested decision, the Commission considered, primarily, that the duration of the bankruptcy procedure would not have had a significant influence on the decision of a private creditor. According to the Commission, regardless of that duration, the local tax office, as a secured creditor, could have obtained satisfaction at any time of at least SKK 194 million owing to the sale of the non-current assets put forward as collateral. The Commission added in that regard that, even applying the assessment method set out in the E report to the applicant’s stocks and short-term receivables, that tax office could have expected to obtain an additional SKK 185 million following the bankruptcy procedure. According to the Commission, it should therefore have been clear to the local tax office that the resulting debt recovery in the context of bankruptcy would have been well in excess of the sum on offer under the arrangement and that only part of that total would have entailed a wait when compared with the arrangement.
It follows from that account of the contested decision that the Commission’s analysis is based on the premiss that the local tax office would have been able to obtain — immediately and irrespective of the course of the bankruptcy procedure — an amount of SKK 194 million owing to the sale of the applicant’s non-current assets. However, as is apparent from the conclusion drawn in paragraph 196 above, that premiss is not substantiated to the requisite legal standard by the evidence in the file.
It follows that the conclusion, drawn in recital 112 of the contested decision, that the duration of the bankruptcy procedure has no significant influence on the decision of a hypothetical private creditor is vitiated by the same defect.
In recitals 113 to 118 of the contested decision, the Commission however assessed, for the sake of completeness, the likely duration of a bankruptcy procedure and its effect on the amount likely to be received by the creditor following such a procedure. According to the Commission, the duration of the procedure would probably be more brief than on average in view of the low number of the applicant’s creditors and the liquidation value of its assets (recitals 113 to 117 of the contested decision). It added that, owing to the size of the proceeds from the sale of those assets, as estimated following its own methodology, in comparison with the amount proposed under the arrangement, even a duration of the bankruptcy procedure of four to five years would play no significant role in the decision of the private creditor. It would be only in the event that a duration of nine years is exceeded that the present value would be lower than the amount agreed under the arrangement; however, it states, such a long duration would not have been considered likely in the present case by any private creditor (recital 118 of the contested decision).
First, it must be held that the consideration set out in recital 118 of the contested decision is based on the premiss that, in the event of bankruptcy, a private creditor would have been able to obtain an amount of SKK 356.7 million, corresponding to the proceeds from the sale of the assets assessed by the Commission after deduction of the costs of the procedure. However, as the applicant observes and as was noted in paragraph 201 above, the Commission’s assessment of the proceeds from the sale of the applicant’s assets is not substantiated to the requisite legal standard by the evidence in the file.
Secondly, in those circumstances, it is not necessary to assess the validity of the assessment, in recitals 113 to 117 of the contested decision, of the likely duration of a bankruptcy procedure. Even supposing that the fact that that procedure could have been conducted speedily is established, it should be observed that that fact alone is, in any event, insufficient to justify the conclusion, in recital 119 of the contested decision, that a private creditor would have preferred the bankruptcy procedure to the proposed arrangement.
As has already been stated in paragraph 201 above, the Commission’s assessment of the probable proceeds from a sale in the context of that bankruptcy procedure is not substantiated to the requisite legal standard. However, in accordance with the case-law cited in paragraph 136 above, besides the duration factor, the factor of the amount likely to be obtained in the context of an alternative procedure influences the choice of the private creditor.
In addition, even supposing that, notwithstanding the reservations rightly expressed by the Commission in respect of the E report (see paragraphs 173 to 175 above), that institution had intended to rely, in the alternative, on the updated assessment of that report, the fact remains that, as is apparent from recital 106 of the contested decision, a private creditor could then have expected to obtain SKK 225.5 million in the context of bankruptcy, that is to say barely SKK 1.2 million more than the amount proposed under the arrangement. Besides the fact that the Commission in no way examined the effect of the duration of a bankruptcy, even more brief than on average, on the choice of a private creditor who could expect to obtain such an amount, it should be noted, in any event, that, in view of that slight difference in the substantial amounts concerned, it may reasonably be considered that a private creditor, even if privileged, would manifestly have preferred to receive an amount of SKK 224.3 million immediately rather than awaiting the outcome of a bankruptcy procedure in which he could obtain SKK 1.2 million more, even assuming that that procedure may be conducted within a relatively short period.
It follows that the applicant’s arguments contesting the assessment of the effect of the duration of a bankruptcy procedure must be upheld.
That conclusion is not called into question by the Commission’s other arguments.
First, the Commission claims that it is for the applicant to establish that the behaviour of the public creditor responded to rational economic logic.
That argument is at variance with the case-law relating to the allocation of the burden of proving that the conditions of a private creditor have been fulfilled, as set out in paragraphs 138 to 143 above.
Secondly, in so far as the Commission responds to the applicant’s various arguments relating to the possibility of quickly finding a buyer for the non-current assets and to O.H.’s interest for those assets, to the assessment of the duration of a bankruptcy procedure and to the case of the company L., it suffices to note that those arguments are unrelated to the finding that the Commission’s analysis of the effect of the duration on a private creditor’s choice is vitiated by the fact that it is based on an assessment of the likely proceeds from the sale of the applicant’s assets which is itself vitiated because it is based on insufficient evidence. Therefore, all of those other arguments are irrelevant at this stage.
In the light of all the foregoing considerations, it must be concluded that the evidence in the file is not capable of substantiating the conclusion, in recital 119 of the contested decision, that a private creditor would have preferred a bankruptcy on the part of the applicant rather than the proposed arrangement.
It follows that the applicant’s third plea must be upheld, without the need to examine the applicant’s arguments regarding the assessment of the likely proceeds from a sale of its stocks.
However, it should be added that the conclusion, in recital 139 of the contested decision, that the private creditor test was not met is based not only on the finding that a private creditor would have preferred a bankruptcy to the proposed arrangement, but also on the finding that such a creditor would have preferred a tax execution over that proposal. It therefore suffices that one of those two procedures — bankruptcy or tax execution — is more advantageous than the arrangement procedure in order to justify the conclusion that the private creditor test was not satisfied in the present case.
Conversely, it follows that it is only if both the bankruptcy procedure and the tax execution procedure were less advantageous than the arrangement procedure that the conclusion, in recital 139 of the contested decision, that the private creditor test was not satisfied would be vitiated by illegality.
Therefore, the conclusion drawn in paragraph 235 above is not, by itself, capable of justifying the annulment of the contested decision. It is also necessary for the fourth plea, relating to the comparison of the tax execution and arrangement procedures, to be also well founded. It is for that reason necessary to assess it.
The fourth plea, alleging errors vitiating the conclusion that the tax execution procedure was more advantageous than the arrangement procedure
By the fourth plea, the applicant disputes the conclusion in the contested decision that, in essence, the tax execution procedure was more advantageous than the proposed arrangement. Having set out, first of all, the stages of that procedure as laid down in Slovak law, the applicant puts forward six sets of arguments in support of that plea. They may be grouped into two categories: (i) those relating to the applicability of the private creditor test for the purpose of comparing the tax execution and arrangement procedures (first and second sets of arguments) and (ii) those relating to the application of that test (third to sixth sets of arguments).
The applicability of the private creditor test with a view to comparing the tax execution and arrangement procedures (first and second sets of arguments)
The applicant considers that the private creditor test was not relevant for the purpose of comparing the tax execution and arrangement procedures since the tax execution procedure was not accessible to a private creditor. Moreover, the applicant disputes the assertion that no evidence establishing the applicability of that test had been submitted in the present case.
Those two questions should be examined in reverse order.
In the first place, the applicant takes the view that, for the reasons which it set out in the second plea raised in support of the present action, the Commission erred in law in recital 120 of the contested decision.
The Commission disputes the merits of that argument and essentially repeats the arguments it made in reply to the applicant’s second plea. It thus notes that the information provided by the Member State concerned, namely that the issue of whether the contested measure constituted State aid had not been considered, undermines any attempt to rely on the private-creditor test. It adds that, if the beneficiary of the measure may rely on that test, it is all the more necessary for him to establish unequivocally that that State was aware, prior to or at the time of granting the advantage, that it was conferring the advantage in its capacity as a private operator.
In the contested decision, the Commission observed, in line with the case-law cited in paragraphs 95 and 97 above which it transposed to the private creditor in recital 82 of that decision, that no evidence had been provided to indicate that the local tax office had considered a tax execution procedure and concluded that that procedure would be less advantageous than the arrangement (recital 120 of the contested decision). However, it is apparent from the contested decision that the Commission, while stating that the applicant did not compare the proposed arrangement with the potential outcome of tax execution, made that comparison on the ground that, as the Slovak authorities confirmed, the tax execution procedure was an option for the local tax office, either prior to the launch of the arrangement procedure or after the veto which it could have exercised against the proposed arrangement and that ‘this option therefore need[ed] to be considered when applying the [private] creditor test’ (recital 121 of the contested decision).
Without there being any need to rule on whether the applicant may merely refer to the arguments raised in support of another plea seeking to contest other considerations expressed by the Commission in the contested decision, it must be stated that the arguments raised by the applicant in support of the second plea are not such as to invalidate the considerations set out in recital 120 of the contested decision. As is apparent from the examination of the second plea, the applicant essentially contested the conclusion, in recital 83 of the contested decision, that it followed from the fact that the Member State had not relied on the private creditor test and, on the contrary, stated that the contested measure constituted State aid, that the measure in fact constituted State aid. However, no conclusion of that kind was reached by the Commission in recital 120.
In addition, in so far as the Commission observed that the private creditor test was inapplicable for the purpose of comparing the tax execution and arrangement procedures and even if recital 120 of the contested decision must be understood as implicitly containing such a conclusion, it should be recalled that it has been held, in the assessment of the second plea raised by the applicant, that that test was applicable to the circumstances of the present case. Since the test is applicable as such, it must be held that the Commission cannot make a distinction, as regards its applicability, based on the different alternatives to the contested measure.
In that regard, it is also important to add that, as noted in paragraph 245 above, it is unequivocally clear from recital 121 of the contested decision that the Commission took the view that the tax execution procedure needed to be considered when applying the private creditor test, since that procedure was an option for the local tax office. In other words, the Commission considered it necessary to examine the substance of the private creditor test in that context since the tax execution was an option and, as the Commission states in its written pleadings, in order to strengthen the contested decision.
In the second place, the applicant asserts that the contested decision is vitiated by an error of law since the tax execution procedure is not accessible to a private creditor and the contested decision makes no mention of any similar procedure from which such a creditor could have benefited. It follows that that procedure cannot be taken into account in respect of the private creditor test.
The Commission disputes the merits of those arguments.
It has already been held that the applicability of the private creditor test depended on the classification of the measure taken as a decision adopted by a private operator rather than on the form in which the advantage had been conferred (see, by analogy, judgment of 3 April 2014in Commission v Netherlands and ING Groep, C‑224/12 P, ECR, EU:C:2014:213, paragraph 31; see also, to that effect and by analogy, judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 93). The decisive factor in this regard is whether the measure in question satisfied an economic rationality test, so that a private creditor, who counts on maximising his chances of recovering his claim or, at the very least, most of that claim, might also agree to take such a measure (see, to that effect and by analogy, judgment in Commission v Netherlands and ING Groep, EU:C:2014:213, paragraph 36).
In the present case, it is common ground that under the arrangement a private creditor was able, in the same way as the local tax office, to agree to waive, in part, its claim. The parties agree that, by contrast, only the local tax office had the option of the tax execution procedure.
However, by analogy with the case-law cited in paragraph 251 above, it must be held that the mere fact that the tax execution procedure was not accessible to a private creditor does not preclude an analysis of the private creditor test for the purpose of comparing that procedure with the arrangement procedure. It does not preclude the verification of the economic rationality of the local tax office’s decision to opt for the arrangement procedure.
In that context, it is once again necessary to reject as irrelevant the case-law cited by the applicant, according to which, in order to assess whether the same measure would have been adopted in normal market conditions by a private investor in a situation as close as possible to that of the State, only the benefits and obligations linked to the situation of the State as shareholder — to the exclusion of those linked to its situation as a public authority — are to be taken into account (see judgment in Commission v EDF, cited in paragraph 26 above, EU:C:2012:318, paragraph 79 and the case-law cited).
Besides the fact that that case-law does not address the question whether the private creditor test may be applied for the purpose of comparing the respective advantages and disadvantages of two procedures for the recovery of claims, of which only one is open to the private creditor whereas the public creditor may have recourse to both procedures, it should be observed that it is apparent from the judgments cited in support of that assertion in the judgment in Commission v EDF, cited in paragraph 26 above (EU:C:2012:318, paragraph 79), namely the judgments in Belgium v Commission, cited in paragraph 51 above (EU:C:1986:302, paragraph 14), of 10 July 1986in Belgium v Commission (40/85, ECR, EU:C:1986:305, paragraph 13), 14 September 1994in Spain v Commission (C‑278/92 to C‑280/92, ECR, EU:C:1994:325, paragraph 22), and 28 January 2003in Germany v Commission (C‑334/99, ECR, EU:C:2003:55, paragraph 134), that all social, regional-policy and sectoral considerations should be left aside when applying the private investor test and that other costs or responsibilities of the Member State in its capacity as public authority should not be taken into account.
In the light of the foregoing considerations, the Court must dismiss the applicant’s arguments relating to the applicability of the private creditor test with a view to comparing the tax execution and arrangement procedures.
The application of the private creditor test for the purpose of comparing the tax execution and arrangement procedures (third to sixth sets of arguments)
The third to sixth sets of arguments raised by the applicant in support of the present plea relate to a comparative assessment, in the context of the private creditor test, of the tax execution and arrangement procedures.
In the first place, the applicant complains that, in recitals 121 and 123 of the contested decision, the Commission erred in determining the moment at which and the transaction to which the private creditor test was to be applied. First, as regards recital 121 of that decision the applicant observes that the tax execution procedure was not legally available following the proposed arrangement and while the arrangement procedure was ongoing, as the Commission implicitly recognised. Moreover, the only relevant question is whether, on 9 July 2004, the tax execution procedure would have been manifestly more advantageous than the arrangement. Secondly, as regards recital 123 of the contested decision, the applicant claims that the Commission was not competent to assess the deferrals of payment between November 2002 and November 2003 and had to confine itself to examining the only relevant transaction in the present case without speculating about matters falling outside the scope of its competence.
In the second place, the applicant observes that recital 123 of the contested decision contains only hypothetical and erroneous assertions, as well as matters which are purely speculative and not resolved by the Commission, which cannot serve as a statement of reasons for such a decision. Furthermore, the Commission failed to address the relevant question of whether a private creditor would have deferred payment of the tax debt.
In the third place, the applicant complains, in essence, that the Commission committed a manifest error of assessment and disregarded the guidance given by the Court of Justice in the judgment in Frucona Košice v Commission, cited in paragraph 21 above (EU:C:2013:32), in so far as it failed to examine all the available information liable to have a significant influence on a private creditor’s decision-making process, as regards both the amount likely to be obtained in the context of tax execution and the costs of that procedure. In the reply, the applicant adds that, contrary to what the Commission claims, the onus was on the Commission to establish in the contested decision the facts justifying its conclusion that tax execution would have led to higher proceeds than the arrangement.
In the fourth place, the applicant claims that the Commission made errors as regards the possible duration of a tax execution procedure. In that regard, it asserts that the Commission merely assumed, without analysis or evidence, that that procedure could have been conducted speedily, and failed to examine that question or, at the very least, to state to the requisite legal standard the reasons on which the contested decision was based. Moreover, the applicant claims that a private creditor would have examined the likely timescale of a tax execution procedure under the relevant legislation and would have taken into account all the implications of such a procedure, including the risk of the applicant being declared bankrupt during that procedure and the duration necessary in order to find a buyer willing to pay the minimum amount having regard to the thresholds of Slovak legislation. In response to the Commission’s arguments alleging that it adopted the contested decision taking account of all the available information, the applicant asserts in the reply that, according to the case-law, the Commission must take the measures necessary to obtain all the information relevant for the purposes of its analysis.
The Commission disputes the merits of all those arguments.
In the first place, the Commission contends that the tax execution procedure could have been commenced prior to the initiation of the arrangement procedure and in the event of refusal by the national courts to approve the arrangement. Moreover, the applicant’s argument relating to recital 123 of the contested decision is based on a misunderstanding of the comment relating to events prior to accession of the Slovak Republic to the European Union. The Commission merely suggested that, even before the conclusion of the arrangement, it was questionable that the behaviour of the Member State concerned was compatible with the private creditor test, although the Commission did not find it necessary to rely on that factor to conclude that, in any event, a private creditor would not have chosen the arrangement.
In the second place, the Commission maintains that the issue of whether the payment deferrals prior to the arrangement were themselves free of aid is not relevant for the purposes of the conclusion that the arrangement constituted State aid. The observations in recitals 122 and 123 of the contested decision are superfluous for the purposes of the reasoning on which the conclusion relating to the existence of aid is based.
In the third place, the Commission observes that, according to the case-law, it is for the applicant to establish unequivocally and on the basis of objective and verifiable evidence that the advantage was not conferred by the Member State concerned in its capacity as a private operator and could have been obtained on the market. In the absence of any attempt by the applicant to provide the necessary information, the Commission takes the view that it had to take into account all the available information and nevertheless assess the credibility of the claim that there was no aid because the Member State acted in the same way as a private creditor; the Commission examined the tax execution procedure in order to strengthen the contested decision. In any event, the applicant’s arguments relating to the amount likely to be obtained in a tax execution procedure and the costs generated by that procedure are unfounded. On the latter point, the Commission observes that it appears to be accepted that a tax execution procedure does not involve as many administrative costs as a bankruptcy procedure and that it had no information on any other costs to be taken into account.
In the fourth place, the Commission contends that it examined the duration of the bankruptcy procedure and that, despite the lack of information available in that regard, it concluded that, as opposed to the propensity for slowness characteristic of a bankruptcy procedure, the fact that the creditor himself conducts the tax execution procedure has a positive influence on the efficiency and, consequently, the duration of that procedure.
The validity of the Commission’s comparative assessment of the tax execution and arrangement procedures with a view to the application of the private creditor test should be examined in the light of the case-law referred to in paragraphs 131 to 147 above.
In accordance with that case-law, first of all, the Commission had to ascertain in the present case whether, in the light of the factors mentioned in paragraph 136 above, for the purposes of recovering the sums owed to it, a normally prudent and diligent private creditor in a situation as close as possible to that of the Slovak authorities would manifestly have preferred the tax execution procedure to the proposed arrangement. For that purpose, in order to identify the more advantageous alternative, the Commission had to compare, on the basis of the interests of a private creditor, the advantages and disadvantages of each of those procedures (see paragraphs 132 to 137 above).
Next, when, in the context of the private creditor test, it carries out the overall assessment referred to in paragraph 133 above, the Commission is to take into account, in addition to the evidence provided by the Member State at issue, all other relevant evidence in the case. Consequently, where it appears that the private creditor test might be applicable, the Commission is under a duty to ask the Member State concerned to provide it with all relevant information enabling it to determine whether the conditions governing the application of that test are met. Therefore, the burden of proof that the conditions of the private creditor test have been fulfilled is borne by the Commission. That applies all the more strongly where the contested decision is based not on a failure to produce evidence which had been requested by the Commission from the Member State concerned, but on the finding that a private creditor would not have behaved in the same way as the authorities of that Member State, a finding which presupposes that the Commission had all the relevant information necessary to draw up its decision (see paragraphs 138 and 139 above).
Lastly, it is apparent from the case-law cited in paragraph 147 above that it is for the Court in particular to review whether the evidence on which the Commission based its assessment contains all the relevant information which must be taken into account and whether it is capable of substantiating the conclusions drawn by it; in accordance with the case-law referred to in paragraph 134 above, all information liable to have a significant influence on the decision-making process of a normally prudent and diligent private creditor, in a situation as close as possible to that of the public creditor concerned and seeking to recover sums due to it by a debtor experiencing difficulty in making the payments, must be regarded as being relevant.
In the present case, it is common ground that, during the administrative procedure, neither the Slovak Republic nor the applicant made a comparison, in respect of the private creditor test, of the arrangement procedure and the tax execution procedure. In particular, it is apparent from the evidence in the file that, in its observations on the decision to initiate the formal procedure, the applicant merely claimed that the tax execution procedure could not have been applied in the present case since the conduct of such a procedure is prevented by the initiation of either a bankruptcy procedure or an arrangement procedure. The applicant added that, if it had not made a proposal for an arrangement, its financial situation would have deteriorated to such an extent that, in the space of a few weeks, it would have been in a state of excessive debt and would therefore have been legally obliged either to file for bankruptcy or to make a proposal for an arrangement. The Slovak authorities stated in particular, in response to that observation of the applicant, that the tax execution procedure could be commenced following the refusal by the national courts to approve the arrangement.
Nevertheless, it is apparent from the contested decision that the Commission made that comparison of the tax execution and arrangement procedures on the ground that the first was an option for the local tax office, either prior to the launch of the arrangement procedure or after the veto which it could have exercised against the proposed arrangement (recital 121 of the contested decision). It essentially concluded that tax execution would have led to a higher return than the arrangement (recital 127 of the contested decision) and that a private creditor, had he had the possibility, would have preferred tax execution to the proposed arrangement (recital 124 of the contested decision).
In that regard, in the first place, observing that the Slovak authorities and the applicant had differing views as to the value of the non-current assets put forward as collateral and that it was not necessary to determine which figure was correct (recital 122 of the contested decision), the Commission noted that, if the value of the applicant’s assets was in reality only half of the pledge, it meant that the securities required for the payment deferrals granted between November 2002 and November 2003 were insufficient. In those circumstances, those deferrals in all probability failed to meet the private creditor test. While taking the view that it was not necessary for it to determine whether those measures were State aid, the Commission nevertheless observed that, if those deferrals already constituted State aid, the private creditor principle could no longer be referred to when the deferred amounts are later partly written off (recital 123 of the contested decision).
However, as the applicant rightly submits and without there being any need to determine whether the Commission was competent to rule on the payment deferrals between November 2002 and November 2003, it should be held that that ground of the contested decision, which is purely hypothetical, cannot on its own justify the conclusion that the partial write-off of the tax debt conferred an advantage on the applicant which the applicant would not have been able to obtain under market conditions. At that stage, the Commission merely makes assumptions without however examining the issues thus raised by it, without setting out the slightest evidence in support of them and without drawing any definitive conclusion from them.
In addition, the Commission accepts in its pleadings that the issue of whether the payment deferrals prior to the arrangement were themselves free of aid is not relevant for the purposes of the conclusion that the arrangement constituted State aid and that the observations in recitals 122 and 123 of the contested decision are superfluous for the purposes of the reasoning on which the conclusion relating to the existence of State aid is based.
In the second place, in the contested decision, the Commission held that, even if the amount of the non-current assets put forward as collateral amounted only to SKK 194 million, a private creditor would have nevertheless favoured the tax execution procedure (recital 124 of the contested decision). In that regard, the Commission noted that the tax office could directly sell the debtor’s assets in the case of such a procedure. According to the Commission, at the time when the arrangement was concluded, the value of the applicant’s current assets, namely SKK 43 million in respect of stocks, at least SKK 37 million in respect of enforceable receivables and SKK 161 million in respect of cash, exceeded the amount proposed in the arrangement. The Commission added that the applicant had non-current assets, the value of which was at least SKK 194 million (recital 125 of the contested decision). Lastly, the Commission observed that, unlike bankruptcy proceedings, tax execution would not involve administrative fees and that, since it was initiated and controlled by the tax office itself, it could be assumed that that procedure could have been conducted in a speedy manner (recital 126 of the contested decision). In the light of those factors, the Commission concluded that tax execution would have led to a higher return than the arrangement (recital 127 of the contested decision).
In that regard, first of all, it should be observed that the Commission’s assessment repeats appraisals carried out under the bankruptcy procedure.
However, it was concluded in paragraph 201 above that that assessment was not substantiated to the requisite legal standard by the evidence in the file.
Next, in respect of the duration of a tax execution procedure, the Commission merely ‘assumed that it would be conducted in a speedy manner’, in particular when compared with the bankruptcy procedure, since it was initiated and controlled by the authorities itself. However, the Commission did not carry out any assessment of that duration, whether in the circumstances of the present case or, at the very least, on average in the light of the stages of the procedure as established by Slovak law. In addition, in its pleadings, the Commission acknowledges the inadequacy of the information available regarding the duration of a tax execution procedure.
It is important to note that the duration of the procedures constitutes a factor which is liable to have a significant influence on the decision-making process of a private creditor (see, to that effect, judgment in Frucona Košice v Commission, cited in paragraph 21 above, EU:C:2013:32, paragraph 81).
Lastly, it should be observed that, according to the case-law, the situation of the beneficiary undertaking may constitute relevant evidence in the overall assessment of the conditions for applying the private creditor test (see, to that effect and by analogy, judgments in Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission, cited in paragraph 56 above, EU:T:2003:57, paragraph 251, and of 30 June 2015in Netherlands and Others v Commission, T‑186/13, T‑190/13 and T‑193/13, EU:T:2015:447, paragraph 88).
Even though, during the administrative procedure, the applicant stated that a tax execution procedure could have been stopped because it could have found it necessary to have to file for bankruptcy in view of the deterioration of its financial situation, the Commission in no way took that evidence into account in the contested decision or even assessed the chances that the tax execution procedure might, in the light of that evidence, be completed in the present case. That gap cannot be filled by the assertion, before the Court, that that applicant’s claim is purely speculative.
Moreover, it should be added that, in respect of the costs of a tax execution procedure, the Commission merely noted that that procedure, unlike the bankruptcy procedure, would not involve administrative fees. By contrast, it is in no way apparent from the contested decision that the Commission examined the question whether the tax execution procedure was likely to generate any fees whatsoever. Nor did it address the possible significance of their effect on the amount likely to be obtained in the context of such a procedure.
It is thus apparent that, on the date of the adoption of the contested decision, the Commission did not have in its possession material evidence enabling it to claim that a private creditor would manifestly have opted for the tax execution procedure on 9 July 2004.
That conclusion applies without there being any need to examine the applicant’s other arguments, which essentially relate to the possibility and probability of a direct sale in the context of tax execution, the value of the assets which an expert would have determined if necessary, the use of the figures ascertained in the assessment of the likely proceeds from a sale of the assets in the context of a bankruptcy procedure, the legal thresholds applicable in the event of tax execution and their effect on the possibility of a sale of the assets in the amounts stated by the Commission, the bankruptcy on the part of L. and the risk of dissipation of the applicant’s assets.
The conclusion drawn in paragraph 284 above is not called into question by the Commission’s arguments.
First, the Commission observes that, according to the case-law, it is for the applicant to establish unequivocally and on the basis of objective and verifiable evidence that the advantage in question was not conferred by the Member State concerned in its capacity as a private operator and could have been obtained on the market. It adds that it compared the two procedures solely on the basis of the information available to it and that it was not in possession of the evidence which the applicant could have provided in order to support its position that the tax execution procedure was less advantageous than the arrangement procedure.
However, having regard to the case-law cited in paragraphs 138, 139, 141 and 269 above, it should be observed that, since it applied the private creditor test for the purpose of comparing the tax execution and arrangement procedures and since it essentially found that a private creditor would have preferred the first procedure to the second procedure, the Commission could not merely make unsubstantiated and unverifiable assumptions on the ground that it was not in possession of sufficient information. Nor can it rely on the case-law relating to the applicability of that test, according to which it is for the Member State concerned or the interested party which invokes it to establish that that Member State took the contested measure in its capacity as market operator, in order to justify the fact that it merely drew, in the absence of such evidence, imprecise conclusions when applying that test.
Nor, secondly, is the conclusion drawn in paragraph 284 above called into question by the other arguments raised by the Commission in response to the arguments relied on by the applicant. Those arguments of the Commission essentially relate to the possibility and probability of a direct sale in the context of tax execution, the value of the assets which an expert would have determined in that case, the use of the amounts ascertained in the assessment of the likely proceeds from a sale of the assets in the context of a bankruptcy procedure, the bankruptcy on the part of L., the legal thresholds applicable in the event of tax execution and, finally, the risk of dissipation of the applicant’s assets.
It should be noted that the conclusion drawn in paragraph 284 above is based solely on the finding that the Commission did not have in its possession material evidence enabling it to claim that a private creditor would manifestly have opted for the tax execution procedure on 9 July 2004. Moreover, that conclusion — which follows from the acceptance of the applicant’s arguments that the Commission, whose responsibility it is to prove that the conditions of the private creditor test have not been fulfilled in the present case, had failed to assess the duration and the costs as well as its own economic situation in the context of the comparison of the tax execution and arrangement procedures — has been reached without needing to examine the applicant’s other arguments referred to in paragraph 285 above. Since the Commission’s arguments mentioned in paragraph 289 above were submitted in response to the latter arguments of the applicant, they cannot in any event serve to reverse the conclusion reached in paragraph 284 above.
In the light of all the foregoing considerations, the fourth plea raised by the applicant is well founded.
As a result and in particular having regard to the conclusions drawn in paragraphs 236 and 291 above, the contested decision must be annulled.
Costs
Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful, it must be ordered to pay the costs, including those relating to the proceedings for interim measures, in accordance with the form of order sought by the applicant.
On those grounds,
THE GENERAL COURT (Second Chamber),
hereby:
1.
Annuls Commission Decision 2014/342/EU of 16 October 2013 on State aid No SA.18211 (C 25/2005) (ex NN 21/2005) granted by the Slovak Republic for Frucona Košice a.s.;
2.
Orders the Commission to bear, in addition to its own costs, the costs incurred by Frucona Košice, including those incurred in connection with the proceedings for interim measures.
Martins Ribeiro
Gervasoni
Madise
Delivered in open court in Luxembourg on 16 March 2016
[Signatures]
Table of contents
Background to the dispute
The change in the applicant’s situation and the arrangement procedure
Administrative procedure
Initial decision
Proceedings before the General Court and the Court of Justice
Contested decision
Procedure and forms of order sought
Law
The first plea, alleging infringement of the rights of defence
The second plea, alleging an error of law vitiating recital 83 of the contested decision
The third plea, alleging errors of fact and of law vitiating the conclusion that the bankruptcy procedure was more advantageous than the arrangement procedure
Preliminary review of the case-law
The merits of the assessment of the proceeds from the sale of the applicant’s assets in the context of bankruptcy (second set of arguments)
The merits of the assessment of the duration of a bankruptcy procedure and of its effect on the choice of the private creditor (third to fifth sets of arguments)
The fourth plea, alleging errors vitiating the conclusion that the tax execution procedure was more advantageous than the arrangement procedure
The applicability of the private creditor test with a view to comparing the tax execution and arrangement procedures (first and second sets of arguments)
The application of the private creditor test for the purpose of comparing the tax execution and arrangement procedures (third to sixth sets of arguments)
Costs
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Grand Chamber)
8 March 2016 ( *1 )
‛Appeal — State aid — Compensation payments made by the Greek Agricultural Insurance Organisation (ELGA) in 2008 and 2009 — Decision declaring aid incompatible with the internal market and ordering its recovery — Concept of ‘State aid’ — Article 107(3)(b) TFEU — Guidelines for State aid in the agricultural sector — Obligation to state reasons — Distortion of evidence’
In Case C‑431/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 19 September 2014,
Hellenic Republic, represented by I. Chalkias and A. Vasilopoulou, acting as Agents,
appellant,
the other party to the proceedings being:
European Commission, represented by A. Bouchagiar, R. Sauer and D. Triantafyllou, acting as Agents,
defendant at first instance,
THE COURT (Grand Chamber),
composed of A. Tizzano, Vice-President, acting as President of the Grand Chamber, L. Bay Larsen, T. von Danwitz, A. Arabadjiev (Rapporteur), C. Toader, D. Šváby and C. Lycourgos, Presidents of Chambers, A. Rosas, E. Juhász, M. Safjan, M. Berger, A. Prechal and E. Jarašiūnas, Judges,
Advocate General: E. Sharpston,
Registrar: I. Illéssy, Administrator,
having regard to the written procedure and further to the hearing on 6 October 2015,
after hearing the Opinion of the Advocate General at the sitting on 15 October 2015,
gives the following
Judgment
By its appeal, the Hellenic Republic seeks to have set aside the judgment of the General Court of the European Union of 16 July 2014 in Greece v Commission (T‑52/12, EU:T:2014:677, ‘the judgment under appeal’), by which the General Court dismissed its action for annulment of Commission Decision 2012/157/EU of 7 December 2011 concerning compensation payments made by the Greek Agricultural Insurance Organisation (ELGA) in 2008 and 2009 (OJ 2012 L 78, p. 21, ‘the decision at issue’).
Legal context
EU law
Point 4.1 of the Temporary Community Framework for State aid measures to support access to finance in the current financial and economic crisis, as set out in the Communication from the European Commission of 17 December 2008 (OJ 2009 C 16, p. 1, ‘the TCF’), states:
‘...
In the light of the seriousness of the current financial crisis and its impact on the overall economy of the Member States, the Commission considers that certain categories of State aid are justified, for a limited period, to remedy those difficulties and that they may be declared compatible with the [internal] market on the basis of Article [107(3)(b) TFEU].’
Under the third subparagraph of point 4.2.2 of the TCF:
‘The Commission will consider such State aid compatible with the common market on the basis of Article [107(3)(b) TFEU], provided all the following conditions are met:
...
(h)
the aid scheme does not apply to undertakings active in the primary production of agricultural products ...’
Point 7 of the TCF states:
‘…
In accordance with the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid [OJ 2002 C 119, p. 22], the Commission applies the following in respect of non-notified aid:
(a)
this Communication, if the aid was granted after 17 December 2008;
(b)
the guidelines applicable when the aid was granted in all other cases.
…’
The TCF was amended by the Communication from the Commission published in the Official Journal of the European Union on 31 October 2009 (C 261, p. 2, ‘the amended TCF’). Point 1 of that communication states:
‘...
The possibility under point 4.2 [of the TCF] to grant a compatible limited amount of aid does not apply to undertakings active in the primary production of agricultural products. Farmers, however, encounter increased difficulties to obtain credit as a consequence of the financial crisis.
... it is appropriate to introduce a separate compatible limited amount of aid for undertakings active in the primary production of agricultural products.’
Subparagraph 3 of point 4.2.2 of the amended TCF provides:
‘The Commission will consider such State aid compatible with the common market on the basis of Article [107(3)(b) TFEU], provided all the following conditions are met:
...
(h)
… Where the aid is granted to undertakings active in the primary production of agricultural products ..., the cash grant (or gross grant equivalent) does not exceed EUR 15000 per undertaking ...’
The amended TCF took effect on 28 October 2009.
Greek law
Law 1790/1988 on the organisation and operation of the Greek Agricultural Insurance Organisation and other provisions (FEK A’ 134/20.6.1988, ‘Law 1790/1988’) established a body operating in the public interest called the ‘Greek Agricultural Insurance Organisation’ (ELGA). ELGA is a legal person governed by private law wholly owned by the State, the main task of which is to insure the crop and animal production and crop and animal assets of agricultural holdings against damage due to natural risks.
Under Article 3a of Law 1790/1988, in the version applicable to the dispute, the ELGA insurance scheme is compulsory and covers natural risks.
Under Article 5a of Law 1790/1988, in the version applicable to the dispute, a special insurance contribution to ELGA is imposed on agricultural producers who are beneficiaries of that insurance scheme. That provision is worded as follows:
‘1. The following domestically-produced agricultural products and by-products shall be subject to the special insurance contribution in favour of ELGA:
(a)
products of vegetable or animal origin ...
...
3. The special insurance contribution is set at 2% for products of vegetable origin and 0.5% for products of animal origin ... Those rates shall be calculated on the value of those products.
...
7. ... the special contribution shall be paid to the competent tax authority by the persons statutorily liable thereto ...
8. The persons liable to pay the special insurance contribution [to the competent tax authority] are … those who ... are obliged to issue purchase or sales invoices for agricultural products and by-products ...
...
15. Where agricultural products are purchased directly from a producer and their price is paid to that producer by [a] bank by means of a payment order, the special insurance contribution shall be withheld by that bank and paid to ELGA ...
16. ELGA’s revenue from the special insurance contribution collected by the public finance services shall be included in the State budget as State revenue and shall be entered under a specific revenue heading. That revenue shall be paid to ELGA from the budget of the Ministry of Agriculture by a transfer of funds in the same amount each year following a proposal to that Ministry by ELGA. The State shall withhold two percent (2%) of the special insurance contribution amounts collected by the public finance services for ELGA for the collection thereof. In addition, the State shall withhold three percent (3%) of the amounts collected by the public finance services, on the basis of the yield declarations made by the persons liable to pay that contribution and other collection documents, for the accounting thereof.’
Background to the dispute and the decision at issue
Following protests in January 2009 by a large number of Greek agricultural producers about the losses suffered by them in 2008 as a result of adverse weather conditions, by Inter-ministerial decree 262037 of the Minister for Economic Affairs and the Minister for Rural Development and Food of 30 January 2009 on exceptional compensation for damage to agricultural production (FEK B’ 155/2.2.2009, ‘the Inter-ministerial decree’), the Hellenic Republic provided that compensation aid of EUR 425 million would be paid to producers on an exceptional basis by ELGA. It was clear from that decree that the expenditure incurred as a result of its implementation chargeable to ELGA’s budget would be financed by means of a loan contracted by ELGA from banks and guaranteed by the State.
By letter of 20 March 2009, sent in response to a request for information from the Commission, the Hellenic Republic informed the Commission that, in 2008, ELGA had paid compensation to farmers, for damage covered by insurance, amounting to EUR 386986648. That sum came partly from insurance contributions paid by producers of EUR 88353000, and partly from funds obtained as a result of a loan of EUR 444 million repayable over 10 years, guaranteed by the State, contracted by ELGA from a bank.
By decision of 27 January 2010 (OJ 2010 C 72, p. 12), the Commission opened the formal investigation procedure provided for by Article 108(2) TFEU in Case C 3/10 (ex NN 39/09), concerning compensation payments made by ELGA in 2008 and 2009 (‘the aid at issue’). On 7 December 2011, the Commission adopted the decision at issue.
The operative part of the decision at issue is worded as follows:
‘Article 1
1. The compensation paid by [ELGA] to producers of agricultural products in 2008 and 2009 constitutes State aid.
2. The compensation aid granted in 2008 under the special compulsory insurance scheme is compatible with the internal market as regards the aid amounting to EUR 349493652.03 which ELGA granted to producers to make good their crop losses and as regards the aid relating to crop losses caused by bears amounting to EUR 91500 and the corrective action taken within the framework of the abovementioned aid. The compensation aid represented by the remaining amount paid in 2008 under the special insurance scheme is incompatible with the internal market.
3. The compensation aid of EUR 27614905 granted in 2009 under [the Inter-ministerial decree] is compatible with the internal market.
The compensation aid of EUR 387404547 granted to producers on dates before 28 October 2009 is incompatible with the internal market. This conclusion shall be without prejudice to aid which, at the time it was granted, met all the conditions laid down in [Commission Regulation (EC) No 1535/2007 of 20 December 2007 on the application of Articles [107 TFEU and 108 TFEU] to de minimis aid in the sector of agricultural production (OJ 2007 L 337, p. 35)].
Article 2
1. [The Hellenic Republic] shall take all measures necessary to recover from its beneficiaries the incompatible aid referred to in Article 1, which was granted unlawfully.
...’
Procedure before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 8 February 2012, the Hellenic Republic brought an action for annulment of the decision at issue. By a separate document lodged at the Registry of the General Court on the same date, the Hellenic Republic applied for interim measures under Articles 278 TFEU and 279 TFEU, seeking suspension of the operation of that decision. By order of the President of the General Court in Greece v Commission (T‑52/12 R, EU:T:2012:447), the operation of that decision was suspended, in so far as it required the Hellenic Republic to recover from the beneficiaries the incompatible aid referred to in Article 1 of that decision.
In support of its application for annulment of the decision at issue, the Hellenic Republic put forward seven pleas in law. By the judgment under appeal, the General Court dismissed the action in its entirety.
Procedure before the Court and forms of order sought
By application lodged at the Court Registry on 30 September 2014, the Hellenic Republic applied for interim measures under Articles 278 TFEU and 279 TFEU seeking, inter alia, suspension of the operation of the judgment under appeal until judgment in the appeal proceedings is given.
That application for interim measures was rejected by order of the Vice-President of the Court in Greece v Commission (C‑431/14 P-R, EU:C:2014:2418), on the ground that the condition relating to a prima facie case was not satisfied.
By letter lodged at the Court Registry on 2 March 2015, the Greek Government requested, pursuant to the third subparagraph of Article 16 of the Statute of the Court of Justice of the European Union, that the Court sit as a Grand Chamber. That request was granted.
By its appeal, the Hellenic Republic claims that the Court should:
—
set aside the judgment under appeal and annul the decision at issue, and
—
order the Commission to pay the costs.
The Commission contends that the Court should:
—
dismiss the appeal as inadmissible or unfounded, and
—
order the Hellenic Republic to pay the costs.
The appeal
First ground of appeal, relating to the concept of State aid, the obligation to state reasons and distortion of evidence
Arguments of the parties
By the first part of the first ground of appeal, the Hellenic Republic complains that the General Court infringed Article 107(1) TFEU by distorting the facts and describing them incorrectly, when it held that the compulsory insurance contributions paid in 2008 and 2009 by farmers who received compensation aid paid by ELGA in those years constituted State resources.
First, the Hellenic Republic submits that the General Court relied on the judgment in Freskot (C‑355/00, EU:C:2003:298) in concluding that that aid constituted State aid; yet, in paragraph 87 of that judgment, the Court held, on the contrary, that it was not — in the case that gave rise to that judgment — sufficiently apprised of the relevant points of fact and law needed in order to rule on the classification of the benefits granted by ELGA as State aid.
Secondly, the General Court was wrong in finding that the contributions paid by farmers were not ‘private resources’ because they were accounted for as State revenue under Article 5a of Law 1790/1988. The Hellenic Republic observes that it is clear from that provision that the special insurance contribution for ELGA was collected by the State or by banks before being paid to ELGA.
The fact that the legislature lays down detailed rules under which the special insurance contribution collected by the State is to be paid to ELGA does not make that contribution a State resource. If such an interpretation were accepted, the classification of that contribution as a private resource or a public resource would turn on its method of collection, and it would therefore be necessary to distinguish the contributions collected by the State from those collected through banks and paid to ELGA. Moreover, if the State collected the funds in question without being required to pay them out in full, it would not have provided, in Article 5a(16) of Law 1790/1988, for the levying of a commission.
Consequently, the State or the banks are merely intermediaries with regard to, or remunerated collectors of, the special insurance contribution. It constitutes ELGA revenue exclusively and is not subject to public control, but is merely collected by banking institutions and by the State in order to be paid to ELGA without ever having been available to the competent authority.
By the second part of the first ground of appeal, the Hellenic Republic complains that the General Court infringed its obligation to state reasons by not responding to the argument that the special insurance contributions ought to have been deducted from the amount of State aid to be recovered because, in the light of the fact that they were paid in 2008 and 2009 by farmers who were beneficiaries of the alleged aid, they did not satisfy the condition relating to the existence of an economic advantage.
In the alternative, the Hellenic Republic submits that the General Court applied that condition incorrectly to the facts of the present case, since, because of the existence of those contributions, the payment of compensation aid had only a limited effect on competition, if indeed any impact at all. In its assessment, the General Court even upheld an interpretation of the decision at issue that is contrary to the principle prohibiting reformatio in peius.
The Commission disputes the admissibility of the argument alleging distortion of the facts as well as the merits of both parts of the present ground of appeal.
Findings of the Court
With regard to the first part of the first ground of appeal, it should be recalled, in the first place, as regards the argument that the General Court distorted the facts, that it follows from the second subparagraph of Article 256(1) TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union that the General Court has exclusive jurisdiction, first, to find the facts, except where the substantive inaccuracy of its findings is apparent from the documents in the file submitted to it, and, second, to assess those facts (judgments in General Motors v Commission, C‑551/03 P, EU:C:2006:229, paragraph 51, and ThyssenKrupp Nirosta v Commission, C‑352/09 P, EU:C:2011:191, paragraph 179).
Therefore, the appraisal of the facts by the General Court does not constitute, save where the clear sense of the evidence produced before it is distorted, a question of law which is subject, as such, to review by the Court of Justice (judgments in Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission, C‑397/03 P, EU:C:2006:328, paragraph 85, and ThyssenKrupp Nirosta v Commission, C‑352/09 P, EU:C:2011:191, paragraph 180).
Where an appellant alleges distortion of the evidence by the General Court, he must, under Article 256 TFEU, the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union and Article 168(1)(d) of the Rules of Procedure of the Court, indicate precisely the evidence alleged to have been distorted by the General Court and show the errors of appraisal which, in his view, led to such distortion. In addition, it is settled case-law of the Court that distortion must be obvious from the documents in the Court’s file, without there being any need to carry out a new assessment of the facts and the evidence (judgments in Lafarge v Commission, C‑413/08 P, EU:C:2010:346, paragraph 16 and the case-law cited, and Austria v Scheucher-Fleisch and Others, C‑47/10 P, EU:C:2011:698, paragraph 59 and the case-law cited).
In the present case, the General Court found as follows in paragraphs 122 to 128 and 130 to 132 of the judgment under appeal:
‘122
The Commission recalled in the contested decision, that the Court had already held in the judgment in Freskot [(C‑355/00, EU:C:2003:298)] that “the national legislation at issue clearly establishe[d] that the benefits provided by ELGA [were] granted through State resources and [were] imputable to the State within the meaning of the Court’s case-law (see, in particular, France v Commission, [C‑482/99, EU:C:2002:294], paragraph 24)” (recital 58).
The Commission found that:
“... under Article 5(a) of Law … 1790/1988 ... and other provisions of Greek legislation in force, ELGA’s income from the special contribution was collected by the tax authorities, entered in the State budget as State revenue and paid to ELGA from the budget of the Ministry of Agriculture (now the Ministry of Rural Development and Food). Consequently, the fact that the contributions in question are entered into the accounts as State revenue is sufficient to consider that the payments made by ELGA were financed by State resources” (recital 58).
Those findings, which are not disputed by the Hellenic Republic, suffice to conclude that the compensation payments that correspond to the contributions by farmers are State resources and are imputable to the State.
Therefore, contrary to what the Hellenic Republic claims, the part of the payments corresponding to the contributions by farmers may not be regarded as being private funds. Accordingly, the fact that a part of the payments made in 2008 was financed by contributions by farmers does not preclude these being State aid financed by resources imputable to the State.
Moreover, contrary to what the Hellenic Republic claims, the classification as State aid does not apply to the contributions paid by farmers but to the payments made in 2008. In that regard, it must be recalled that it has been held in the context of the first and second pleas in law that neither the compensatory nature of the measures, nor the fact that they are justified by a social objective, precludes the payments made by ELGA being classified as an advantage.
Furthermore, the Hellenic Republic concedes that the contributions paid by farmers are not proportionate to risk and that it is possible that certain farmers pay a contribution without receiving compensation payments from ELGA. The payments made in 2008 were therefore independent of the contributions paid by the farmers and constituted an advantage that the beneficiary undertaking could not have obtained under normal market conditions.
It follows from the foregoing that the Commission was fully entitled to find that the payments made by ELGA in 2008 were advantages financed by State resources, even if they were financed in part by contributions by farmers. The Hellenic Republic has not shown that the Commission erred in classifying those payments as State aid.
...
The contested decision states that the compensation payments made by ELGA in 2009, of EUR 415019452 in total, were made on the basis of the Inter-ministerial decree. The Inter-ministerial decree provided for compensation of EUR 425 million, on an exceptional basis, for damage in 2008 and stated that, for the purpose of paying that compensation, ELGA would take out a loan, guaranteed by the State, with a bank, for the total amount ...
It follows that the Commission was correct in finding that the compensation payments made in 2009 were not financed by the contributions paid under the ELGA compulsory insurance scheme ... .
Therefore, contrary to what the Hellenic Republic claims, the contributions paid by farmers in 2009 under the compulsory insurance scheme may not be regarded as financing part of the aid paid in 2009.’
In the light of the General Court’s findings set out above, the argument alleging distortion of the facts must be rejected at the outset, since, by its line of argument, the Hellenic Republic has not shown that the General Court distorted the facts in a manner obvious from the documents in the file.
In the second place, with regard to the argument that the General Court described the facts incorrectly, it should be stated that, having first of all pointed out, in paragraph 126 of the judgment under appeal, that the classification as State aid did not apply to the special insurance contribution paid by farmers but to the payment of compensation aid by ELGA; having then found, in paragraph 127 of that judgment, that the payments made in 2008 were independent of those contributions; and, lastly, having pointed out, in paragraphs 130 to 132 of that judgment, that the payments made in 2009 were financed not by the contributions but by means of a loan, guaranteed by the State, taken out to that end with a bank, the General Court was entitled to conclude, without erring in law, that those payments were advantages financed by State resources.
Nor did the General Court err in law, in the third place, in relying, in paragraph 122 of the judgment under appeal, on paragraph 81 of the judgment in Freskot (C‑355/00, EU:C:2003:298), since the Court held in that paragraph, with regard to a previous version of Article 5a of Law 1790/1988 but a version in essence identical to that applicable to the present dispute, that that legislation ‘clearly establishe[d] that the benefits provided by ELGA [were] granted through State resources and [were] imputable to the State within the meaning of the Court’s case-law’.
Moreover, it should be pointed out that the Hellenic Republic does not dispute that the contributions to the special insurance contribution, in so far as they were collected by the tax authorities, were included in the State budget.
As regards the second part of the first ground of appeal, it must be recalled that, according to the settled case-law of the Court, the duty incumbent upon the General Court under Article 36 and the first paragraph of Article 53 of the Statute of the Court of Justice of the European Union to state reasons for its judgments does not require the General Court to provide an account that follows exhaustively and one by one all the arguments articulated by the parties to the case. The reasoning may therefore be implicit, on condition that it enables the persons concerned to understand the grounds of the General Court’s judgment and provides the Court of Justice with sufficient information to exercise its powers of review on appeal (see, inter alia, judgment in A2A v Commission, C‑320/09 P, EU:C:2011:858, paragraph 97).
In the present case, in paragraph 126 of the judgment under appeal, the General Court pointed out that, contrary to what the Hellenic Republic claimed, the classification as State aid did not apply to the contributions paid by farmers but to the payments made in 2008 by ELGA.
Furthermore, in that same paragraph, the General Court referred to its findings made in the context of the examination of the first and second pleas in law in the action for annulment. In the context of that examination, the General Court stated, in paragraph 70 of the judgment under appeal, ‘that the fact that the payments made by ELGA in 2009 were intended to compensate for damage caused to agricultural production because of adverse weather conditions d[id] not preclude the existence of an advantage and the classification as State aid’ and, in paragraph 102 of that judgment, ‘that, according to settled case-law, competition is distorted where a measure mitigates the burden imposed on a beneficiary undertaking and thereby strengthens its position as regards competing undertakings’.
In those circumstances, it must be held that the statement of reasons in the judgment under appeal meets the requirements referred to in paragraph 38 of this judgment.
Moreover, having found that the payments of compensation aid made in 2008 and 2009 were independent of the contributions paid by the farmers, the General Court was entitled to conclude, without erring in law, that those payments constituted an advantage that the beneficiary undertaking could not have obtained under normal market conditions, and therefore affected competition.
In view of the independence of the contributions paid by the farmers in relation to the compensation aid received by them, those contributions cannot be regarded as specific charges imposed on the advantage consisting, in the present case, of the payment of that aid; nor can those contributions be regarded as connected with the introduction of that advantage. Accordingly, the General Court was fully entitled to conclude that, in the present case, the Commission was justified, under Article 107(1) TFEU, in refusing to offset the advantage and those same contributions (see, to that effect, judgment in France Télécom v Commission, C‑81/10 P, EU:C:2011:811, paragraphs 43 and 48).
It follows that the first ground of appeal must be rejected as, in part, inadmissible and, in part, unfounded.
Second ground of appeal, relating to the concept of State aid and the obligation to state reasons
Arguments of the parties
The Hellenic Republic complains that the General Court rejected its first and second pleas in law in the action by relying on the settled case-law of the Court that measures which, whatever their form, are likely directly or indirectly to favour certain undertakings or which are to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions are to be regarded as State aid (judgment in Altmark Trans and Regierungspräsidium Magdeburg, C‑280/00, EU:C:2003:415, paragraph 84 and the case-law cited). In so doing, the General Court failed to have regard to the fact that those principles are valid only under normal market and economic conditions and not under the exceptional conditions experienced by the Greek economy in 2009.
The Hellenic Republic submits that, against that exceptional background, the General Court ought to have interpreted and applied Article 107 TFEU differently and, in particular, ought to have assessed whether the compensation aid paid to Greek farmers in 2009 had in fact conferred an advantage on them and placed them in a more advantageous position as regards their commercial transactions within the European Union.
In view of the fact that, during that period, the Greek economy had to face a series of budgetary measures aimed at stabilising the economy, such as the over-taxation of farmers, the introduction of exceptional and solidarity contributions, the dismantling of the welfare state, increased value added tax, higher heating oil prices, and cuts in wages and pensions, any ‘economic advantage’ that the farmers might have received from ELGA would automatically have been wiped out.
The General Court failed to examine whether, in such exceptional circumstances, the financial impact of the measures adopted by the Inter-ministerial decree could in fact affect trade between Member States and threaten to distort competition. In particular, it ought to have determined whether those exceptional circumstances were such as to alter the conditions for the application of the de minimis scheme relating to aid which does not have a significant impact on trade and competition between the Member States.
Lastly, the Hellenic Republic submits, in the alternative, that the General Court failed to examine its arguments fully.
The Commission disputes the admissibility as well as the merits of the present ground of appeal.
Findings of the Court
The documents of the proceedings at first instance show that the argument put forward by the Hellenic Republic before the Court to the effect that the settled case-law of the Court relating to the concept of State aid, referred to in paragraph 45 of this judgment, is inapplicable to the present case because of the exceptional economic conditions experienced by the Hellenic Republic in 2009, was not put forward before the General Court.
At first instance, the Hellenic Republic complained that the Commission did not adequately explain, in the decision at issue, in what respect the compensation payments had conferred on the farmers concerned a competitive advantage affecting trade between Member States, and could, therefore, be classified as State aid, notwithstanding the serious crisis affecting the Greek economy at that time.
However, in raising such an argument, the Hellenic Republic cannot be regarded as having set out a complaint other than one alleging that the decision at issue failed to state reasons.
Therefore, the argument that the General Court infringed Article 107(1) TFEU by failing to find — in the context of the serious crisis affecting the Greek economy in 2009 — that the payment of compensation aid neither conferred any competitive advantage on the farmers concerned nor affected trade between Member States, is new in character.
Consequently, that argument must be rejected as inadmissible. According to the settled case-law of the Court of Justice, to allow a party to put forward for the first time before the Court of Justice a plea in law which it has not raised before the General Court, would in effect allow that party to bring before the Court of Justice a wider case than that heard by the General Court (see, to that effect, judgments in Alliance One International and Standard Commercial Tobacco v Commission and Commission v Alliance One International and Others, C‑628/10 P and C‑14/11 P, EU:C:2012:479, paragraph 111, and Groupe Gascogne v Commission, C‑58/12 P, EU:C:2013:770, paragraph 35).
It follows that the second ground of appeal is admissible only in so far as, by that ground, the Hellenic Republic in essence complains that the General Court did not respond to the complaint that the decision at issue was inadequately reasoned.
As stated in paragraph 38 of this judgment, the duty incumbent upon the General Court to state reasons for its judgments does not require the General Court to provide an account that follows exhaustively and one by one all the arguments articulated by the parties to the case. The reasoning may therefore be implicit, on condition that it enables the persons concerned to understand the grounds of the General Court’s judgment and provides the Court of Justice with sufficient information to exercise its powers of review on appeal (judgment in Isdin v Bial-Portela, C‑597/12 P, EU:C:2013:672, paragraph 21).
It has already been held in paragraph 41 of this judgment that the statement of reasons in the judgment under appeal enabled the parties, and the Hellenic Republic in particular, to understand the grounds on which the General Court found that there was an economic advantage liable to distort competition.
It should be added that, in its response to the complaint that the statement of reasons concerning the condition as to there being an adverse effect on competition and an effect on trade was inadequate, the General Court stated, in paragraph 108 of the judgment under appeal, that ‘the economic crisis in the European Union from 2008 does not constitute a circumstance that is capable of calling in question the fact that the agricultural sector is exposed to strong competition within the European Union’ and that ‘the Commission has moreover adopted specific rules aimed at authorising certain State aid during the economic crisis, in particular, the [TCF], which precluded aid granted in the primary agricultural sector being declared compatible with the internal market’.
It follows that the second ground of appeal must be rejected as, in part, inadmissible and, in part, unfounded.
Third ground of appeal, relating to misinterpretation and misapplication of Article 107(3)(b) TFEU and the obligation to state reasons
First part of the third ground of appeal, relating to misinterpretation and misapplication of Article 107(3)(b) TFEU
– Arguments of the parties
The Hellenic Republic complains that the General Court infringed Article 107(3)(b) TFEU by failing to examine whether the Commission had made a manifest error of assessment, at the very least, on account of its refusal to apply that provision notwithstanding the serious disturbances in the Greek economy.
Furthermore, the General Court did not examine its arguments relating to the Commission’s incorrect restriction of the scope of Article 107(3)(b) TFEU, in view of the exceptional conditions in the Greek economy in 2009, which were different from those contemplated in the TCF. By relying on the amended TCF, the General Court refused to apply that provision directly, even though it had pointed out that the validity of communications issued by the Commission is conditional on their being consistent with the provisions of the TFEU.
The Commission contends that the Hellenic Republic has put forward out of time the exceptional circumstances of the economic crisis in Greece at the material time, which circumstances were not established before the General Court. Consequently, the Hellenic Republic may not legitimately claim before the Court that those unproven circumstances ought to have led the General Court to reach a different conclusion as regards the application of Article 107(3)(b) TFEU. The Commission also disputes the merits of that line of argument.
– Findings of the Court
As regards the admissibility of the first part of the third ground of appeal, the documents of the proceedings at first instance show that, in support of the fourth plea in law in the action for annulment, by which the Hellenic Republic complained that the Commission misused its discretion and misinterpreted and misapplied Article 107(3)(b) TFEU, the Hellenic Republic put forward evidence, which — in its view — was such as to establish, inter alia, the existence of a very serious disturbance in the Greek economy as a whole in 2009.
Consequently, as the Advocate General observed in points 32 and 34 of her Opinion, even if it is apparent from paragraphs 185 to 188 of the judgment under appeal that, in its response to the fourth plea in law in the action for annulment, the General Court did not rule on the existence in 2009 of a very serious disturbance in the Greek economy, the Hellenic Republic is entitled to claim before the Court that the General Court erred in law in rejecting its argument that such a disturbance justified the application of Article 107(3)(b) TFEU to the facts of the present case.
As regards the substance, the General Court held as follows in paragraphs 185 to 188 of the judgment under appeal:
‘185
With regard to the arguments raised in the fourth plea, it is clear that, contrary to what the Hellenic Republic claims, the Commission had to base its decision on the [TCF] and not directly apply Article 107(3)(b) TFEU in order to assess the compatibility of the payments made by ELGA in 2009 on account of the economic crisis experienced in Greece.
It is clear from the case-law that, in adopting rules of conduct and announcing by publishing them that they will henceforth apply to the cases to which they relate, the Commission imposes a limit on the exercise of its aforementioned discretion and cannot depart from those rules without being found, where appropriate, to be in breach of general principles of law, such as equal treatment or the protection of legitimate expectations (see judgment[s] in Germany and Others v Kronofrance, [C‑75/05 P and C‑80/05 P, EU:C:2008:482], paragraph 60 and the case-law cited, and … Holland Malt v Commission, C‑464/09 P, [EU:C:2010:733], paragraph 46).
Accordingly, in the specific area of State aid, the Commission is bound by the guidelines and notices that it issues, to the extent that they do not depart from the rules in the Treaty (see judgment in Holland Malt v Commission, [C‑464/09 P, EU:C:2010:733], paragraph 47 and the case-law cited).
Therefore, it is necessary to reject the arguments of the Hellenic Republic to the effect that, on account of the serious disturbance in the Greek economy due to the economic crisis experienced in Greece since the end of 2008 and in 2009, the Commission should have declared the payments made by ELGA in 2009 compatible directly on the basis of Article 107(3)(b) TFEU.’
Under Article 107(3)(b) TFEU, ‘the following may be considered to be compatible with the internal market: … aid … to remedy a serious disturbance in the economy of a Member State’.
As the General Court stated in paragraphs 159 to 161 of the judgment under appeal, it is settled case-law of the Court that, in the application of Article 107(3) TFEU, the Commission enjoys wide discretion, the exercise of which involves complex economic and social assessments (judgments in Germany and Others v Kronofrance, C‑75/05 P and C‑80/05 P, EU:C:2008:482, paragraph 59, and Banco Privado Português and Massa Insolvente do Banco Privado Português, C‑667/13, EU:C:2015:151, paragraph 67).
Furthermore, as the General Court stated in paragraphs 186 and 187 of the judgment under appeal, the Court has also consistently held that, in adopting rules of conduct and announcing by publishing them that they will henceforth apply to the cases to which they relate, the Commission imposes a limit on the exercise of its aforementioned discretion and, in principle, cannot depart from those rules without being found, where appropriate, to be in breach of general principles of law, such as equal treatment or the protection of legitimate expectations (judgments in Holland Malt v Commission, C‑464/09 P, EU:C:2010:733, paragraph 46, and Banco Privado Português and Massa Insolvente do Banco Privado Português, C‑667/13, EU:C:2015:151, paragraph 69).
However, in the specific area of State aid, the Commission is bound by the guidelines that it issues, to the extent that they do not depart from the rules in the TFEU, including, in particular, Article 107(3)(b) TFEU (see, to that effect, judgment in Holland Malt v Commission, C‑464/09 P, EU:C:2010:733, paragraph 47), and to the extent that their application is not in breach of general principles of law, such as equal treatment, in particular where exceptional circumstances, different from those envisaged in those guidelines, distinguish a given sector of the economy of a Member State.
Consequently, first, the Commission may not fail to have regard to Article 107(3) TFEU by adopting guidelines vitiated by an error of law or a manifest error of assessment, nor may it waive, by the adoption of guidelines, the exercise of the discretion that that provision confers on it. Further, when, in the exercise of that discretion, it adopts guidelines of that nature, these must be kept under continuous review for the purposes of anticipating any major developments not covered by those measures.
Secondly, the adoption of such guidelines does not relieve the Commission of its obligation to examine the specific exceptional circumstances relied on by a Member State, in a particular case, for the purpose of requesting the direct application of Article 107(3)(b) TFEU, and to provide reasons for its refusal to grant such a request, should the case arise.
In the present case, it is not in dispute that, precisely because of the effect of the economic crisis experienced by the Member States, and in particular, the Hellenic Republic, on the primary agricultural sector of the European Union, the Commission exercised the discretion conferred on it by Article 107(3)(b) TFEU by adopting the TCF and then the amended TCF, since both the former and the latter expressly mention that sector.
However, the fact remains that although the Hellenic Republic claimed before the General Court that Article 107(3)(b) TFEU ought to be applied directly to the facts of the case, notwithstanding the existence of the rules of conduct set out in the TCF and the amended TCF, it did not argue, in support of that claim, that there were, in the present case, specific exceptional circumstances in the primary agricultural sector concerned, such as those referred to in paragraphs 70 and 72 of this judgment.
Indeed, it is apparent from the documents in the file that the material that the Hellenic Republic put before the General Court was intended to establish the existence of a very serious disturbance affecting the Greek economy from the end of 2008 and in 2009, but it was not such as to prove to the requisite legal standard that that economy was faced with specific exceptional circumstances that ought, in this case, to have led the Commission to assess the aid at issue directly in the light of Article 107(3)(b) TFEU.
Consequently, the first part of the third ground of appeal must be rejected as unfounded.
The second part of the third ground of appeal, relating to the obligation to state reasons
– Arguments of the parties
The Hellenic Republic complains that the General Court failed to respond to its argument that the decision at issue was excessive in that it also required the recovery of the compensation aid that constituted compensation for actual damage. Furthermore, the situation in the Greek agricultural sector, already exceptionally difficult when the compensation aid was paid, was even more precarious at the date the decision at issue was adopted.
Specifically, the General Court did not examine to what extent the decision at issue, in so far as it ordered the recovery of the contributions paid to farmers, was compatible with the provisions of Article 107(3)(b) TFEU and of Article 14(1) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1).
The Commission contends that that line of argument is too vague in that it does not identify precisely the complaint raised at first instance to which — it is claimed — the General Court did not respond, and that it is, in any event, unfounded.
– Findings of the Court
First, as the Commission correctly contends, the General Court responded in detail to the complaint relating to an alleged breach of the principle of proportionality, raised in the fifth plea in law in the action for annulment, and to that relating to the calculation of the amount of aid to be recovered, raised in the sixth plea in law in that action.
Secondly, the Hellenic Republic has not indicated with sufficient precision the other complaints put forward by it at first instance to which the General Court did not respond.
In those circumstances, the second part of this ground of appeal must be rejected as, in part, unfounded and, in part, inadmissible.
It follows that the third ground of appeal and, therefore, the appeal must be dismissed as, in part, inadmissible and, in part, unfounded.
Costs
Under Article 184(2) of the Rules of Procedure, where the appeal is unfounded, the Court is to make a decision as to the costs.
Under Article 138(1) of those rules, which apply to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party must be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
As the Hellenic Republic has been unsuccessful and the Commission has applied for costs, the Hellenic Republic must be ordered to pay the costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders the Hellenic Republic to pay the costs.
[Signatures]
( *1 ) Language of the case: Greek. |
JUDGMENT OF THE COURT (Seventh Chamber)
10 September 2015 ( *1 )
‛Failure of a Member State to fulfil obligations — Article 49 TFEU — Freedom of establishment — Notaries — Nationality requirement — Article 51 TFEU — Connection with the exercise of official authority’
In Case C‑151/14,
ACTION for failure to fulfil obligations under Article 258 TFEU, brought on 31 March 2014,
European Commission, represented by I. Rubene and H. Støvlbæk, acting as Agents, with an address for service in Luxembourg,
applicant,
v
Republic of Latvia, represented by D. Pelše, I. Kalniņš and K. Freimanis, acting as Agents,
defendant,
supported by:
Czech Republic, represented by M. Smolek and J. Vláčil, acting as Agents,
Hungary, represented by M. Tátrai and M. Fehér, acting as Agents,
interveners,
THE COURT (Seventh Chamber),
composed of J.-C. Bonichot, President of the Chamber, A. Arabadjiev (Rapporteur) and J.L. da Cruz Vilaça, Judges,
Advocate General: P. Cruz Villalón,
Registrar: A. Calot Escobar,
having regard to the written procedure,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
By its application the European Commission asks the Court to declare that, by imposing a nationality requirement for access to the profession of notary, the Republic of Latvia has failed to fulfil its obligations under Articles 49 TFEU and 51 TFEU.
Legal context
The general organisation of the profession of notary in Latvia
The organisation of the notarial profession is governed by the Law on the notarial profession (Notariāta likums) of 9 July 1993 (Latvijas Vēstnesis, 1993, No 48; ‘the Law on the notarial profession’).
Article 1(2) of that law states that it governs the professional and business activity of notaries who, under Article 238 of that law, have a professional occupation.
Under Article 3 of that law, notaries are regarded as public officers. By virtue of Article 5 thereof, they are subject only to the law and perform their functions on a fully independent basis.
In accordance with Article 8(1) of that law, notaries are nominated, transferred and dismissed by the Minister for Justice.
As regards the conditions of access to the notarial profession, Article 9(1) of that law provides that ‘only nationals of the Republic of Latvia may be notaries’.
By virtue of Article 38(1) of the Law on the notarial profession, members of that profession are to perform their duties within the area of the judicial district in which they are established. In accordance with Article 39(1) of that law, notaries may assist persons who request their help, even if their place of residence or their property, to which the notarised document refers, is located outside that judicial district.
Under Article 39(2) of that law, notaries cannot refuse to practise their profession, except in situations provided for by the law. None the less, they are obliged, in accordance with Article 40 of that law, to refuse their services when their assistance is sought to participate in activities which manifestly have an illegal or immoral purpose.
The activities of a notary in Latvia
As regards the various activities of a notary in the Latvian legal system, a notary’s principal task is to draw up authentic instruments.
Article 82(1) of the Law on the notarial profession provides that ‘when certifying an expression of will, notaries must draw up an authentic instrument’ and Article 87(1) of that law states, inter alia, that notaries are required to note the will of the parties in that document and the terms of the agreement and to inform the parties of any possible legal consequences of that agreement.
As regards the enforcement of notarial acts, Article 107(4) of that law states that a creditor may submit to a notary a notarised instrument with a view to enforcing performance of an obligation within one year from the date on which the obligation becomes enforceable. If the debtor believes that the creditor’s claim is unfounded, he may, under Article 107(9) of that law, bring an action in accordance with the provisions laid down in Article 406 of the Code of Civil Procedure (Latvijas Vēstnesis, 1998, No 326/330).
By virtue of Articles 108 to 139 of that law, notaries authenticate, inter alia, signatures, copies and translations and attest to the reality of certain facts, such as the fact that a person is alive.
In accordance with Articles 140 to 145 of the Law on the notarial profession, notaries carry out activities of preservation of funds, securities and documents.
In matters of succession, Article 264 of that law provides that notaries must establish a notarised instrument where the surviving spouse and heirs who have accepted the estate have reached an agreement. Article 315 of that law states that any disagreement in matters of succession must be settled by a court in accordance with the applicable procedures.
Article 320 of the Law on the notarial profession states that a notary may proceed to divide the estate provided that there is no disagreement between the heirs in that regard. Any disagreement must, in accordance with Article 250(1) of the Code of Civil Procedure, be brought before a court which may, under Article 250(3) of that code, entrust the notary with the supervision of the division of the estate. In that situation, Article 250(3) of that code provides that the notary must, when drafting the instrument dividing the estate, take measures to reconcile the parties concerned which are likely to bring about agreement between them. Article 250(5) of that code states that the notary must place the inventory, valuation and draft instrument dividing the estate before the court.
As regard a notary’s powers in divorce matters, Articles 325 and 327 of the Law on the notarial profession provide that a notary may dissolve a marriage where there is a joint request by the spouses, if they have no children in common and do not jointly own a property. If that is not the case, the notary may pronounce the dissolution of the marriage if the parties concerned have concluded a prior contract concerning the custody of the child, the arrangements for visiting rights and the means necessary for its maintenance or the division of the property.
Article 338 of that law states that a notary is to provide the information concerning a transnational divorce to the Ministry of Foreign Affairs.
The pre-litigation procedure
The Commission sent a letter of formal notice to the Republic of Latvia dated 12 October 2006 requesting that it submit, within two months, its observations on the compatibility of the nationality requirement for access to the profession of notary with Articles 49 TFEU and 51 TFEU.
The Republic of Latvia responded to that letter of formal notice by letter of 21 December 2006, in which it set out the reasons for which, from its point of view, the first paragraph of Article 51 TFEU applies to notaries.
Not being persuaded by the arguments put forward by the Republic of Latvia, the Commission, by letter of 17 October 2007, sent a reasoned opinion to that Member State, to which the Republic of Latvia replied by letter of 3 January 2008.
On 24 May 2011, in the judgments in Commission v Belgium (C‑47/08, EU:C:2011:334), Commission v France (C‑50/08, EU:C:2011:335), Commission v Luxembourg (C‑51/08, EU:C:2011:336), Commission v Austria (C‑53/08, EU:C:2011:338), Commission v Germany (C‑54/08, EU:C:2011:339) and Commission v Greece (C‑61/08, EU:C:2011:340), the Court held that the nationality requirement, applied in Belgium, France, Luxembourg, Austria, Germany and Greece respectively, for access to the profession of notary constitutes discrimination on the ground of nationality prohibited under Article 43 EC (now Article 49 TFEU). The Republic of Latvia intervened, before the Court, in support of those Member States.
By letter of 9 November 2011, the Commission drew the attention of the Republic of Latvia to the judgments referred to in the previous paragraph of the present judgment.
The Republic of Latvia replied to that letter by a letter of 5 January 2012.
On 22 November 2012, the Commission sent an additional reasoned opinion to the Republic of Latvia, which dealt only with the questions that the Court had not covered in the judgments referred to in paragraph 21 of this judgment.
By a letter of 21 January 2013, the Republic of Latvia responded to that opinion, setting out the reasons for its view that the position adopted by the Commission was unfounded.
In those circumstances, the Commission decided to bring the present action.
The action
Arguments of the parties
The Commission is of the opinion that the activities carried out by a notary in the Latvian legal order have no connection with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU, as interpreted by the Court.
Firstly, with regard to the task of authenticating documents and agreements, the Commission argues that, on the one hand, the notary’s intervention thus presupposes the prior existence of consent of the parties and, on the other, a notary cannot unilaterally alter a document without obtaining the prior consent of the parties concerned. In that regard, it refers to the case-law of the Court, in accordance with which that activity of authentication cannot be likened to a direct and specific connection to the exercise of official authority.
Furthermore, the authentication of signatures of citizens as part of the procedure for lodging citizens’ legislative proposals should be assessed in the same way.
Secondly, with regard to notaries’ activities of the preservation of funds, securities and documents, the Commission is also of the opinion that those do not have a connection with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU either.
Thirdly, notaries’ activities in matters of succession are, like the divorce matters which they handle, non-contentious, Article 315 of the Law on the notarial profession providing that any dispute in that area must be settled in legal proceedings.
In the view of the Commission, those activities are preparatory to the exercise of official authority, since they lead to the establishment of an inventory, an evaluation thereof and a draft division of the estate which the notary must then pass to the court. Accordingly, the view cannot be taken that the notary has binding decision-making powers in that regard.
Fourthly, as regards notaries’ activities in divorce matters, the Commission points out that the Law on the notarial profession confers on notaries only the right to pronounce divorces by mutual consent. Where there is conflict between the spouses, only the court has jurisdiction. In the case of transnational divorces, notaries may make only the purely formal finding that one of the spouses is actually resident in Latvian territory.
Furthermore, the specific nature of the status of notary in Latvian law, the oath of allegiance to the Latvian State, his access to information for which the State is responsible and the use of State symbols are not directly relevant to the assessment of the nature of the activities carried out by notaries.
In particular, the Commission recalls that, in accordance with the case-law of the Court as regards the specific status of notaries, it is by reference to the nature of the relevant activities themselves, not by reference to that status as such, that it must be ascertained whether those activities fall within the exception in the first paragraph of Article 51 TFEU.
The Commission also points out that the Court has stated that while notaries’ fees are indeed partly fixed by law, the quality of the services they provide may vary from one notary to another, depending in particular on their professional capabilities. The Court therefore concluded that, within the geographical boundaries of their office, notaries practise their profession in conditions of competition, which is not characteristic of the exercise of official authority.
The Republic of Latvia, supported by the Czech Republic and Hungary, submits, firstly, that the notarial profession cannot be regarded as a business activity for the purposes of Article 49 TFEU, as shown by Article 239 of the Law on the notarial profession, which states that the professional activity of notaries is intellectual work which does not have the purpose of making a profit.
In addition, notaries do not practise their profession in conditions of free competition, since they choose neither the services which they provide nor the place in which they provide them, nor the remuneration they receive for providing those services.
In any event, notaries in Latvia carry out activities connected with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU even if that is not the case of notaries practising in the Member States which, by the judgments referred to in paragraph 21 of the present judgment, were found to have failed to fulfil their obligations.
On the one hand, notaries have a discretion in so far as they can legally refuse to draw up notarised instruments connected with unlawful activities.
On the other, the instruments drawn up by notaries in the practice of their profession are public acts.
Secondly, the Republic of Latvia argues that Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications (OJ 2005 L 255, p. 22), as amended by Directive 2013/55/EU (OJ 2013 L 354, p. 132; ‘Directive 2005/36’), does not apply to notaries, which excludes them from the scope of the freedom to provide services and the freedom of establishment.
Thirdly, as regards the activities carried out by notaries, the Republic of Latvia points out that the establishment of authentic acts is a manifestation of the exercise of official authority, since authentication of a document renders it enforceable against third parties.
Authentic instruments established by a notary thus enjoy complete probative force and are enforceable and the fact that a notarised act can be the object of legal proceedings does not suggest that it constitutes merely an auxiliary or preparatory act.
As regards the powers of notaries in matters of succession, they carry out their activities independently and are entrusted with establishing acts concerning the confirmation of the rights of the heirs.
With regard to the activities carried out by notaries in divorce matters, the Republic of Latvia asserts that it is irrelevant that those activities are limited to divorces by mutual consent, since the decision which the notary is called upon to make in the matter is a final decision binding on the parties and on third parties. Notaries are not subject to any judicial supervision in respect of those particular tasks, including where the divorces are transnational.
Furthermore, the fact that the divorces are registered in the registers of births, marriages and deaths confirms that the notarial activity in those matters is connected with the exercise of official authority (judgment in Colegio de Oficiales de la Marina Mercante Española, C‑405/01, EU:C:2003:515, paragraph 42).
Findings of the Court
It must be noted first of all that, in the judgments referred to in paragraph 21 of the present judgment, the Court considered that the freedom of establishment, as set out in Article 49 TFEU, is applicable to the notarial profession.
The argument of the Republic of Latvia, as summarised in paragraphs 37 and 38 of the present judgment, that the notarial profession cannot be regarded as a business activity does not cast doubt on the above assessment.
Firstly, in accordance with Article 238 of the Law on the notarial profession, notaries have a professional occupation. Secondly, it is not disputed that, apart from the cases in which a notary is appointed by law, every party can choose a notary freely. While notaries’ fees are indeed fixed by law, the quality of the services they provide may vary from one notary to another, depending in particular on their professional capabilities.
It follows that, within the geographical limits of their office, notaries exercise their profession in conditions of competition.
Next, it must be borne in mind that Article 49 TFEU is intended to ensure that all nationals of all Member States who establish themselves in another Member State for the purpose of pursuing activities there as self-employed persons receive the same treatment as nationals of that State, and it prohibits, as a restriction on freedom of establishment, any discrimination on grounds of nationality resulting from national legislation (see, inter alia, the judgments in Commission v France, 270/83, EU:C:1986:37, paragraph 14, and Commission v Netherlands, C‑157/09, EU:C:2011:794, paragraph 53).
In the present case, the national legislation at issue reserves access to the profession of notary to Latvian nationals, thus enshrining a difference in treatment on the ground of nationality which is prohibited in principle by Article 49 EC.
The Republic of Latvia submits, however, that the activities of notaries are outside the scope of Article 49 TFEU because they are connected with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU.
It must be noted, in that regard, that in the cases which gave rise to the judgments referred to in paragraph 21 of the present judgment, the view was taken that the activities entrusted to the notaries concerned did not involve, within the meaning of the case-law of the Court, a direct and specific connection with the exercise of official authority.
It must therefore be ascertained in the light of the above considerations whether the activities entrusted to notaries in the Latvian legal system involve a direct and specific connection with the exercise of official authority.
Firstly, as regards the authentication activity, it is not in dispute that its main characteristic is that the notary must ascertain, inter alia, that all the conditions required by law for drawing up the instrument are satisfied.
Furthermore, under Latvian legislation, the documents or agreements freely signed or entered into by the parties are subject to authentication. They decide themselves, within the limits laid down by law, the extent of their rights and obligations and choose freely the conditions which they wish to be subject to when they produce a document or agreement to the notary for authentication. The notary’s intervention thus presupposes the prior existence of an agreement or consensus of the parties.
In that regard, the Court has held that the activity of authentication entrusted to notaries therefore does not, in itself, involve a direct and specific connection with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU (see, by analogy, inter alia, judgment in Commission v Belgium, C‑47/08, EU:C:2011:334, paragraph 92).
It is true that, as submitted by the Republic of Latvia, the notary’s ascertainment, before carrying out the authentication of a document or agreement, that all the conditions required by law for drawing up that document or agreement have been satisfied, pursues an objective in the public interest, namely to guarantee the lawfulness and legal certainty of documents entered into by individuals. However, the mere pursuit of that objective cannot justify the powers necessary for that purpose being reserved exclusively to notaries who are nationals of the Member State concerned (judgment in Commission v Belgium, C‑47/08, EU:C:2011:334, paragraphs 94 and 95).
It is also true that a notary must refuse to authenticate a document or agreement which does not satisfy the conditions laid down by law, regardless of the wishes of the parties. However, following such a refusal, the parties remain free to remedy the unlawfulness, amend the conditions in the document or agreement, or abandon the document or agreement (see judgment in Commission v Belgium, C‑47/08, EU:C:2011:334, paragraph 98).
Thus, with the exception of the argument concerning the enforceability of the document against third parties, which cannot validly succeed in that the enforceability is linked to the probative force of the document, it must be held that the Republic of Latvia does not put forward anything to distinguish the activities of a notary in that Member State from those carried out in the Member States which, by the judgments referred to in paragraph 21 of this judgment, were found to have failed to fulfil their obligations.
Furthermore, nor can the authentication of signatures of citizens as part of the procedure for lodging citizens’ legislative proposals, having regard to the considerations in paragraphs 60 and 61 of the present judgment, be regarded as having a connection with the exercise of official authority.
Secondly, it must also be ascertained whether the other activities entrusted to notaries in the Latvian legal system, referred to by the Republic of Latvia, involve a direct and specific connection with the exercise of official authority.
Firstly, as regards the activities of preservation of funds, securities and documents, it must be found that the Republic of Latvia has disputed only that such activities do not have any connection with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU.
Secondly, with regard to the activities carried out in matters of succession, on the one hand, a notary may proceed to divide the estate only if there is no disagreement between the heirs in that regard and, on the other, that, in the event of disagreement between the heirs, the notary must, under Article 250(5) of the Code of Civil Procedure, place the inventory, valuation and draft instrument dividing the estate before the court.
Since the tasks entrusted to notaries in matters of succession are carried out in that matter, either on a consensual basis or as preparatory tasks under the supervision of the court, they cannot, consequently, be regarded as having, in themselves, a direct and specific connection with the exercise of official authority.
With regard, thirdly, to the activities carried out by notaries in divorce matters, it must be noted that, in accordance with Articles 325 and 327 of the Law on the notarial profession, a notary has powers to dissolve a marriage where the spouses have expressed their agreement on the principle of the divorce and where, if they have a child in common or jointly own a property, they have concluded a prior contract concerning the custody of the child, the arrangements for visiting rights and the means necessary for its maintenance or the division of the property.
Furthermore, with regard to other divorce cases, it is clear from Article 233 of the Code of Civil Procedure, which forms part of Chapter 29 entitled ‘Aspects concerning the annulment and dissolution of marriage’, that handling such cases falls within the powers of the courts.
Clearly, therefore, a notary’s powers in divorce matters, which are based entirely on the wishes of the parties and leave the prerogatives of the courts intact in the absence of agreement between the parties, do not have any connection with the exercise of official authority.
As regards the argument which the Republic of Latvia derives from the judgment in Colegio de Oficiales de la Marina Mercante Española (C‑405/01, EU:C:2003:515), relating to the fact that, in Latvia, divorce by mutual consent pronounced by a notary is registered by the Registrar of births, marriages and deaths, it is apparent from paragraph 42 of that judgment that, when the Court ruled that the duties conferred on masters and chief mates of merchant ships flying the Spanish flag constitute participation in the exercise of rights under powers conferred by public law, it was referring to all the duties performed by them, including rights connected to the maintenance of safety and to the exercise of police powers, together with, in appropriate cases, powers of investigation, coercion and punishment, and not merely the authority held by those masters and chief mates in respect of the registration of births, marriages and deaths.
Nor is the conclusion set out in paragraph 70 of the present judgment called into question by the power conferred on notaries in cases of transnational divorce, since, on the one hand, those divorces are based on the common will of the spouses to dissolve their marriage and, on the other, the notary’s task in that regard is to ascertain that all the conditions required by law for the pronouncement of such a divorce are satisfied. As stated in paragraphs 60 and 61 of the present judgment, that task cannot be regarded as directly and specifically connected with the exercise of official authority.
Thirdly, as regards the particular status of notaries in the Latvian legal system, it need only be recalled that it is by reference to the nature of the relevant activities themselves, not by reference to that status as such, that it must be ascertained whether those activities fall within the exception in the first paragraph of Article 51 TFEU (see, inter alia, judgment in Commission v Belgium, C‑47/08, EU:C:2011:334, paragraph 85).
Furthermore, it is not in dispute, as has been stated in paragraph 51 of the present judgment, that notaries practise their profession in conditions of competition, which is not characteristic of the exercise of official authority (see, by analogy, judgment in Commission v Belgium, C‑47/08, EU:C:2011:334, paragraph 117).
Finally, the argument which the Republic of Latvia bases on Directive 2005/36 not being applicable to notaries also fails to convince. The fact that the legislature has chosen to exclude notarial activities from the scope of a given measure, in this case that directive, does not mean that those activities necessarily fall under the exception provided for in the first paragraph of Article 51 TFEU (see, to that effect, inter alia, judgment in Commission v Belgium, C‑47/08, EU:C:2011:334, paragraph 119).
In those circumstances, it must be concluded that the activities of notaries as defined in the current state of the Latvian legal system are not connected with the exercise of official authority within the meaning of the first paragraph of Article 51 TFEU.
Consequently, the nationality condition required by Latvian legislation for access to the profession of notary constitutes discrimination on grounds of nationality prohibited by Article 49 TFEU.
Having regard to all the foregoing considerations, it must be held that the Commission’s action is well founded.
Costs
Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party must be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Commission has applied for costs and the Republic of Latvia has been unsuccessful, the latter must be ordered to pay the costs.
Under Article 140(1) of those rules the Member States and the institutions which have intervened in the case must bear their own costs. The Czech Republic and Hungary must therefore bear their own costs.
On those grounds, the Court (Seventh Chamber) hereby:
1.
Declares that, by imposing a nationality requirement for access to the profession of notary, the Republic of Latvia failed to fulfil its obligations under Article 49 TFEU;
2.
Orders the Republic of Latvia to pay the costs;
3.
Orders the Czech Republic to bear its own costs;
4.
Orders Hungary to bear its own costs.
[Signatures]
( *1 ) Language of the case: Latvian. |
OPINION OF ADVOCATE GENERAL CRUZ VILLALÓN delivered on 9 July 2015 (1)
Case C‑326/14 Verein für Konsumenteninformation v A1 Telekom Austria AG (Reference for a preliminary ruling from the Oberster Gerichtshof (Austria)) (Directive 2002/22/EC — Users’ rights relating to electronic communications networks and services — Right of subscribers to terminate their contracts without penalty — Extraordinary right to terminate — Alteration of charges under the terms of the contract — Linking of charges to a consumer price index — Inter-relationship with Directive 93/13/EEC)1. This question, referred for a preliminary ruling in proceedings between a consumer protection association and a telecommunications company, concerns specific contractual terms that allow charges for telecommunications services to be adjusted to a consumer price index. In particular, the question under discussion is whether Article 20(2) of Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (‘Universal Service Directive’), (2) means that subscribers have a right to terminate the contract without penalty if such adjustments to the charges are notified in accordance with the indexation method provided for in the contract.
2. Although the question referred for a preliminary ruling by the Oberster Gerichtshof refers exclusively to the Universal Service Directive, both the statement of reasons of the order for reference and the written and oral observations presented in this case reveal the necessity of taking into consideration also the provisions of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. (3)
3. This matter gives the Court of Justice the opportunity for the first time of ruling on the problem raised by a term providing for prices to be adjusted according to an index in relation to the users’ extraordinary right to terminate. If certain contractual terms relating to price changes have been examined by this Court, the terms previously analysed and the problems raised in those cases were not the same as those that are the subject-matter of this dispute. Thus, on the one hand, Invitel (4) concerned the interpretation of Directive 93/13 in a case regarding a clause which provided for the unilateral amendment of costs related to the services supplied, which neither expressly described the method for fixing those costs nor specified the reasons for the amendment. In RWE Vertrieb, (5) on the other hand, the argument was whether a contractual term which, although it provided that customers could terminate the contract, allowed a supplier to vary the cost of the gas supply unilaterally, without indicating the cause, conditions or implications of the change, met the requirements of good faith, balance and transparency laid down by Directives 93/13 and 2003/55. (6) Finally, in Schulz and Egbringhoff, (7) in which Directive 93/13 was not applicable, but only Directives 2003/54 (8) and 2003/55, it was debated whether specific terms which, although they guaranteed information concerning price increases within a reasonable time and the right to terminate the contract, did not contain the reasons, preconditions and scope of a price change, satisfied the level of transparency required by those provisions.
I – Legislative framework A – EU law 4. Recital 30 in the preamble to the Universal Service Directive establishes that ‘[c]ontracts are an important tool for users and consumers to ensure a minimum level of transparency of information and legal security. Most service providers in a competitive environment will conclude contracts with their customers for reasons of commercial desirability. In addition to the provisions of this Directive, the requirements of existing Community consumer protection legislation relating to contracts, in particular … Directive 93/13/EEC … and Directive 97/7/EC … apply to consumer transactions relating to electronic networks and services. Specifically, consumers should enjoy a minimum level of legal certainty in respect of their contractual relations with their direct telephone service provider, such that the contractual terms, conditions, quality of service, condition for termination of the contract and the service, compensation measures and dispute resolution are specified in their contracts. Where service providers other than direct telephone service providers conclude contracts with consumers, the same information should be included in those contracts as well. The measures to ensure transparency on prices, tariffs, terms and conditions will increase the ability of consumers to optimise their choices and thus to benefit fully from competition’.
5. Moreover, recital 49 in the preamble to the Universal Service Directive establishes that the Directive ‘… should provide for elements of consumer protection, including clear contract terms and dispute resolution, and tariff transparency for consumers’.
6. Article 1 of the Universal Service Directive, which is designed to set out the aims and scope of the Directive, is worded as follows:
‘1. Within the framework of Directive 2002/21/EC (Framework Directive), this Directive concerns the provision of electronic communications networks and services to end-users. The aim is to ensure the availability throughout the Community of good-quality publicly available services through effective competition and choice and to deal with circumstances in which the needs of end-users are not satisfactorily met by the market. The Directive also includes provisions concerning certain aspects of terminal equipment, including provisions intended to facilitate access for disabled end-users.
2. This Directive establishes the rights of end-users and the corresponding obligations of undertakings providing publicly available electronic communications networks and services. With regard to ensuring provision of universal service within an environment of open and competitive markets, this Directive defines the minimum set of services of specified quality to which all end-users have access, at an affordable price in the light of specific national conditions, without distorting competition. This Directive also sets out obligations with regard to the provision of certain mandatory services.
… 4. The provisions of this Directive concerning end-users’ rights shall apply without prejudice to Community rules on consumer protection, in particular Directives 93/13/EEC and 97/7/EC, and national rules in conformity with Community law.’
7. Chapter IV of the Universal Service Directive is devoted to the protection of end-user interests and rights. In that chapter, Article 20 of the Directive provides:
‘1. Member States shall ensure that, when subscribing to services providing connection to a public communications network and/or publicly available electronic communications services, consumers, and other end-users so requesting, have a right to a contract with an undertaking or undertakings providing such connection and/or services. The contract shall specify in a clear, comprehensive and easily accessible form at least:
… d) details of prices and tariffs, the means by which up-to-date information on all applicable tariffs and maintenance charges may be obtained, payment methods offered and any differences in costs due to payment method;
… 2. Member States shall ensure that subscribers have a right to withdraw from their contract without penalty upon notice of modification to the contractual conditions proposed by the undertakings providing electronic communications networks and/or services. Subscribers shall be given adequate notice, not shorter than one month, of any such modification, and shall be informed at the same time of their right to withdraw, without penalty, from their contract if they do not accept the new conditions. Member States shall ensure that national regulatory authorities are able to specify the format of such notifications.’
8. Recital 27 in the preamble to Directive 2009/136, which amends the Universal Service Directive, states that ‘the right of subscribers to withdraw from their contracts without penalty refers to modifications in contractual conditions which are imposed by the providers of electronic communications networks and/or services’.
9. Article 3 of Directive 93/13 provides:
‘1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.
… 3. The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair.’ 10. Point 1 of the Annex to Directive 93/13 lists among the terms mentioned in Article 3(3) of the Directive terms which have the object or effect of:
‘… j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;
… l) providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded;
…’ 11. In relation to the scope of point 1(j) and (l) of the Annex to Directive 93/13, point 2 of that Annex provides:
‘… b) … Subparagraph (j) is also without hindrance to terms under which a seller or supplier reserves the right to alter unilaterally the conditions of a contract of indeterminate duration, provided that he is required to inform the consumer with reasonable notice and that the consumer is free to dissolve the contract.
… d) Subparagraph (l) is without hindrance to price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described.’
B – Austrian law 12. Paragraphs 25 and 25a in Section III of the Telekommunikationsgesetz 2003 (Telecommunications Law) (9) read as follows:
‘Paragraph 25 1. Operators of communications networks or services shall adopt general terms and conditions of business describing, inter alia, the services offered, and lay down the charging regime applicable to those services ...
2. Before they come into effect, changes to the general terms and conditions of business and the charging regime shall be notified to the regulatory authority and announced in an appropriate manner. Changes that do not operate exclusively to the benefit of the subscriber must be announced and notified at least two months in advance. The provisions of the Konsumentenschutzgesetz … (KSchG) and of the Allgemeines Bürgerliches Gesetzbuch (General Civil Code) shall otherwise remain unaffected.
3. The substance of changes that do not operate exclusively to the benefit of the subscriber shall be notified to him in writing, for example by being printed on a periodic statement of account, not less than one month before the change comes into effect. At the same time, the subscriber shall be alerted to the point in time at which the changes are to come into effect and to the fact that he is entitled to terminate the contract at no cost up until that time. … Changes to the general terms and conditions of business and charging regimes applied by operators of communications networks and services which become necessary following an order adopted by the regulatory authority on the basis of this provision and which do not operate exclusively to the benefit of users shall not entitle the subscriber to terminate the contract at no cost ...
5. Charging regimes shall, as a minimum, contain: … 2. an indication of the means by which up-to-date information on all applicable tariffs and maintenance charges may be obtained,
…’ 13. Paragraph 6 of the Konsumentenschutzgesetz (Consumer Protection Law), (10) contains the following provisions:
‘Paragraph 6 Unlawful contract terms I. In no circumstances shall the consumer be bound by, in particular, contract terms, within the meaning of Paragraph 879 of the ABGB (General Civil Code), under which
… 5. the trader is entitled, at his request, to apply in respect of the service which he provides a charge higher than that which was determined at the time when the contract was concluded, unless the contract also provides for a reduction in the charge if the agreed conditions governing changes to charges are satisfied, the circumstances triggering the change to the charge are set out and objectively justified in the contract, and the change is outside the trader’s control …’
14. The Bundesstatistikgesetz 2000 (Law on Federal Statistics) (11) establishes, in Paragraph 22 et seq., the federal institution ‘Statistik Österreich’, which is responsible for, inter alia, compiling and publishing statistics. This institution is responsible for compiling the consumer price index.
II – Facts and procedure in the main proceedings 15. The Verein für Konsumenteninformation (Consumer Information Association) has brought a collective action for an injunction against A1 Telekom Austria AG, seeking an order that that company should make no further use of, and refrain from enforcing, certain clauses in the general terms and conditions of business which it applies in the course of trade with consumers, which provide for the charges for telecommunications services to be adjusted according to the fluctuation of a consumer price index. (12)
16. The applicant’s claims were upheld in full in the judgment at first instance. An unsuccessful appeal was brought against that judgment by A1 Telekom. The appellate court considered, in particular, that, in so far as the defendant is entitled to make unilateral changes to the charging regime, subscribers also have an extraordinary right to terminate.
17. This question referred for a preliminary ruling is raised in connection with the appeal on a point of law brought by A1 Telekom Austria against the judgment on appeal. The appeal on a point of law was declared admissible by the Oberster Gerichtshof, the referring court, in the light of the opposing criteria followed by different Divisions of the appellate court in this regard. Another Division of the appellate court had taken the view that the protective purpose of Paragraph 25 of the TKG does not cover adjustments to charges based on a previously agreed index, since such price-adjustment clauses are sufficiently determined and are not within the control of the telecommunications company.
III – The question referred for a preliminary ruling and procedure before the Court of Justice 18. In those circumstances the Oberster Gerichtshof has referred the following question for a preliminary ruling:
‘Is the right, provided for in Article 20(2) of the Universal Service Directive, for subscribers to withdraw from their contracts without penalty ‘upon notice of modifications in the contractual conditions’ also to be provided for in the case where an adjustment to charges derives from contractual conditions which, from the time when the contract is first concluded, provide that future charges are to be adjusted (upwards or downwards) in accordance with changes in an objective consumer price index reflecting movements in the value of money? ’
19. Written observations have been presented in the proceedings before the Court of Justice by the Verein für Konsumenteninformation, A1 Telekom Austria, the European Commission and the Belgian Government, all of which, with the exception of the last, appeared at the hearing held on 30 April 2015.
IV – The question referred for a preliminary ruling A – Observations presented before the Court of Justice 20. The Verein für Konsumenteninformation denies, in the first place, that the suppliers of telecommunication services have a right to amend the contractual terms under Article 20 (2) of the Universal Service Directive, which does, on the other hand, affirm the right of the consumer to terminate the contract. As the association pointed out at the hearing, it would be contrary to the Directive’s objective of maintaining affordable access to the service if there were to be no such right. In the second place, the right to terminate exists precisely for those cases in which that opportunity for making unilateral changes is provided for contractually, for, failing such a previous agreement, the operator could not make those changes. If the interpretation proposed by A1 Telekom Austria is followed, the right to terminate could be systematically avoided through the introduction of indexation clauses. Furthermore, the indexation proposed is not automatic, but depends on the operator deciding to inform the consumer that it intends to raise charges. The association also refers to the judgement in RWE Vertrieb, (13) in support of its argument that a clause which allows a change in charges constitutes a modification in the contractual conditions, within the meaning of the second sentence of Paragraph 2 (b) of the Annex to Directive 93/13 and of Annex A (b) of Directive 2003/55. As the association declared at the hearing, Directives 93/13 and 2002/22 are different in scope, so that the extraordinary right to terminate contemplated in the latter would apply in any case, irrespective of whether the indexation clauses are unfair or not. Nor, in addition, is the use of the consumer price index justified from a substantive point of view, for that index does not reflect the constant movement of prices downwards in the telecommunications sector. As was pointed out at the hearing, the relative weight of communications in the body of prices taken into consideration in order to draw up the index is very low (2.2%) Finally, the association refers to the case-law of the Oberster Gerichtshof, which has interpreted the national legislation transposing Article 44 (1) of Directive 2007/64 (14) to the effect that price changes resulting from clauses other than adjustments of interest rates in accordance with what has been agreed must be regarded as included within the concept of a contractual modification. (15)
21. According to A1 Telekom Austria, a price change resulting from the application of indexation clauses does not constitute a contractual modification, but the ordinary performance of the contract. The aim of indexation, in this respect, is to compensate for future monetary erosion and to maintain equivalence between the material obligations and the financial obligations agreed between the parties. Accordingly, there being no amendment of the contract, Paragraph 25 of the Telekommunikationsgesetz, laying down the consumer’s right to terminate, is not applicable. Moreover, such price changes are in accordance with Paragraph 6(1)(5) of the consumer protection law. Furthermore, A1 Telekom Austria considers that a price adjustment made on the basis of an indexation clause does not constitute a modification actively imposed by the service supplier, within the meaning of recital 27 in the preamble to Directive 2009/136, which amends the Universal Service Directive, but is the performance of an agreed contractual provision, and that the circumstances leading to a price adjustment are independent of the operator’s will. Consequently, an adjustment to the consumer price index such as that in the main proceedings does not fall within the scope of Article 20(2) of the Universal Service Directive. A1 Telekom Austria also alludes to point 2(d) of the Annex to Directive 93/13, according to which lawful price-indexation clauses explicitly describing the method by which prices are to vary are not unfair. The reference to Article 44 of Directive 2007/64 on payment services, which is found in the order for reference, is, on the contrary, irrelevant, since that provision governs different contractual relations. Nor does point 1(b) of Annex I to Directive 2009/73 support any conclusion regarding the term ‘modification’ in the case with which we are concerned. Similarly, A1 Telekom Austria pointed out at the hearing that the criterion of affordability, within the meaning of Article 3(1) of the Universal Service Directive, applies strictly in relation to Chapter II of that Directive, devoted to universal service obligations, and cannot be used to interpret Article 20 of the Directive. Finally, A1 Telekom Austria also explained at the hearing that most of the contracts in which the clause at issue is inserted are contracts of indeterminate duration that may be terminated without penalty if one month’s notice is given and that fixed-term contracts under which a penalty would indeed be imposed on the subscriber for early termination have a minimum term of two years at most.
22. The Belgian Government, for its part, considers that an adjustment of prices arising under the general terms of the contract, such as that which is the subject-matter of the main proceedings, gives rise to the subscribers’ right to terminate. Paragraph 2(d) of the Annex to Directive 93/13 and Article 20(2) of the Universal Service Directive are different in scope, for which reason they must be applied accumulatively. This interpretation was confirmed, according to the Belgian Government, by the judgments of the Court of Justice in Invitel and RWE Vertrieb. (16) Moreover, indexation should be regarded as a modification imposed by the telecommunications operator, within the meaning of recital 27 of Directive 2009/136. Finally, the Belgian Government alludes to several studies which show the downward trend of communication prices, and therefore maintains that indexation cannot be considered necessary to maintain equivalence of obligations.
23. The European Commission considers that the right to terminate must not apply in relation to indexation clauses, for the resulting price changes do not constitute a modification in the contractual conditions within the meaning of Article 20(2) of the Universal Service Directive: the adjustment of charges on the basis of an agreed index and in accordance with the rules established was known at the time the contract was concluded, and therefore constitutes the application of one of the contractual terms, which has not been modified. Furthermore, from the moment it is concluded, the contract establishes the rules for varying charges in a transparent and detailed manner, linking them to an index compiled by a third body (Statistik Austria), on the basis of the objective fluctuation of the value of money. Moreover, the Commission points out that this interpretation is also in accordance with the rules of Directive 93/13. At the hearing, the Commission also emphasised that, irrespective of the different scopes of Directive 93/13 and the Universal Service Directive, both Directives may apply in a case such as this one. It also touched on the difference between the circumstances of the present case and those of Invitel and RWE Vertrieb, (17) which were concerned with unfair terms that must give rise to a right to terminate. Finally, the Commission considers that the reference made by the referring court to Directive 2007/64 on payment services is irrelevant.
B – Analysis 24. By the question it has referred for a preliminary ruling, the Oberster Gerichtshof seeks to ascertain, in essence, whether an adjustment made to the charges for telecommunications services according to a consumer price index constitutes a modification in the contractual conditions, within the meaning of Article 20(2) of the Universal Service Directive, thus giving rise to the right of subscribers to terminate the contract without penalty. The reply to this question depends, therefore, on the interpretation of the expression ‘modifications in the contractual conditions’ inserted in that provision.
25. In this context, it is necessary to examine the particular function of indexation in long-term contracts and contracts of indeterminate duration. Consumer price indices, in their various formulations, are index numbers which measure the proportionate or percentage changes over time in the prices of certain goods and services that households consume. (18) Indexation is a procedure whereby the monetary values of certain payments is adjusted to a consumer price index (CPI). (19) Although the primary function of indexation has generally been linked to the maintenance of purchasing power or standard of living, (20) applying to salaries or to certain Social Security benefits, the publication and regular nature of consumer price indices, as well as the fact that they are generally considered to be indicators of inflation, (21) lead to them also being used as a reference, failing any other more suitable indices, for the adjustment of payment obligations in certain long-term contracts or contracts of indeterminate duration, with the aim of compensating losses in monetary value arising from general inflation. (22) Accordingly, in contract law, price adjustment clauses containing a reference to a consumer price index are generally considered to be a remedy, albeit imperfect, (23) for monetary instability, restoring balance between obligations. (24)
26. Having made these points of a preliminary nature in the light of the questions raised by the observations presented before the Court of Justice, I think it necessary to clarify, first of all, the questions arising from the inter-relationship between the Universal Service Directive and Directive 93/13. It should be borne in mind that the latter contains specific references both to price modification clauses which refer to an index and to the consumer’s right to terminate the contract.
1. Interaction of the Universal Service Directive and Directive 93/13 27. As has been extensively discussed both in the written observations as in those presented during the hearing, in Directive 93/13 the EU legislature established an exception, in respect of price-indexation clauses, to the classification of terms which enable the supplier to alter prices as unfair.
28. The fact remains that the Annex to Directive 93/13 (25) gives the consumer’s right to terminate a decisive value as one of the factors making it possible to establish the unfairness of clauses that allow a modification in the contractual conditions (point 1(j) of the Annex) and of clauses which allow the supplier to increase prices (point 1(l) of the Annex). (26) However, in relation to the latter clauses, the Annex itself to Directive 93/13 establishes a clear exception with regard to ‘price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described’. (27)
29. Although it is apparent from the above that Directive 93/13 specifically considers not to be unfair price-indexation clauses that are lawful and contain an explicit description of the method by which prices vary, it must be stressed that the Universal Service Directive, which is the subject-matter of the question which has been referred for a preliminary ruling, applies without prejudice to the provisions of Directive 93/13. (28) That means, most particularly, that the fact that a price-indexation clause is not considered unfair, within the meaning of Directive 93/13, by no means prejudges whether a variation in prices resulting from its application may constitute a modification in the contractual conditions within the meaning of the Universal Service Directive, with the logical consequences with regard to the right to terminate under Article 20(2) contemplated in that provision.
30. This is the background against which we must give a useful reply to the question referred for a preliminary ruling in this case, for, as the Commission has indeed pointed out at the hearing, in none of the observations presented before the Court of Justice has it been argued that the clauses with which we are concerned are unfair. Unlike the provisions of Directive 93/13, the Universal Service Directive does not make the right to terminate conditional in any way on a declaration that the clauses concerned are unfair. The reply to the question with which we are concerned therefore stems only from the interpretation of the ‘modifications in the contractual conditions’, within the meaning of Article 20 (2) of the Universal Service Directive, always irrespective of whether the attitude of the EU legislature to price-indexation clauses, as shown in the Annex to Directive 93/13, indicates the particular consideration to be given to the practice of indexation.
2. Interpretation of the expression ‘modifications in the contractual conditions’, within the meaning of Article 20(2) of the Universal Service Directive
31. Directive 2002/22 is a key legal instrument in the liberalisation of the telecommunications sector, and its primary aim is to ensure the availability throughout the Community of good quality publicly available services through effective competition and choice, To this end it establishes at the same time a legislative framework, fundamentally by means of its Chapter II, (29) which makes it possible to deal with circumstances in which the needs of end-users are not satisfactorily met by the market. (30) As has repeatedly been held in the case-law of the Court of Justice, Directive 2002/22 ‘is intended to create a harmonised regulatory framework which secures, in the electronic communications sector, the delivery of universal service, that is to say, of a defined minimum set of services to all end-users at an affordable price’. (31)
32. In this context, the Directive also seeks to establish a set of rights of end-users and the corresponding obligations of undertakings providing electronic communications networks and services, (32) to which it devotes Chapter IV, in which it places the provision whose interpretation constitutes the subject-matter of this case. (33) The aim of protecting consumers therefore underlies the provisions of the Universal Service Directive and is also closely related to the liberalisation of the telecommunications market. (34)
33. As recital 30 in the preamble to the Universal Service Directive emphasises, in this sphere of the protection of the rights and interests of end-users, contracts are an important tool for ensuring a minimum level of legal certainty and transparency of information. This is guaranteed, in particular, by specifying the conditions by which the contract is governed, among which transparency of the conditions relating to the method of fixing tariffs is particularly important for users. (35) In the light of this aim, Article 20(1) of the Directive establishes the points which the contract must specify in a clear, comprehensive and easily accessible form. Those points include ‘details of prices and tariffs, the means by which up-to-date information on all applicable tariffs and maintenance charges may be obtained …’
34. It cannot be inferred, from the obligation to include in the contract details and up-to-date information relating to prices and tariffs, that the Universal Service Directive and, in particular, Article 20(1) thereof, requires those prices and tariffs to be established at a fixed and immutable monetary value, precluding the possibility of introducing provisions concerning the conditions for varying them. In this regard, it is clear from Article 20(2) of the Universal Service Directive, as the Court of Justice declared in the judgment in RWE Vertrieb when it interpreted point 2(b), second indent, and (d) of the Annex to Directive 93/13, and Annex A(b) to Directive 2003/55 concerning common rules for the internal market in natural gas, (36) that the EU legislature has recognised, in the context of contracts of indeterminate duration, in this case, telecommunications contracts, ‘the existence of a legitimate interest of the supply undertaking in being able to alter the charge for its service ’. (37)
35. In this regard, and as a first conclusion, I believe that a literal interpretation of the concept of ‘modifications in the contractual conditions’, as stated in Article 20(2) of the Universal Service Directive, leads to the conclusion that an adjustment to the tariffs resulting from application of the contractual conditions does not constitute, strictly speaking, a contractual modification, but the application or performance of the provisions of one of the contractual conditions laid down ab initio.
36. Nevertheless, a conclusion such as that above, stated in such general and undifferentiated terms, carries a clear risk of diminishing the effectiveness of the right to terminate provided for in Article 20(2) of the Directive. Indeed, any price or tariff variation clause, however it is configured, if it is laid down in the contract ab initio, might thus deprive subscribers of the opportunity to terminate the contract unilaterally without penalty, even if it is a clause of indeterminate form, subject to the unilateral will of the company supplying the services, which alters the equilibrium established by the contractual conditions stipulated initially with unforeseeable results for the user.
37. As an immediate consequence of the above, it becomes apparent that it is necessary to make sure that the consideration payable by the subscriber as an ‘index-linked price ‘is shown with sufficient foreseeability, transparency and legal certainty to support the conclusion that there is no modification in the contractual conditions, within the meaning of Article 20(2) of the Universal Service Directive, having regard to the content of the clauses at issue and to the specific characteristics of the contracts in which they are inserted.
38. The general contractual conditions at issue provide rules which govern the fixing of tariffs for the case in which that indexation has been agreed. On the one hand, in that situation, there is no provision for automatic price indexation, (38) but more precisely, for the possibility for the supplier of increasing tariffs for the following calendar year according to the increase of the annual consumer price index compiled by Statistik Austria. On the other hand, conversely, the supplier is required to pass on reductions of the annual CPI by reducing the aforementioned tariffs in the customers’ favour. This obligation is mitigated only if the operator has refrained from increasing tariffs which it would have been authorised to do, in accordance with clause, in the previous period, thus maintaining the equilibrium between the interests of the contracting parties.
39. As A1 Telekom Austria pointed out at the hearing, most of the contracts in which the clause at issue is inserted are contracts of indeterminate duration which may, in any case, be terminated without penalty if one month’s notice is given. On the other hand, fixed-term contracts, to which the clause with which we are concerned would also be applicable and under which a penalty would indeed be imposed on the subscriber for early termination have a minimum term of two years at most.
40. That said, it is for the national court to assess whether, in this case, there is sufficient legal certainty, foreseeability and transparency to conclude that there is no modification in the contractual conditions, within the meaning of Article 20 (2) of the Universal Service Directive. In this regard, it is necessary to take into consideration various particularly relevant factors in order to make that assessment.
41. In the first place, it should be pointed out that the concept of modification in the contractual conditions, in a situation in which adjustments to tariffs are the consequence of one of the clauses initially laid down in the contract, means that there is a change in the subscriber’s position. (39) Thus, a variation of prices brought about in accordance with an indexation clause must be seen from the perspective of the continuity of the life of the contract, (40) ensuring the maintenance of the initial balance of the undertakings given and the equivalence of the reciprocal obligations within a specific contractual framework. In this context, it is also necessary to examine the particular function of indexation in long-term contracts or contracts of indeterminate duration.
42. In the second place, it has to be considered whether the variation of those tariffs is provided for in the contract in a manner detailed, precise, comprehensible and transparent to the subscriber, referring to an index easily accessible to the public, fixed by a third body, irrespective of the wishes of the service provider, in accordance with objective criteria and in such a way that application of the clauses does not produce results that are unforeseeable or disproportionate for subscribers.
43. In the third place, the fact that an indexation clause is not applied automatically does not necessarily mean that there is a modification in the contractual conditions within the meaning of Article 20(2) of the Universal Service Directive, provided that that lack of automatic effect operates, by maintaining the balance of the interests of the contracting parties, in favour of subscribers.
44. Finally, I think it unnecessary to take into consideration the claims based on the interpretation which the Oberster Gerichtshof itself has offered in relation to the national legislation transposing Article 44 of Directive 2007/64 payment services, to the effect that any adjustment other than an adjustment resulting from a change in interest rates is to be regarded as included in the concept of contractual modification. Irrespective of whether the specificity of the payment services regulated by that provision may be against an automatic transposition of that interpretation to the sphere of the Universal Service Directive, at all events, the aforementioned provision of Directive 2007/64, which is not the subject-matter of the present dispute, has not yet been interpreted by the Court of Justice.
45. In short, I consider that a variation of tariffs brought about by the application of a price adjustment clause does not imply a modification in the contractual conditions, within the meaning of Article 20(2) of the Universal Service Directive, in so far as the statement of the consideration payable by the subscriber as the ‘index-linked price’ has sufficient foreseeability, transparency and legal certainty to support the conclusion that there has been no change in the subscriber’s contractual position. It is for the national court, in the light of the content of the clauses at issue and of the specific characteristics of the contracts in which they are inserted, to make that assessment.
V – Conclusion 46. In the light of the foregoing, I consider that the reply to be given to the question referred for a preliminary ruling by the Oberster Gerichtshof should be as follows:
‘A variation of tariffs brought about by the application of a price adjustment clause does not imply a modification in the contractual conditions, within the meaning of Article 20(2) of the Universal Service Directive, in so far as the statement of the consideration payable by the subscriber as the ‘index-linked price’ is sufficiently foreseeable, transparent and legally certain to support the conclusion that there has been no change in the subscriber’s contractual position. It is for the national court, in the light of the content of the clauses at issue and of the specific characteristics of the contracts in which they are inserted, to make that assessment.’
1– Original language: Spanish.
2– OJ 2002 L 108, p. 51, amended by Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (OJ 2009 L 337, p. 11).
3– OJ 1993 L 95, p. 29.
4– Judgment in Invitel, C‑472/10, EU:C:2012:242.
5– Judgment in RWE Vertrieb, C‑92/11, EU:C:2013:180.
6– Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC (OJ 2003 L 176, p. 57), repealed by Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 (OJ 2009 L 211, p. 94).
7– Judgment in Joined Cases Schulz and Egbringhoff, C‑359/11 and C‑400/11, EU:C:2014:2317.
8– Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC (OJ 2003 L 176, p. 37), repealed by Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity (OJ 2009 L 211, p. 55).
9– Bundesgesetz, mit dem ein Telekommunikationsgesetz erlassen wird, (TKG 2003), BGBl. I Nr. 70/2003 idF BGBl. I No 44/2014.
10– Bundesgesetz vom 8. März 1979, mit dem Bestimmungen zum Schutz der Verbraucher getroffen werden (KSchG), BGBl. No 140/1979.
11– BGBl.I Nr. 163/1999.
12– The general contract terms to which the Verein für Konsumenteninformation refers in its appeal are worded as follows:
‘Section 4 — Changes to the contract …
4.3. Where a change does not operate exclusively to the benefit of the customer, A1 shall announce that change — unless it is to apply only to future customers — two months before it is due to come into effect … The notification of the substance of the change shall include a reference to the right to terminate the contract at no cost and the requisite period of notice … Changes to charges which are based on an agreed index shall not entitle the customer to terminate the contract for cause …
Section 10 — Charges, payment terms
10.12. If the charging regime or an individual agreement makes provision, without further stipulation, for an index-linking mechanism, the following rules shall apply.
10.12.1 Any changes in the annual average (measured over a calendar year) of the consumer price index (‘CPI annual average’) published by Statistik Austria shall have the following effects on charges:
– A1 shall be entitled to raise charges for the following calendar year in accordance with the increase in the CPI annual average.
– A1 shall be obliged to pass on any fall in the CPI annual average and to lower the aforementioned charges in accordance with that fall. AI shall inform customers of the adjustments in writing (e.g. by printing them on bills).
10.12.2 Unless otherwise stipulated, the adjustment to charges shall be based on the relationship between the change in the CPI annual average for the calendar year preceding the adjustment in comparison with the CPI annual average for the last but one calendar year preceding the adjustment (index basis: 2010 CPI annual average = 100). A1 shall not take into account variations of 2% (variation margin) from the index basis. If, however, the variations in subsequent years, taken as a whole, fall above or below that margin, A1 shall adjust the charges by the full amount. The new value shall constitute the new index basis for future adjustments. Any obligation to reduce charges shall diminish to the extent that A1 waived the right to increase charges the previous year.
10.12.3 Charges shall be adjusted in the year following the change in the index basis, but not before the year following the conclusion of the contract:
– Increase in charges: 1 April to 31 December.
– Reduction in charges: always 1 April.
10.12.4 If the CPI annual average ceases to be published, it shall be replaced by its official successor’.
13– Judgment in RWE Vertrieb, C‑92/11, EU:C:2013:180.
14– Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market, amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (OJ 2007 L 319, p. 1).
15– The association refers to the judgments of 6 July 2011, 3 OB 107/11y, and 1 August 2012, 1 OB 244/11f. This argument is also emphasised in the order for reference.
16– Judgments in RWE Vertrieb, C‑92/11, EU:C:2013:180 and Invitel, C‑472/10, EU:C:2012:242.
17– Ibid.
18– Consumer Price Index Manual. Theory and Practice. (Compiled by the International Labour Office, International Monetary Fund, Organisation for Economic Co-operation and Development, Eurostat, United Nations, International Bank for Reconstruction and Development, and the World Bank), 2006, p. 1.
19– Ibid., p. 41.
20– Ibid., p. 41 et seq. William Fleetwood, one of the precursors of price indices, published in 1707 a work in defence of students whose annual income exceeded five pounds —the limit for income above which students were not entitled to a scholarship, set in the statute, dating from the XVth century, of a college of a historic British university —. Fleetwood proposed a non-literal interpretation of the rule, stating that it would be necessary to adjust that amount to a sum which would cover the same needs as could be met for the sum of five pounds at the time the sum was fixed. William Fleetwood, Chronicon Preciosum: or an Account of English Money, the Price of Corn, and Other Commodities, for the last 600 Years, London, Charles Harper, 1707.
21– Thus, for example, Council Regulation (EC) No 2494/95 of 23 October 1995 concerning harmonised indices of consumer prices (OJ 1995 L 257, p. 1), the fourth recital of which states that consumer price indices are essential to an understanding of the inflationary process.
22– Consumer Price Index Manual, op. cit. p. 43.
23– J. Ghestin and M. Billiau, Le prix dans les contrats de longue durée, L.G.D.J., 1990, p. 106.
24– In any event these considerations must be understood to be without prejudice to the debate, from an economic point of view, of the effects connected with the practice of indexation (see regarding this debate, S. Fischer, Indexing, Inflation, and Economic Policy, MIT Press, Cambridge, Mass. 1986) and of the rules adopted in this regard by the Member States, usually inspired by considerations of economic policy [to give an example, we may refer, in France, to Ordonnances No 58-1374 of 30 December 1958 and No 59-246 of 4 February 1959; in Germany to the Preisklauselgesetz of 7 September 2007 (BGBl. I S. 2246, 2247) or, in Spain, in relation, fundamentally, to the public sector, to Ley 2/2015 de 30 de marzo de desindexación de la economía española, BOE 77, p. 27244]. For a comparative study, see Ministère de l’économie et du commerce extérieur, ‘Modalités de la réglementation des clauses d’indexation de prix en France, Allemagne, Belgique et Luxembourg’, Perspectives de politique économique No 19, 2012, Luxembourg, available at www.competitivite.lu.
25– The Annex, in accordance with Article 3 of Directive 93/13, contains an indicative and non-exhaustive list of certain clauses which may be declared unfair. The Court of Justice has repeatedly held that, although the content of the Annex ‘does not suffice in itself to establish automatically the unfair nature of a contested term, it is nevertheless an essential element on which the competent court may base its assessment as to the unfair nature of that term’, judgment in Invitel, C‑472/10, EU:C:2012:242, paragraph 26.
26– First, in relation to the clauses which permit the supplier of financial services to alter the terms of the contract unilaterally, the second indent of point 2(b) of the Annex specifies that this is understood to be without hindrance to terms ‘under which a seller or supplier reserves the right to alter unilaterally the conditions of a contract of indeterminate duration, provided that he is required to inform the consumer with reasonable notice and that the consumer is free to dissolve the contract’. Second, and in relation to the terms which grant the seller or supplier the right to increase prices, Paragraph 1(l) of the Annex stipulates that they will be considered unfair if the consumer does not have ‘the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded’. The Court of Justice has interpreted these provisions according special importance to that right. See the judgments in Invitel, C‑472/10, EU:C:2012:242, paragraph 24, and RWE Vertrieb, C‑92/11, EU:C:2013:180, paragraphs 49 and 54.
27– Point 2(d) of the Annex to Directive 93/13.
28– Article 1(4) and recital 30 of the Universal Service Directive.
29– The heading of which is ‘Universal service obligations, including social obligations’.
30 – Article (1) of the Directive
31– Judgments in Base and Others, C‑389/08, EU:C:2010:584, paragraph 32, and Commission v France, C‑220/07, EU:C:2008:354, paragraph 28.
32– See Article 1(2) of the Directive.
33 – It is not clear from the order of the reference to what type of services the clauses apply. In this respect, although the provisions relating to special tariffs and mechanisms for financing the universal service contemplated by the Directive do not apply to all types of services (in relation to the exclusion of mobile communication services, see the judgment in Base Company and Mobistar, C‑1/14, EU:C:2015:378), that limitation does not apply in respect of the rights of end-users as referred to in Chapter IV of the Directive — in particular, Article 20 refers to services providing connection to a public communications network and/or publicly available electronic communications services .
34– See, by analogy, the judgment in Schulz and Egbringhoff, C‑359/11 and C‑400/11, EU:C:2014:2317, paragraph 40.
35– See also recital 49 in the preamble to the Directive.
36– This last provision establishes the consumer protection measures. In particular point (b) of the Annex in its current wording [Annex I(b) of Directive 2009/73] establishes that, inter alia, ‘[…] Service providers shall notify their subscribers directly of any increase in charges, at an appropriate time no later than one normal billing period after the increase comes into effect in a transparent and comprehensible manner. Member States shall ensure that customers are free to withdraw from contracts if they do not accept the new conditions notified to them by their gas service provider’.
37– Judgment in RWE Vertrieb, C‑92/11, EU:C:2013:180, paragraph 46. However, ‘[a] standard term which allows such a unilateral adjustment must … meet the requirements of good faith, balance and transparency laid down by those directives’, paragraph 47.
38– Academic legal writing distinguishes between indexation clauses in the strict sense, which are characterised by being automatic, and index-linked modification clauses. See J. P. Doucet, L’indexation, 1965, L.G.D.J, p. 6. With regard to the distinction between automatic indexation clauses and clauses of non-automatic adjustment of prices and tariffs, see G. Rouhette, ‘La révision conventionnelle du contrat’, Revue internationale de droit comparé, 1986, p. 369-408.
39– On this matter, see P. Nihoul and P. Rodford, EU Electronic Communications Law, 2nd ed, Oxford University Press, 2011, p. 399.
40– This perspective of continuity is the setting for the approach taken to indexation in the case-law of the Court of Justice in the very different context of the sphere of public procurement, when interpreting the notion of essential modification to the contract within the framework of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1), [repealed and replaced by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114). Thus, the Court of Justice has even declared that the replacement of a price index by a subsequent index, provided for in the basic contract is merely applying the stipulations of the basic agreement as regards keeping the indexation clause up to date, and therefore does not constitute an amendment to the essential conditions of the initial agreement such as to constitute a new award of a contract within the meaning of Directive 92/50. Judgment in pressetext Nachrichtenagentur, C‑454/06, EU:C:2008:351, paragraphs 68 and 69. |
JUDGMENT OF THE COURT (First Chamber)
7 April 2016 ( *1 )
‛Reference for a preliminary ruling — Public procurement — Directive 2004/18/EC — Technical and/or professional abilities of economic operators — Article 48(3) — Possibility to rely on the capacities of other entities — Conditions and procedures — Nature of the links between the tenderer and the other entities — Amendment of the tender — Annulment and repetition of an electronic auction — Directive 2014/24/EU’
In Case C‑324/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Krajowa Izba Odwoławcza (National Appeal Chamber, Poland), made by decision of 18 June 2014, received at the Court on 7 July 2014, in the proceedings
Partner Apelski Dariusz
v
Zarząd Oczyszczania Miasta,
intervening parties:
Remondis sp. z o.o.,
MR Road Service sp. z o.o.,
THE COURT (First Chamber),
composed of A. Tizzano (Rapporteur), Vice-President of the Court, acting as President of the First Chamber, F. Biltgen, E. Levits, M. Berger and S. Rodin, Judges,
Advocate General: N. Jääskinen,
Registrar: K. Malacek, Administrator,
having regard to the written procedure and further to the hearing on 7 May 2015,
after considering the observations submitted on behalf of:
—
Partner Apelski Dariusz, by T. Krześniak, adwokat,
—
Zarząd Oczyszczania Miasta, by K. Wąsik, radca prawny,
—
Remondis sp. z o.o. and Mr Road Service sp. z o.o., by K. Kamiński and K. Dajczer, radcowie prawni,
—
the Polish Government, by B. Majczyna ainsi que by M. Szwarc and D. Lutostańska, acting as Agents,
—
the Spanish Government, by J. García-Valdecasas Dorrego, acting as Agent,
—
the Latvian Government, by I. Kalniņš and I. Ņesterova, acting as Agents,
—
the European Commission, by K. Herrmann and A. Tokár, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 8 September 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 2, 44 and 48(3) of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114).
The request has been made in proceedings between Partner Apelski Dariusz (‘Partner’) and Zarząd Oczyszczania Miasta (Warsaw municipal cleansing authority) concerning its exclusion from the procedure for the award of a public contract for the comprehensive mechanical cleansing of roadways of the city of Warsaw (Poland) in the years from 2014 to 2017.
Legal context
EU law
Directive 2004/18
Recital 46 of the contested directive reads as follows:
‘Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. As a result, it is appropriate to allow the application of two award criteria only: “the lowest price” and “the most economically advantageous tender”.
To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation — established by case-law — to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. …’
Article 2 of that directive, entitled ‘Principles of awarding contracts’, provides:
‘Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.’
Article 44 of that directive, entitled ‘Verification of the suitability and choice of participants and award of contracts’, provides:
‘1. Contracts shall be awarded on the basis of the criteria laid down in Articles 53 and 55, taking into account Article 24, after the suitability of the economic operators not excluded under Articles 45 and 46 has been checked by contracting authorities in accordance with the criteria of economic and financial standing, of professional and technical knowledge or ability referred to in Articles 47 to 52, and, where appropriate, with the non-discriminatory rules and criteria referred to in paragraph 3.
2. The contracting authorities may require candidates and tenderers to meet minimum capacity levels in accordance with Articles 47 and 48.
The extent of the information referred to in Articles 47 and 48 and the minimum levels of ability required for a specific contract must be related and proportionate to the subject matter of the contract.
These minimum levels shall be indicated in the contract notice.
…’
Article 47(2) of Directive 2004/18 entitled ‘Economic and financial standing’, provides:
‘An economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them. It must in that case prove to the contracting authority that it will have at its disposal the resources necessary, for example, by producing an undertaking by those entities to that effect.’
Article 48 of Directive 2004/18 entitled ‘[t]echnical and/or professional ability’ states:
‘1. The technical and/or professional abilities of the economic operators shall be assessed and examined in accordance with paragraphs 2 and 3.
2. Evidence of the economic operators’ technical abilities may be furnished by one or more of the following means according to the nature, quantity or importance, and use of the works, supplies or services:
(a)
…
(ii)
a list of the principal deliveries effected or the main services provided in the past three years, with the sums, dates and recipients, whether public or private, involved. …
…
…
3. An economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them. It must in that case prove to the contracting authority that it will have at its disposal the resources necessary for the execution of the contract, for example, by producing an undertaking by those entities to place the necessary resources at the disposal of the economic operator.
…’
Article 51 of Directive 2004/18, headed ‘Additional documentation and information’, is worded as follows:
‘The contracting authority may invite economic operators to supplement or clarify the certificates and documents submitted pursuant to Articles 45 to 50.’
Article 54 of Directive 2004/18 entitled ‘Use of electronic auctions’ states:
‘1. Member States may provide that contracting authorities may use electronic auctions.
…
4. Before proceeding with an electronic auction, contracting authorities shall make a full initial evaluation of the tenders in accordance with the award criterion/criteria set and with the weighting fixed for them.
All tenderers who have submitted admissible tenders shall be invited simultaneously by electronic means to submit new prices and/or new values; …
…
8. After closing an electronic auction contracting authorities shall award the contract in accordance with Article 53 on the basis of the results of the electronic auction.
Contracting authorities may not have improper recourse to electronic auctions nor may they use them in such a way as to prevent, restrict or distort competition or to change the subject matter of the contract, as put up for tender in the published contract notice and defined in the specification.’
Directive 2014/24/EU
Recital 2 of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ 2014 L 94, p. 65) reads as follows:
‘… the public procurement rules adopted pursuant to Directive 2004/17/EC … should be revised and modernised in order to increase the efficiency of public spending, facilitating in particular the participation of small and medium-sized enterprises (SMEs) in public procurement … There is also a need to clarify basic notions and concepts to ensure legal certainty and to incorporate certain aspects of related well-established case-law of the Court of Justice of the European Union.’
Article 63 of Directive 2014/24, entitled ‘Reliance on the capacities of other entities’, states as follows:
‘1. With regard to criteria relating to economic and financial standing as set out pursuant to Article 58(3), and to criteria relating to technical and professional ability as set out pursuant to Article 58(4), an economic operator may, where appropriate and for a particular contract, rely on the capacities of other entities, regardless of the legal nature of the links which it has with them. With regard to criteria relating to the educational and professional qualifications as set out in point (f) of Annex XII Part II, or to the relevant professional experience, economic operators may however only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required. Where an economic operator wants to rely on the capacities of other entities, it shall prove to the contracting authority that it will have at its disposal the resources necessary, for example, by producing a commitment by those entities to that effect.
…
2. In the case of works contracts, service contracts and siting or installation operations in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself …’
Under Article 90(1) of that directive:
‘Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 18 April 2016. …’
Polish law
Directive 2004/18 was transposed into the Polish national legal system by the Law on public contracts (codified text DZ. U of 2013, headings 907, 984, 1047 and 1473, and Dz. U of 2014, heading 423, ‘Law on public contracts’).
Article 26(2b) of the Law on public contracts provides:
‘The economic operator may rely on the knowledge and experience, technical capacity, staff able to perform the contract or financial capacities of other entities, regardless of the legal nature of the links which it has with them. In that case the economic operator is required to prove to the contracting authority that it will have at its disposal the resources necessary to perform the contract, inter alia by producing for that purpose a written undertaking by those entities that they will make available to it the necessary resources for the period during which they are used to perform the contract. …’
Article 83(2) and (3) of the Law on public contracts states:
‘2. The contracting authority may permit the submission of tenders for lots, where the subject matter of the contract can be divided.
3. In the case referred to in paragraph 2 the economic operator may submit tenders for one or more lots, unless the contracting authority has specified a maximum number of lots for which one economic operator may submit tenders.’
Article 91b(1) of the Law on public contracts provides:
‘The contracting authority shall invite electronically all the economic operators which have submitted non-rejected tenders to take part in an electronic auction.’
According to Article 93(1)(7) of the Law on public contracts:
‘The contracting authority shall annul the procedure for the award of the contract where … the award procedure is vitiated by an irreparable defect which prevents the conclusion of a non-annullable public contract.’
Article 1(6) of the Regulation of the president of the Council of Ministers of 19 February 2013 on the type of documents which may be required by the a contracting authority from an economic operator and the method of production of those documents (Dz. U. of 2013, heading 231) is worded as follows:
‘If, in order to establish that it meets the conditions referred to in Article 22(1) of the [Law on public contracts], an economic operator relies on the capacities of other entities pursuant to the provisions of Article 26(2b) of the [Law on public contracts], the contracting authority, in order to determine whether the economic operator will have capacities of other bodies to the extent necessary for the proper performance of the contract or whether the link between the economic operator and those entities does in fact ensure access to those capacities may require:
(1)
with regard to the conditions referred to in Article 22(1)(4) of the [Law on public contracts], the documents listed in Article 22(1)(9) to (11), and the same for other documents relating to the economic and financial standing, as laid down in the tender notice or the tender specifications;
(2)
documents relating in particular to:
(a)
the extent of the resources of another entity which the economic operator is able to access;
(b)
the rules governing the use by the economic operator of the resources of another entity in order to perform the contract;
(c)
the nature of the link between an operator and another entity; and
(d)
the extent and duration of the participation of another entity in the performance of the contract.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
It is apparent from the order for reference that, in December 2013, the Warsaw municipal cleansing authority initiated a procedure for the award of a public contract for the comprehensive mechanical cleansing of roadways in Warsaw in the winter and summer seasons of 2014 to 2017. The winter cleansing, which is the subject of that contract consists essentially in preventing and removing ice by salting and using snow-ploughs on certain categories of municipal roadways. Summer cleansing involves sweeping and wet cleaning of roadways.
The Warsaw municipal cleansing authority chose to conduct a tendering procedure which was to close with an electronic auction. The subject matter of the contract was divided into eight lots, corresponding to different districts of Warsaw, thereby allowing each tenderer either to submit a tender for the whole of that contract or a partial tender.
As provided for in the tender specifications, in order to demonstrate its technical abilities, each tenderer was required to submit a list of winter maintenance services for roadways with pre-wetting technology provided in the three years prior to the expiry of the deadline for submitting the tender. The total value of those services had to be at least PLN 1000000 (approximately EUR 224 442) for each of the eight lots of the contract at issue. Therefore, in order to submit a tender for the whole contract, a tenderer had to prove that it had provided services with a value of at least PLN 8000000 (approximately EUR 1795537).
Following the publication in the Official Journal of the European Union of the tender notice, Partner put itself forward as a candidate for the whole contract, stating that in the previous 3 years it had supplied 14 services, including 12 based on its own experience and 2 based on the experience of PUM z o.o. (‘PUM’), which is established in Grudziądz (Poland), a town situated approximately 230 km from Warsaw.
In addition, it attached to its tender an undertaking by PUM, by which the latter made its capacities available to Partner, in particular, its consulting services including, among others, training for Partner’s employees and help to resolve any problems which might arise at the performance stage of the contract. Partner also stated that, for the purposes of the performance of the contract that cooperation was to be governed by a contract between the two undertakings.
On 26 February 2014, the Warsaw municipal cleansing authority invited Partner to provide further details of the activities that PUM carried out and the effect that those activities might have on the quality and efficiency of the services provided in Warsaw, taking account, in particular, of the distance between Grudziądz and Warsaw.
Since it was not satisfied by Partner’s answer, and it took the view that PUM’s knowledge and experience could not be made available without the personal, actual participation of that company in the performance of the contract at issue, by letter of 11 March 2014, the Warsaw municipal cleansing authority requested Partner to supplement the documents in that respect.
In its answer of 18 March 2014, Partner challenged the approach adopted by the Warsaw municipal cleansing authority, and requested that its tender be taken into consideration when awarding each of the eight lots of that contract in a certain order of priority.
The Warsaw municipal cleansing authority nonetheless rejected Partner’s tender in its entirety and closed the procurement procedure at issue after holding an electronic auction.
Therefore, Partner brought an action before the Krajowa Izba Odwoławcza (National Appeal Chamber) in order to obtain the annulment of the decision by which it has been excluded from the procurement procedure at issue and that which adopted the most advantageous offers for the various lots of that contract. Furthermore, it requested that the tenders submitted in that procurement procedure be re-examined and that it be allowed to take part in a new electronic auction.
In those circumstances, Krajowa Izba Odwoławcza (National Appeal Chamber), decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Can Article 48(3) of Directive 2004/18 in conjunction with Article 2 thereof, be interpreted, where it states that “where appropriate” an economic operator may rely on the capacities of other entities, as covering any situation where a particular economic operator does not have the skills required by the contracting authority and wishes to rely on the capacities of other entities? Or must the indication that an economic operator may rely on the resources of other entities only “where appropriate” be regarded as a restriction indicating that such reliance may be had only exceptionally and not as a rule when providing evidence of the skills of economic operators in procedures for the award of public contracts?
(2)
Can Article 48(3) of Directive 2004/18, in conjunction with Article 2 thereof, be interpreted as meaning that reliance by an economic operator on the capacities of other entities in terms of their knowledge and experience “regardless of the legal nature of the links which it has with them” and “having at its disposal the resources” of those entities denote that during performance of the contract an economic operator need not have links with those entities or can have very loose and vague links, that is to say, it can perform the contract independently (without the involvement of another entity) or such participation can consist of “advice”, “consultation”, “training” and the like? Or must Article 48(3) be interpreted as meaning that the entity on whose capacities the economic operator relies must actually and personally perform the contract in so far as its capacities were declared?
(3)
Can Article 48(3) of Directive 2004/18, in conjunction with Article 2 thereof, be interpreted as meaning that an economic operator which has its own experience but to a lesser degree than it would like to indicate to the contracting authority (for example, insufficient experience to submit a tender for the whole contract) may rely additionally on the capacities of other entities to improve its situation in the procedure?
(4)
Can Article 48(3) of Directive 2004/18, in conjunction with Article 2 thereof, be interpreted as meaning that in the contract notice or the tendering specifications the contracting authority can (or even must) lay down the rules under which the economic operator may rely on the capacities of other entities, for example in what way the economic operators must participate in the performance of the contract, in what way the capacity of the economic operator and another entity can be combined, and whether the other entity will bear joint and several liability with the economic operator for the due performance of the contract in so far as the economic operator has relied on its capacities?
(5)
Does the principle of equal and non-discriminatory treatment of economic operators set out in Article 2 of Directive 2004/18 allow reliance on the capacities of another entity under Article 48(3) where the capacities of two or more entities which do not have the capacities in terms of knowledge and experience required by the contracting authority are combined?
(6)
Therefore, does the principle of equal and non-discriminatory treatment of economic operators set out in Article 2 of Directive 2004/18 allow an interpretation of Articles 44 and 48(3) of Directive 2004/18 to the effect that the conditions for participation in the procedure that are laid down by the contracting authority may be fulfilled just formally for the purposes of participating in the procedure and regardless of the actual skills of the economic operator?
(7)
Where it is permitted to submit a tender for lots, does the principle of equal and non-discriminatory treatment of economic operators set out in Article 2 of Directive 2004/18 allow an economic operator, after the submission of tenders, to state — for example in the context of the supplementing or explaining of documents — to which lot the resources specified by it in order to prove that the conditions for participation in the procedure have been fulfilled are to be assigned?
(8)
Do the principle of equal and non-discriminatory treatment of economic operators and the principle of transparency set out in Article 2 of Directive 2004/18 allow an auction which has been carried out to be annulled and an electronic auction to be repeated where it was carried out improperly in an essential respect, for example where not all economic operators which submitted admissible tenders were invited to participate?
(9)
Do the principle of equal and non-discriminatory treatment of economic operators and the principle of transparency set out in Article 2 of Directive 2004/18 allow a contract to be awarded to an economic operator whose tender was selected as a result of such an auction without it being repeated, where it is not possible to determine whether or not the participation of the economic operator which was not taken into consideration would have altered the result of the auction?
(10)
In interpreting the provisions of Directive 2004/18, is it permitted to use as a guide to interpretation the content of the provisions of Directive 2014/24 and of the preamble thereto, even though the period for implementing it has not expired, in so far as it explains certain assumptions and intentions of the EU legislature and is not contrary to Directive 2004/18?’
Consideration of the questions referred for a preliminary ruling
Questions 1 to 3, 5 and 6
By questions 1 to 3, 5 and 6, which it is appropriate to examine together, the referring court asks the Court of Justice essentially to determine the conditions which must be met in order for an economic operator to rely on the capacities of other entities, within the meaning of Article 48(3) of Directive 2004/18, and to clarify the detailed rules according to which the necessary resources of those entities are to be made available and, therefore, their possible participation in the performance of the contract concerned.
In order to answer those questions it must be recalled, as a preliminary point, that, according to Article 44(1) of Directive 2004/18, it is for the contracting authorities to check the suitability of the candidates or tenderers in accordance with the criteria referred to in Articles 47 to 52 thereof.
Furthermore, under Article 44(2) of Directive 2004/18 a contracting authority may require candidates or tenderers to meet minimum levels of economic and financial standing and technical and professional ability in accordance with Articles 47 and 48 of that directive.
According to the Court’s settled case-law, Articles 47(2) and 48(3) of Directive 2004/18 recognise the right of every economic operator to rely, for a particular contract, upon the capacities of other entities, regardless of the nature of the links which it has with them, provided that it proves to the contracting authority that it will have at its disposal the resources necessary for the performance of the contract (see, to that effect, judgment in Swm Costruzioni 2 and Mannocchi Luigino, C‑94/12, EU:C:2013:646, paragraphs 29 and 33).
Such an interpretation is consistent with the aim of the widest possible opening-up of public contracts to competition pursued by the relevant directives to the benefit not only of economic operators but also of contracting authorities. In addition that interpretation also facilitates the involvement of small- and medium-sized undertakings in the contracts procurement market, an aim also pursued by Directive 2004/18, as stated in recital 32 thereof. (judgment in Swm Costruzioni 2 and Mannocchi Luigino, C‑94/12, EU:C:2013:646, paragraph 34 and the case-law cited).
It follows that, taking account of its importance in the EU legislation on public procurement, the right established in Articles 47(2) and 48(3) of that directive constitutes a general rule which the contracting authorities must take into account when they exercise their powers of verification of the suitability of the tenderer to perform a specific contract.
In those circumstances, the fact that, under Article 48(3) of Directive 2004/18, an economic operator may rely on the resources of other entities ‘where appropriate’ cannot be interpreted as the referring court, in particular, appears to suggest, as meaning that it is only exceptionally that such an operator may rely on the resources of third party entities.
That being said, it must be stated, first, that, although it is free to establish links with the entities on whose resources it relies, and to choose the legal nature of those links, the tenderer is nonetheless required to produce evidence that it actually has available to it the resources of those entities or undertakings, which it does not itself own, and which are necessary for the performance of the contract (see to that effect, judgment in Holst Italia, C‑176/98, EU:C:1999:593, paragraph 29 and the case-law cited).
Thus, in accordance with Articles 47(2) and 48(3) of Directive 2004/18, a tenderer may not rely on the resources of other entities in order to satisfy in a purely formal manner the conditions required by the contracting authority.
Second, as the Court has already held, the provisions of Directive 2004/18 do not preclude the exercise of the right established in Articles 47(2) and 48(3) thereof from being limited in exceptional circumstances (see, to that effect, judgment in Swm Costruzioni 2 and Mannocchi Luigino, C‑94/12, EU:C:2013:646, paragraph 36).
It is conceivable that there may be works with special requirements necessitating a certain capacity which cannot be obtained by combining the capacities of more than one operator, which, individually, would be inadequate. In such circumstances, the contracting authority would be justified in requiring that the minimum capacity level concerned be achieved by a single economic operator or, where appropriate, by relying on a limited number of economic operators, in accordance with the second subparagraph of Article 44(2) of Directive 2004/18, as long as that requirement is related and proportionate to the subject matter of the contract at issue (judgment in Swm Costruzioni 2 and Mannocchi Luigino, C‑94/12, EU:C:2013:646, paragraph 35).
Likewise, it is conceivable that, in specific circumstances, having regard to the nature and objectives of a particular contract, the capacities of a third party entity, which are necessary for the performance of a particular contract, cannot be transferred to the tenderer. Accordingly, in such circumstances, the tenderer may rely on those capacities only if the third party entity directly and personally participates in the performance of the contract concerned.
In the present case, the referring court expresses doubts as to whether PUM’s capacities may genuinely be transferred to Partner so that the resources necessary for the performance of the contract at issue in the main proceedings may be placed at Partner’s disposal in accordance with the terms of Article 48(3) of Directive 2004/18, given the fact that the resources in that case are made available simply by providing consultation and training services, without any direct participation by PUM in the performance of that contract.
In that connection, it must be observed that the public contract at issue in the main proceedings, described in paragraph 19 of the present judgment, is for the comprehensive mechanical cleansing of the roadways of Warsaw in winter and summer for four consecutive years.
In particular, as regards winter cleansing, it is apparent from the order for reference that that service requires specific skills and a detailed knowledge of the topography of the city of Warsaw and, above all, the ability to react immediately in order to attain specific maintenance standards for the roadways within a specific period.
Furthermore, that service is based on the use of specific technology requiring a level of experience and a high degree of skill in using it, which alone enables the contract at issue in the main proceedings to be performed properly while avoiding dangerous consequences for road traffic.
In those circumstances, the actual performance of such a contract requires the involvement of experienced staff who, inter alia, by directly observing the state of the surface of the roadways and carrying out on-the-spot tests are able to anticipate or, in any event, respond appropriately to the specific needs of that contract.
Taking account of the subject matter of the contract at issue in the main proceedings and its objectives, it is conceivable that PUM’s proposed involvement, consisting simply in the provision of consultation and training services, cannot be regarded as sufficient in order to guarantee that Partner would have at its disposal the resources necessary for the performance of that contract within the meaning of the case-law set out in paragraph 33 of the present judgment. That is further justified by the fact that, as is apparent from the order for reference, PUM’s registered office is situated in the city of Gurdziądz, approximately 230 km from Warsaw.
In those circumstances, it is for the referring court, taking account of all the specific facts of the contract at issue in the main proceedings, to determine whether resources would be made available to the tenderer in such a way as to meet the requirements laid down by that case-law.
Having regard to the foregoing considerations, the answer to questions 1 to 3, 5 and 6 is that Articles 47(2) and 48(3) of Directive 2004/18, read together with Article 44(2) thereof, must be interpreted as meaning that:
—
they recognise the right of all economic operators, as regards a specific contract, to rely on the capacities of other entities, whatever the nature of the links existing between it and those entities, provided that it is proved to the contracting authority that the candidate or tenderer will have at its disposal the resources of those entities necessary for the performance of that contract, and
—
it is conceivable that the exercise of that right may be limited, in specific circumstances, having regard to the subject matter of the contract concerned and its objectives. Such is the case, in particular, where the capacities that a third party entity has, which are necessary for the performance of that contract, cannot be transferred to the candidate or the tenderer, so that the latter may rely on those capacities only if that third party entity directly and personally participates in the performance of that contract.
The fourth question
By its fourth question, the referring court asks essentially whether Article 48(2) and (3) of Directive 2004/18 must be interpreted as meaning that the contracting authority has the possibility to expressly set out, in the tender notice or the tender specifications, the precise rules under which an economic operator may rely on the capacities of other entities.
In order to answer that question, it must be recalled, as stated in paragraphs 33 and 49 of the present judgment, that Articles 47(2) and 48(3) of Directive 2004/18 recognise the right of all economic operators to rely on the capacities of other entities, provided that it is proved to the contracting authority that the candidate or tenderer will have at its disposal the resources necessary for the performance of the contract concerned.
For that purpose, although the tenderer must prove that it will actually have at its disposal the resources of the other entity, which it does not itself own and which are necessary for the performance of the contract, it is nonetheless free to choose the legal nature of the links it intends to establish with the other entities on whose capacities it relies in order to perform a particular contract and, on the other, the type of proof of the existence of those links (judgment in Ostas celtnieks, C‑234/14, EU:C:2016:6, paragraph 28).
Therefore, the contracting authority cannot, in principle, impose express conditions which may impede the exercise of the right of all economic operators to rely on the capacities of other entities, in particular, by indicating in advance the detailed rules according to which the capacities of those other entities may be relied on. That finding applies especially since, in practice, as the European Commission rightly observes, it appears difficult or even impossible for an economic operator to foresee, a priori, all the possible scenarios in which the capacities of other entities may be used.
That being said, as acknowledged in answer to questions 1 to 3, 5 and 6, having regard to the subject matter of the contract concerned and its objectives, the exercise of such a right may be limited in specific circumstances such as those set out in paragraphs 39 to 41 of the present judgment.
In such circumstances, it cannot be excluded from the outset that the contracting authority may, for the purposes of the proper performance of the contract concerned, expressly set out, in the tender notice or the tender specifications, the specific rules authorising an economic operator to rely on the capacities of other entities.
However, if the contracting authority decides to make use of such a possibility, it must ensure that the rules it adopts are related and proportionate to the subject matter and objectives of that contract.
Furthermore, such a requirement also helps to ensure compliance with the principle of transparency as regards the rules adopted by the contracting authority, while allowing economic operators the possibility to propose to the contracting authority alternative ways of relying on the capacities of other entities which ensure that those capacities are in fact made available.
Accordingly, the answer to question 4 is that Article 48(2) and (3) of Directive 2004/18 must be interpreted as meaning that, having regard to the subject matter of a particular contract and its objectives, the contracting authority may, in specific circumstances, for the purpose of the proper performance of that contract, expressly set out in the tender notice or the tender specifications the specific rules in accordance with which an economic operator may rely on the capacities of other entities, provided that those rules are related and proportionate to the subject matter and objectives of that contract.
The seventh question
By question 7, the referring court asks essentially whether the principles of equal treatment and non-discrimination of economic operators, laid down in Article 2 of Directive 2004/18, must be interpreted as meaning that they preclude a contracting authority, after the opening of the tenders submitted in a public procurement procedure, from allowing the request of an economic operator, which has submitted a tender for the whole of the contract concerned, to consider its tender solely for the award of certain lots of that contract.
In order to answer that question, it must be recalled that, in accordance with recital 46 and Article 2 of Directive 2004/18, the contracting authorities are required to afford economic operators equal, non-discriminatory and transparent treatment.
Thus, first, the principles of equal treatment and non-discrimination require tenderers to be afforded equality of opportunity when formulating their bids, which therefore implies that the bids of all tenderers must be subject to the same conditions. Second, the principle of transparency is essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority. That obligation implies that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the notice or contract documents so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, secondly, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the relevant contract (see, to that effect, judgment in Cartiera dell’Adda, C‑42/13, EU:C:2014:2345, paragraph 44 and the case-law cited).
Furthermore, as the Court has already held, the principles of equal treatment and non-discrimination and the obligation of transparency preclude any negotiation between the contracting authority and a tenderer during a public procurement procedure, which means that, as a general rule, a tender cannot be amended after it has been submitted, whether at the request of the contracting authority or at the request of the tenderer concerned. It follows that, where the contracting authority regards a tender as imprecise or as failing to meet the technical requirements of the tender specifications, it cannot require the tenderer to provide clarification (judgment in Manova, C-336/12, EU:C:2013:647, paragraph 31 and the case-law cited).
However, the Court has explained that Article 2 of Directive 2004/18 does not preclude the correction or amplification of details of a tender, on a limited and specific basis, particularly when it is clear that they require mere clarification, or to correct obvious material errors (judgment in Manova, C‑336/12, EU:C:2013:647, paragraph 32 and the case-law cited).
To that end, the contracting authority must ensure, in particular, that the request for clarification does not lead to the submission, by a tenderer, of what would appear in reality to be a new tender (see, to that effect, judgment in Manova, C‑336/12, EU:C:2013:647, paragraph 36).
Furthermore, when exercising its right to ask a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome (judgment in Manova, C‑336/12, EU:C:2013:647, paragraph 37).
In the present case, as is apparent from the order for reference, the Warsaw municipal cleansing authority, having doubts as to whether Partner had the resources necessary for the performance of the contract at issue in the main proceedings, requested that company, after it had submitted its tender, to specify the nature of PUM’s participation in the performance of the contract.
In answer to that request for clarification, Partner asked the Warsaw municipal cleansing authority, in the event that it considered the experience shown to be insufficient, to allocate the resources Partner relied on to each of the eight lots of the contract at issue in the main proceedings in a certain order of priority, so that a possible rejection would not concern the whole contract, but only the lots in respect of which it did not meet the conditions required.
It is common ground that such communication, by which an economic operator indicates to the contracting authority, after the opening of the tenders, the order of priority of the lots of the contract concerned according to which its tender should be assessed, far from being merely a clarification made on a limited or specific basis or a correction of obvious material errors, within the meaning of the case-law set out in paragraph 63 of the present judgment, constitutes, in reality, a substantive amendment which is more akin to the submission of a new tender.
It follows that the contracting authority cannot allow an economic operator to clarify its initial offer in such a way without infringing the principles of equal treatment and non-discrimination of economic operators and the obligation of transparency deriving from that, to which the contracting authority is subject under Article 2 of Directive 2004/18 (see, to that effect, judgment in Cartiera dell’Adda, C‑42/13, EU:C:2014:2345, paragraph 43).
It follows from the foregoing that the answer to question 7 is that the principles of equal treatment and non-discrimination of economic operators, set out in Article 2 of Directive 2004/18, must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, they preclude a contracting authority, after the opening of the tenders submitted in a public procurement procedure, from acceding to the request of an economic operator which has submitted a tender for the whole of the contract concerned, to take its offer into consideration for the purpose of awarding only certain lots of that contract.
Questions 8 and 9
By questions 8 and 9, which it is appropriate to examine together, the referring court asks essentially whether the principle of equal treatment and non-discrimination of economic operators, set out in Article 2 of Directive 2004/18, must be interpreted as meaning that they require the annulment and repetition of an electronic auction in respect of which an economic operator which submitted an admissible tender was not invited to participate, even if it cannot be established that the participation of the excluded operator would have changed the outcome of the auction.
In accordance with recital 14 and Article 1(7) of Directive 2004/18, recourse to electronic auctions enables contracting authorities, after an initial full evaluation of the tenders, to ask tenderers to submit new prices, revised downwards, and when the contract is awarded to the most economically advantageous tender, also to improve elements of the tenders other than prices.
In such a procedure, as that recital provides, Directive 2004/18 requires that electronic auctions operate in full accordance with the principles of equal treatment, non-discrimination and transparency.
For that purpose, first, Article 54(4) of Directive 2004/18 provides for the right of all tenderers which have submitted an admissible tender to be invited to participate in the electronic auction in order to submit new prices and/or new values.
Second, Article 54(8), second subparagraph, of that directive explicitly requires the contracting authorities, where they decide to organise an electronic auction, not to have recourse to such a procedure so as to prevent, restrict or distort competition or to change the subject matter of the contract as put up for tender in the published contract notice and defined in the specification.
It follows that, when a tenderer submits an admissible tender and thereby satisfies the criteria set out in the tender notice, the contracting authority must, in accordance with Article 54(4) of Directive 2004/18, ensure the tenderer is able to exercise its right to take part where appropriate, in the electronic auction.
Therefore, where such a tenderer is not invited to take part in that auction, as the Advocate General observed in paragraph 52 of his Opinion, the principles of equal treatment and non-discrimination, laid down in Article 2 of Directive 2004/18, require the contracting authority to annul and repeat the electronic auction.
In that connection, it must be stated that that applies independently of whether its participation would have altered the outcome of the auction or not.
The exercise of the tenderer’s right to take part in an electronic auction cannot be subject in any way to the result proposed by it and thus, cannot be excluded from the outset by reason of hypothetical considerations expressed by the contracting authority.
In other words, as the Krajowa Izba Odwolawcza (National Chamber of Appeal) also pointed out in its order for reference, it is possible that an economic operator which has not been allowed to take part in an electronic auction may have submitted the most advantageous tender, so that the error committed by the contracting authority necessarily requires the annulment and repetition of the auction.
Therefore, the answer to questions 8 and 9 is that the principles of equal treatment and non-discrimination of economic operators laid down in Article 2 of Directive 2004/18 must be interpreted as meaning that they require the annulment and repetition of an electronic auction in which an economic operator having submitted an admissible tender has not been invited to take part, even if it cannot be established that the participation of that operator would have altered the outcome of the auction.
Question 10
By question 10, the referring court asks essentially whether the provisions of Directive 2004/18 can be interpreted in the light of those of Directive 2014/24, even though the period within which to transpose the latter has not yet expired and provided that its provisions are not contrary to those of Directive 2004/18.
In order to answer that question, it must be recalled, as a preliminary point, that, according to settled case-law, the applicable directive is, as a rule, the one in force when the contracting authority chooses the type of procedure to be followed and decides definitively whether it is necessary for a prior call for competition to be issued for the award of a public contract. Conversely, a directive is not applicable if the period prescribed for its transposition expired after that point in time (judgment in Impresa Pizzarotti , C‑213/13, EU;C:2014:2067, paragraph 31 and the case-law cited).
In the case in the main proceedings, the procurement procedure in question was published on 24 December 2013 while Directive 2014/24 was adopted only on 26 February 2014 and, in any event, the period prescribed for its transposition will expire, in accordance with Article 90 thereof, on 18 April 2016.
In those circumstances, Directive 2014/24 is not applicable, ratione temporis, in the main proceedings.
Furthermore, to apply Directive 2014/24 which, as appears from its title, repeals Directive 2004/18, before the expiry of its period prescribed for transposition would prevent the Member States, as well as contracting authorities and economic operators from benefitting from a sufficient period in which to adapt to the new provisions introduced by it.
That being said, it must be observed, as is clear from the order for reference that, by its question, the referring court asks, inter alia, whether Article 48(3) of Directive 2004/18, which recognises the right of all economic operators to rely on the capacities of other entities for a particular contract, must be interpreted as taking into consideration the content of Article 63(1) of Directive 2014/24, which is the provision corresponding to Article 48.
In that connection, it must be observed, as the referring court noted, that Article 48(3) of Directive 2004/18 is formulated in general terms and does not expressly set out the detailed rules according to which an economic operator may rely on the capacities of other entities in a public procurement procedure.
However, Article 63(1) of Directive 2014/24 now provides that economic operators may ‘only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required’.
Although it is true, as stated, inter alia, by recital 2 of Directive 2014/24, Directive 2014/24 aims to clarify basic notions and concepts to ensure legal certainty and to incorporate certain aspects of related well-established case-law of the Court of Justice of the European Union, the fact remains that Article 63 of that directive introduces substantial amendments as regards the right of an economic operator to rely on the capacities of other entities in the context of public contracts.
Far from preserving the continuity of Article 48(3) of Directive 2004/18, and clarifying its scope, Article 63(1) of Directive 2014/24 introduces new conditions which were not provided for under the previous legislation.
In those circumstances, that provision of Directive 2014/24 cannot be used as a criterion for the interpretation of Article 48(3) of Directive 2004/18 since there is no question in the present case of dispelling a problem of interpretation concerning the content of the latter provision.
Another approach might in some way incorrectly anticipate the application of the new legislation which differs from that laid down by Directive 2004/18, and would be manifestly contrary to the principle of the legal certainty for economic operators, which, as is clear inter alia from recital 2 thereof, is a principle that Directive 2014/24 expressly intends to ensure is observed.
In view of the foregoing, the answer to question 10 is that, in circumstances such as those in the main proceedings, the provisions of Article 48(3) of Directive 2004/18 cannot be interpreted in the light of those of Article 63(1) of Directive 2014/24.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (First Chamber) hereby rules:
1.
Articles 47(2) and 48(3) of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, read together with Article 44(2) thereof, must be interpreted as meaning that:
—
they recognise the right of all economic operators, as regards a specific contract, to rely on the capacities of other entities, whatever the nature of the links existing between it and those entities, provided that it is proved to the contracting authority that the candidate or tenderer will have at its disposal the resources of those entities necessary for the performance of that contract, and
—
it is conceivable that the exercise of that right may be limited, in specific circumstances, having regard to the subject matter of the contract concerned and its objectives. Such is the case, in particular, where the capacities that a third party entity has, which are necessary for the performance of that contract, cannot be transferred to the candidate or the tenderer, so that the latter may rely on those capacities only if that third party entity directly and personally participates in the performance of that contract.
2.
Article 48(2) and (3) of Directive 2004/18 must be interpreted as meaning that, having regard to the subject matter of a particular contract and its objectives, the contracting authority may, in specific circumstances, for the purpose of the proper performance of that contract, expressly set out in the tender notice or the tender specifications the specific rules in accordance with which an economic operator may rely on the capacities of other entities, provided that those rules are related and proportionate to the subject matter and objectives of that contract.
3.
The principles of equal treatment and non-discrimination of economic operators, set out in Article 2 of Directive 2004/18, must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, they preclude a contracting authority, after the opening of the tenders submitted in a public procurement procedure, from acceding to the request of an economic operator which has submitted a tender for the whole of the contract concerned, to take its offer into consideration for the purpose of awarding only certain lots of that contract.
4.
The principles of equal treatment and non-discrimination of economic operators laid down in Article 2 of Directive 2004/18 must be interpreted as meaning that they require the annulment and repetition of an electronic auction in which an economic operator having submitted an admissible tender has not been invited to take part, even if it cannot be established that the participation of that operator would have altered the outcome of the auction.
5.
In circumstances such as those in the main proceedings, the provisions of Article 48(3) of Directive 2004/18 cannot be interpreted in the light of those of Article 63(1) of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18.
[Signatures]
( *1 ) Language of the case: Polish. |
JUDGMENT OF THE COURT (First Chamber)
22 October 2015 ( * )
‛Reference for a preliminary ruling — Social security — Regulation (EC) No 883/2004 — Article 67 — Regulation (EC) No 987/2009 — Article 60(1) — Payment of family benefits where parents are divorced — Definition of the ‘person concerned’ — Law of a Member State providing for the payment of family benefits to the parent who has taken the child into his household — Residence of that parent in another Member State — Failure of that parent to claim family benefits — Possibility of entitlement of the other parent to claim those family benefits’
In Case C‑378/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Finance Court, Germany), made by decision of 8 May 2014, received at the Court on 7 August 2014, in the proceedings
Bundesagentur für Arbeit — Familienkasse Sachsen
v
Tomislaw Trapkowski,
THE COURT (First Chamber),
composed of A. Tizzano, Vice-President of the Court, acting as President of the First Chamber, F. Biltgen, A. Borg Barthet, M. Berger and S. Rodin (Rapporteur), Judges,
Advocate General: P. Mengozzi,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 17 June 2015,
after considering the observations submitted on behalf of:
—
Mr Trapkowski, by C. Rebber, Rechtsanwalt,
—
the Netherlands Government, by B. Koopman and M. Bulterman, acting as Agents,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the United Kingdom Government, by V. Kaye, acting as Agent, and J. Holmes, Barrister,
—
the European Commission, by S. Grünheid and D. Martin, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This reference for a preliminary ruling concerns the interpretation of Article 60(1), second and third sentences, of Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems (OJ 2009 L 284, p. 1).
The reference has been made in proceedings between the Bundesagentur fúr Arbeit — Familienkasse Sachsen (Federal Employment Agency — Family Allowances Office, Saxony) (‘BfA’) and Mr Trapkowski concerning the BfA’s refusal to pay family benefits for Mr Trapkowski’s child who lives with its mother in Poland.
Legal context
EU law
Regulation (EC) No 883/2004
Article 1 of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (OJ 2004 L 166, p. 1, and corrigendum OJ 2004 L 200, p. 1), as amended by Regulation (EU) No 465/2012 of the European Parliament and of the Council of 22 May 2012 (OJ 2009 L 149, p. 4) (‘Regulation No 883/2004’), provides:
‘For the purposes of this Regulation:
…
(i)
“member of the family” means
(1)
(i)
any person defined or recognised as a member of the family or designated as a member of the household by the legislation under which benefits are provided;
…’
Article 2(1) of that regulation states:
‘This Regulation shall apply to nationals of a Member State, stateless persons and refugees residing in a Member State who are or have been subject to the legislation of one or more Member States, as well as to the members of their families and to their survivors.’
Article 11(1), (2) and (3) of that regulation is worded as follows:
‘1. Persons to whom this Regulation applies shall be subject to the legislation of a single Member State only. Such legislation shall be determined in accordance with this Title.
2. For the purposes of this Title, persons receiving cash benefits because or as a consequence of their activity as an employed or self-employed person shall be considered to be pursuing the said activity. This shall not apply to invalidity, old-age or survivors’ pensions or to pensions in respect of accidents at work or occupational diseases or to sickness benefits in cash covering treatment for an unlimited period.
3. Subject to Articles 12 to 16:
(a)
a person pursuing an activity as an employed or self-employed person in a Member State shall be subject to the legislation of that Member State;
…’
Article 67 of the regulation provides as follows:
‘A person shall be entitled to family benefits in accordance with the legislation of the competent Member State, including for his family members residing in another Member State, as if they were residing in the former Member State. However, a pensioner shall be entitled to family benefits in accordance with the legislation of the Member State competent for his pension.’
Article 68(1) of that regulation, entitled ‘Priority rules in the event of overlapping’, lays down the ‘priority rules’ where, during the same period and for the same family members, benefits are provided for under the legislation of more than one Member State.
Regulation No 987/2009
According to Article 60(1) of Regulation No 987/2009:
‘The application for family benefits shall be addressed to the competent institution. For the purposes of applying Articles 67 and 68 of the basic Regulation, the situation of the whole family shall be taken into account as if all the persons involved were subject to the legislation of the Member State concerned and residing there, in particular as regards a person’s entitlement to claim such benefits. Where a person entitled to claim the benefits does not exercise his right, an application for family benefits submitted by the other parent, a person treated as a parent, or a person or institution acting as guardian of the child or children, shall be taken into account by the competent institution of the Member State whose legislation is applicable.’
German law
Paragraph 64(1) and (2) of the Law on income tax (Einkommensteuergesetz) (‘the EStG’) provides:
‘(1) For each child, family benefits shall be provided to only one person entitled to benefits;
(2) If there are several persons entitled to benefits, family benefits shall be paid to the person who has taken the child into his household. If the child is taken in to the parents’ joint household, or into the household of one parent and his or her spouse, foster parents or grandparents, they must decide between themselves who shall receive the benefits …’
The dispute in the main proceedings and the question referred for a preliminary ruling
Mr Trapkowski, resident in Germany, has divorced his wife, who lives in Poland with their child, born in April 2000.
From January 2011 until October 2012, Mr Trapkowski received unemployment benefit for a certain period. However, from November 2011 until January 2012, and from 1 to 22 February 2012, he was in paid employment in Germany, after which he was paid benefits under German social security law.
In August 2012, Mr Trapkowski claimed family benefits for his son from the BfA for the period from January 2011 to October 2012. During the period in question, the child’s mother, who was in paid employment in Poland, did not receive or apply for family benefits, either under German or Polish law.
By decision of 3 September 2012, the BfA rejected Mr Trapkowski’s claim on the ground that it was principally the child’s mother who was entitled to family benefits under German law. The challenge to that decision was also rejected.
However, the Finanzgericht Düsseldorf (Finance Court, Düsseldorf) upheld Mr Trapkowski’s action against the BfA’s decision of 3 September 2012 and against the decision rejecting his challenge for that decision. The court held that he was entitled to family benefits under German law, which applied to his situation by virtue of Article 11(1) and (3)(a) of Regulation No 883/2004.
In addition, the Finanzgericht Düsseldorf (Finance Court, Düsseldorf) held that by virtue of the deeming provision included in Article 60(1), second sentence, of Regulation No 987/2009, Mr Trapkowski’s family must be treated as if they resided in Germany. Thus, in the case in the main proceedings, there would have been no conflict as to entitlement for the purposes of Article 68 of Regulation No 883/2004, since the child’s mother could not claim family benefits in Poland.
The Finanzgericht Düsseldorf (Finance Court, Düsseldorf) concluded that Article 60(1) of Regulation No 987/2009 sought only to prevent a person who leaves one Member State to go to another Member State from losing his rights and it is not intended to limit or extend the rights of a person living in the home State.
The BfA appealed against the decision of the Finanzgericht Dússeldorf (Finance Court, Dusseldorf), arguing that the persons to whom Regulation No 883/2004 applies are subject only to the law of a single Member State. Under German law, family benefits are provided to the person who has taken the child into his household.
According to the BfA, a combined reading of Article 67(1) of Regulation No 883/2004 and Article 60(1) of Regulation No 987/2009 and the case-law of the Court lead to the conclusion, in the case in the main proceedings, that the main beneficiary of the entitlement to family benefits was, consistently with German law, the child’s mother, and not Mr Trapkowski.
The referring court highlights the fact that under German law family benefits are paid only to an identifiable recipient. Under German law, family benefits are paid to the parent who has taken the child into his household, since general experience shows that the parent having custody of the child bears higher maintenance costs. In that connection, it asks whether the application of EU law, in the case in the main proceedings, might lead to Mr Trapkowski being deprived of only entitlement to family benefits.
That court observes that the fact that the defendant’s ex-wife is not entitled to family benefits in Poland is irrelevant for the decision as to whether Regulation No 883/2004 applies in the case in the main proceedings. In addition, that court points out that under German law, the fact the child’s parents are divorced does not prevent them from being treated as members of the family to whom family benefits may be paid.
Given that the deeming provisions included in Article 60(1) of Regulation No 987/2009 is applicable, the referring court considers that an interpretation according to which the child’s mother may be entitled to family benefits, since, in accordance with that deeming provisions, she must be regarded as residing in Germany and the child as living with her, cannot be excluded from the outset, in particular in the light of Article 68 of Regulation No 883/2004.
If such an interpretation were to be accepted, the referring court asks if Article 60(1), third sentence, of Regulation No 987/2009 precludes the application to the case in main proceedings of Paragraph 64(2) of the EStG, according to which only the parent who has taken the child into his household may claim family benefits, or whether it is appropriate instead to distinguish between the entitlement to claim family benefits — which may be granted to Mr Trapkowski — and the entitlement actually to receive such benefits — which lies exclusively with his ex-wife because the child lives with her.
Finally, if Article 60(1), third sentence, of Regulation No 987/2009 were to be interpreted as meaning that the entitlement to family benefits is transferred to the parent residing in the home Member State where the first recipient of the benefits, residing in another Member State, has not applied for them, the referring court asks after what period of time must have passed for the first recipient to be regarded as having failed to make an application.
In those circumstances, the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
In a case where a person residing in one Member State (the home State) is entitled to child benefit for children who live in another Member State (abroad) with the other spouse from whom he is separated, is the second sentence of Article 60(1) of Regulation No 987/2009 to be applied in such a way that the deeming provisions that, for the purpose of applying Articles 67 and 68 of Regulation No 883/2004, the situation of the whole family is to be taken into account as if all the persons involved were subject to the legislation of the Member State concerned and residing there, in particular as regards a person’s entitlement to claim benefits, leads to the parent residing in the other Member State (abroad) being exclusively entitled to child benefit because the national law of the first Member State provides that where several persons are entitled to child benefit, the benefit is granted to the parent who has taken the child into his or her household?
(2)
If the first question is to be answered in the affirmative:
In the situation set out in paragraph 1, is the third sentence of Article 60(1) of Regulation No 987/2009 to be interpreted as meaning that the parent residing in one Member State (the home State) has the right to child benefit under domestic law because the other parent residing in the other Member State (abroad) has not made an application for child benefit?
(3)
If, in the situation set out in paragraph 1, the answer to the second question is that the failure of the parent residing in another EU Member State to make an application leads to the transfer of the right to child benefit to the parent residing in the home State:
After what period of time may it be presumed that a parent residing in another EU Member State is not “exercising” his or her right to child benefit within the meaning of the third sentence of Article 60(1) of Regulation No 987/2009, so that the parent residing in the home State has the right to child benefit?’
Consideration of the questions referred for a preliminary ruling
Preliminary observations
In order to answer the questions referred, it must be stated at the outset that a person such as Mr Trapkowski, periodically employed in one Member State, in this case the Federal Republic of Germany, and residing in that State, falls within the scope of Regulation No 883/2004 by virtue of Articles 2(1) and 11(3)(a) thereof.
Furthermore, it is common ground that the benefits at issue in the main proceedings, which are intended to alleviate the financial burdens involved in the maintenance of children, fall within the concept of ‘family benefits’ within the meaning of Regulation No 883/2004 (see judgments in Offermanns, C‑85/99, EU:C:2001:166, paragraph 41, and Lachheb, C‑177/12, EU:C:203:689, paragraph 35).
Moreover, as regards the concept of ‘members of the family’ Article 1(1)(i) of Regulation No 883/2004 states that it designates ‘any person defined or recognised as a member of the family or designated as a member of the household by the legislation under which benefits are provided’.
In the present case, it is apparent from the order for reference that German law determines the persons entitled to family benefits without expressly defining the concept of ‘member of the family’.
However, as the referring court observes, the entitlement to child benefits is granted, in accordance with German law, to the child’s first degree relatives, whether or not they are married.
On that basis, that court takes the view that the child at issue in the main proceedings and its mother must be regarded as members of Mr Trapkowski’s family for the purposes of German law, as far as concerns the entitlement to family benefits.
It is not for the Court of Justice to challenge that finding, based on the national law as interpreted by the national court (see, to that effect, judgment in Slanina, C‑363/08, EU:C:2009:732, paragraph 27).
As regards the applicability of the priority rules laid down in Article 68(1) of Regulation No 883/2004 it should be recalled that, according to the settled case-law of the Court, for a finding that such overlapping is present in a given case, it is not enough for such benefits to be due in the relevant child’s Member State of residence and to be, in parallel, merely capable of being due in another Member State, where one of the parents of that child works (judgment in Schwemmer, C‑16/09, EU:C:2010:605, paragraph 52 and the case-law cited).
Therefore, as the mother of the child concerned in the main proceedings could not claim family benefits in Poland, the priority rules do not apply in the case in the main proceedings.
The first question referred
By its first question, the referring court asks essentially, whether Article 60(1), second sentence, of Regulation No 987/2009 must be interpreted as meaning that the deeming provision included there might lead to granting entitlement to family benefits to a person not residing on the territory of the Member State responsible for paying those benefits.
In order to answer that question, it should be recalled, first of all, that the deeming provisions included in in Article 67 of Regulation No 883/2004 has the effect that a person may claim family benefits for members of his family who reside in a Member State other than that responsible for paying those benefits, as if they resided in that Member State.
Second, Article 60(1), second sentence, of Regulation No 987/2009 provides that, for the purposes of the application, in particular, of Regulation No 883/2004, the situation of the whole family is taken into consideration as if all the persons concerned were subject to the law of the Member State concerned and were resident there, in particular as regards the entitlement of a person to claim family benefits.
Third, Article 60(1), third sentence, of Regulation No 987/2009 states that, where a person entitled to claim the benefits does not exercise his right, ‘the other parent’ is one of the persons or institutions authorised to apply for such benefits.
It is apparent from a combined reading of Article 67 of Regulation No 883/2004 and Article 60(1) of Regulation No 987/2009, first, that a person may claim family benefits for members of his family who reside in a Member State other than that responsible for paying those benefits and, second, that the possibility to apply for family benefits is granted not only to persons who reside in the Member State required to pay the family benefits, but also to all the ‘persons concerned’, who may claim those benefits, including the parents of the child for whom the benefits are claimed.
Accordingly, given that the parents of the child for whom family benefits are claimed fall within the definition of ‘persons concerned’ within the meaning of Article 60(1) of Regulation No 987/2009, authorised to claim payment of those benefits, it is conceivable that a parent who resides in a Member State other than that required to pay those benefits is the person entitled to receive those benefits, if all the other conditions laid down by national law are also met.
It is for the competent national authority to determine the persons who, in accordance with national law, have a right to family benefits.
It is clear from all of the foregoing that Article 60(1), second sentence, of Regulation No 987/2009 must be interpreted as meaning that the deeming provision included these may lead to the grant of entitlement to family benefits to a person who does not reside in the Member State responsible for paying those benefits, where all the other conditions for the grant of those benefits laid down by national law are met, a matter which is for the referring court to determine.
The second question referred
By its second question, the referring court asks essentially whether Article 60(1), third sentence, of Regulation No 987/2009 must be interpreted as meaning that the parent of the child for whom family benefits are paid, who resides in the Member State required to pay those benefits, must be granted entitlement to those benefits because the other parent, who resides in another Member State, has not made an application for family benefits.
To answer that question, it should be recalled, as a preliminary point, that Regulations No 987/2009 and No 883/2004 do not determine the persons entitled to family benefits, even though they lay down the rules which enable the persons entitled to claim those benefits to be determined.
The persons entitled to family benefits are, as is clear from Article 67 of Regulation No 883/200, to be determined in accordance with national law.
Furthermore, it must be observed that Article 60(1), third sentence, of Regulation No 987/2009 provides that where a person entitled to claim the benefits does not exercise his right, the competent institutions of the Member States must take into account such applications made by the persons or institutions mentioned in that provision which include the ‘other parent’.
First, it appears both from the wording and the general scheme of Article 60(1) of Regulation No 987/2009 that a distinction must be made between making a claim for family benefits and the right to receive such benefits.
Second, it is also clear from the wording of that article that it is sufficient if one of the persons able to claim the benefit of those family benefits makes an application for such benefits, so that the competent institution of the Member State must take that application into consideration.
However, EU law does not preclude such an institution, by applying national law, from finding that the person entitled to receive child benefits is a person other than the person who made the application for those benefits.
Therefore, where all the conditions for the grant of child benefits have been met and those benefits are actually granted, the issue as to which parent is regarded under national law as the person entitled to receive such benefits is irrelevant (see, to that effect, judgment in Hoever and Zachow, C‑245/94 and C‑312/94, EU:C:1996:379, paragraph 37).
It is clear from all of the foregoing that Article 60(1), third sentence, of Regulation No 987/2009 must be interpreted as meaning that there is no requirement that a parent of the child for whom child benefits are paid, who resides in the Member State obliged to pay those benefits, must be granted entitlement to those benefits on the ground that the other parent, who resides in another Member State, has not applied for them.
In view of the answers given to the first two questions, it is unnecessary to reply to the third question.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (First Chamber) hereby rules:
1.
Article 60(1), second sentence, of Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems must be interpreted as meaning that the deeming provision included there may lead to the grant of entitlement to family benefits for a person who does not reside in the Member State responsible for paying those benefits where all the other conditions for the grant of those benefits laid down by national law are met, a matter which is for the referring court to determine.
2.
Article 60(1), third sentence, of Regulation No 987/2009 must be interpreted as meaning that there is no requirement that the parent of the child for whom child benefits are paid, who resides in the Member State obliged to pay those benefits, must be granted entitlement to those benefits on the ground that the other parent, who resides in another Member State, has not applied for them.
[Signatures]
( * ) Language of the case: German. |
JUDGMENT OF THE COURT (Second Chamber) 4 June 2015 (*)
(Failure of a Member State to fulfil obligations — Common system of value added tax — Directive 2006/112/EC — Article 98(2) — Category (10) of Annex III — Reduced rate of VAT applicable to the provision, construction, renovation and alteration of housing, as part of a social policy — Category (10a) of Annex III — Reduced rate of VAT applicable to renovation and repairing of private dwellings, excluding materials which account for a significant part of the value of the service supplied — National legislation applying a reduced rate of VAT to supplies of services of installing ‘energy-saving materials’ and supplies of such materials)
In Case C‑161/14, ACTION for failure to fulfil obligations under Article 258 TFEU, brought on 4 April 2014, European Commission, represented by M. Clausen and C. Soulay, acting as Agents, with an address for service in Luxembourg,
applicant, v United Kingdom of Great Britain and Northern Ireland, represented by L. Christie, acting as Agent, and K. Lasok QC,
defendant, THE COURT (Second Chamber), composed of R. Silva de Lapuerta, President of the Chamber, J.-C. Bonichot (Rapporteur), A. Arabadjiev, J.L. da Cruz Vilaça and C. Lycourgos, Judges,
Advocate General: M. Szpunar, Registrar: L. Hewlett, Principal Administrator, having regard to the written procedure and further to the hearing on 26 February 2015, having decided, after hearing the Advocate General, to proceed to judgment without an Opinion, gives the following Judgment 1 By its application, the European Commission asks the Court to declare that, by applying a reduced rate of value added tax (‘VAT’) to supplies of services of installing ‘energy-saving materials’ and to supplies of such materials by a person who installs those materials in residential accommodation:
– to the extent that those supplies cannot be considered as ‘the provision, construction, renovation and alteration of housing, as part of a social policy’ for the purposes of Category (10) of Annex III to Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2009/47/EC of 5 May 2009 (OJ 2009 L 116, p. 18) (‘the VAT Directive’);
– to the extent that those supplies fall outside the purview of ‘renovation and repairing of private dwellings’ for the purposes of Category (10a) of Annex III to the VAT Directive, and
– to the extent that those supplies, even if they fall within the purview of renovation and repairing of private dwellings for the purposes of Category (10a) of Annex III to the VAT Directive, include materials which account for a significant part of the value of the services supplied,
the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 98 of the VAT Directive, read in conjunction with Annex III thereto.
Legal context EU law 2 Article 96 of the VAT Directive provides:
‘Member States shall apply a standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services.’
3 Article 98(1) and (2) of that directive is worded as follows:
‘1. Member States may apply either one or two reduced rates. 2. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III. ...’ 4 Article 110 of the VAT Directive states:
‘Member States which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage or applying reduced rates lower than the minimum laid down in Article 99 may continue to grant those exemptions or apply those reduced rates.
The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must have been adopted for clearly defined social reasons and for the benefit of the final consumer.’
5 Annex III to the VAT Directive, headed ‘List of supplies of goods and services to which the reduced rates referred to in Article 98 may be applied’, refers in Categories (10) and (10a) thereof to the following:
‘(10) provision, construction, renovation and alteration of housing, as part of a social policy; (10a) renovation and repairing of private dwellings, excluding materials which account for a significant part of the value of the service supplied.’
United Kingdom law 6 Under Section 29A of the Value Added Tax Act 1994 (‘the VAT Act’), in the version applicable in this case, goods and services specified in Schedule 7A to that act are to be taxed at the reduced VAT rate of 5%.
7 In Part 2 of Schedule 7A to that act, Group 2, headed ‘Installation of energy-saving materials’, specifies:
‘1. Supplies of services of installing energy-saving materials in (a) residential accommodation, or (b) a building intended for use solely for a relevant charitable purpose. 2. Supplies of energy-saving materials by a person who installs those materials in (a) residential accommodation, or (b) a building intended for use solely for a relevant charitable purpose. ...’ Pre-litigation procedure 8 By letter of 29 September 2011, the Commission gave formal notice to the United Kingdom that it should bring to an end the incompatibility of the system of reduced VAT rates provided for in Section 29A of the VAT Act, as specified in Part 2, Group 2, of Schedule 7A to that act, with the provisions of Article 98 of the VAT Directive, read together with Annex III to that directive.
9 By letter of 29 November 2011, the United Kingdom replied that it did not agree with the Commission. The United Kingdom accepted that its legislation was contrary to EU law, but only to the extent that it provided for the application of a reduced rate of VAT to supplies of goods and services made in respect of buildings intended for charitable purposes. In that letter, the United Kingdom confirmed its intention to withdraw from the 2013 Budget the reduced rate of VAT applied to the installation of energy-saving materials in buildings intended for use solely for a relevant charitable purpose.
10 On 21 June 2012 the Commission sent to the United Kingdom a reasoned opinion in which it restated it position. In its reply of 16 August 2012, the United Kingdom maintained that its legislation complied with EU law, since the reduced rate of VAT concerning buildings intended for charitable purposes had been removed.
11 As the Commission was not satisfied with the United Kingdom’s reply, it decided to bring this action.
The action Arguments of the parties 12 While the Commission withdraws from the scope of its action the complaint with regard to the application of the reduced rate of VAT to supplies of energy-saving materials and supplies of services of installing such materials in buildings intended for use for charitable purposes, the Commission confirms that, with respect to the remainder, the national law at issue does not comply with the conditions laid down for the reduced rate of VAT as stated in Categories 10 and 10a of Annex III to the VAT Directive.
13 First, according to the Commission, Category 10 of that annex, which refers to ‘provision, construction, renovation and alteration of housing, as part of a social policy’, does not cover the provision and installation of ‘energy-saving materials’ as referred to in Part 2, Group 2, of Schedule 7A to the VAT Act. In that regard, it is apparent from the majority of language versions of Annex III to the VAT Directive that it is the supply of housing in itself which must be part of a social policy if the services supplied are to qualify for the reduced rate of VAT. The Commission considers that social policy in the field of housing includes governmental interventions to enhance housing opportunities for people on low income and to ensure equitable access to housing, such as through the direct provision of social housing.
14 The Commission maintains that a policy of promoting the use of energy-saving materials in the general housing stock does not constitute such a social policy. The reduced rate at issue, which applies without reference to social conditions, was adopted by the United Kingdom not for reasons of exclusively social interest or, at the least, for reasons of principally social interest, but to serve environmental or energy policy objectives, in the interests of society as a whole, unconnected to the issue of housing as part of a social policy. By adopting Directive 2009/47 the Council of the European Union specifically did not accept the Commission’s proposal to extend the scope of the reduced VAT rates to all renovation and repair work aiming at energy-saving.
15 Second, the Commission maintains that the provisions of national law at issue do not comply with the condition laid down in Category 10a of Annex III to the VAT Directive, which provides that a reduced rate of VAT can be applied only to the renovation and repairing of private dwellings, excluding materials which account for a significant part of the value of the service supplied.
16 As regards the scope of Category 10 of Annex III to the VAT Directive, the United Kingdom contends that it is apparent from the various language versions of that provision that operations at a reduced rate of VAT must be justified by a social policy which applies either to those operations, or to the housing in question, or to both.
17 As regards the United Kingdom, its social policy in the housing sector operates at two levels, with some initiatives that are directed generally, in the light of the problem of housing in the United Kingdom, at the entire population, and other more specific initiatives which are directed at a specific segment or group of segments of society. The application of a reduced rate of VAT to supplies of energy-saving materials and services involving installation of such materials in housing reduces the costs of improvements made to that housing. Households are thereby enabled to maintain their living standards with respect to heating and power, those two factors being very significant items of household expenditure. The United Kingdom claims that that reduced rate therefore addresses an obvious social need.
18 The United Kingdom accepts that, in the event that the Court were to hold that the provisions of national law at issue did not fall within the scope of Category 10 of Annex III to the VAT Directive, which it disputes, but fell within the scope of Category 10a of that annex, those provisions do not comply with the exclusion laid down by that provision, with regard to materials which account for a significant part of the value of the service supplied. The United Kingdom submits however that the ‘installing’ of the materials which are referred to by the provisions of national law at issue consists in alteration that is equivalent to either ‘renovation’ or ‘repairing’ of an existing dwelling, as referred to in Category 10a. Contrary to what is claimed by the Commission, the reduced rate of VAT laid down by those provisions of national law is not therefore applicable to the ‘provision’ and ‘construction’ of private dwellings, with respect to which, moreover, the zero rate is applicable in accordance with Schedule 8 to the VAT Act.
Findings of the Court The complaint relating to infringement of Category 10 of Annex III to the VAT Directive 19 It must be stated that, as noted by the parties, the differences in the wording of the various language versions of Category 10 of Annex III to the VAT Directive may affect the meaning of that provision.
20 First, there are versions of Category 10, such as that in English (‘provision, construction, renovation and alteration of housing, as part of a social policy’), which indicate that it is the services supplied which might be regarded as having to be part of a social policy in order to qualify for the reduced rate of VAT, whereas other versions of Category 10, such as that in French (‘livraison, construction, rénovation et alteration de logements fournis dans le cadre de la politique sociale’), Spanish (‘Suministro, construcción, renovación y transformación de viviendas proporcionadas en el marco de la política social’) and Italian (‘cessione, costruzione, restauro e trasformazione di abitazioni fornite nell’ambito della politica sociale’) indicate that it is the housing which must be supplied as part of a social policy in order to qualify for the reduced rate. As regards the German language version of Category 10 (‘Lieferung, Bau, Renovierung und Umbau von Wohnungen im Rahmen des sozialen Wohnungsbaus’), it suggests that the reduced rate is to be reserved to operations concerning social housing.
21 It is settled case-law that the wording used in one language version of a provision of EU law cannot serve as the sole basis for the interpretation of that provision, or be made to override the other language versions in that regard. Such an approach would be incompatible with the requirement of the uniform application of EU law. Where there is divergence between the various language versions, the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms part (see, inter alia, the judgment in Commission v Netherlands, C‑41/09, EU:C:2011:108, paragraph 44).
22 As regards the general scheme of the rules relating to VAT, it should be noted that Article 96 of the VAT Directive provides that the same rate of VAT, namely, the standard rate, is applicable to supplies of goods and services. As an exception to that principle, Article 98(1) of the VAT Directive gives the Member States the option of applying either one or two reduced rates of VAT. In accordance with the first subparagraph of Article 98(2), the reduced rates of VAT can apply only to supplies of goods and services in the categories set out in Annex III to the VAT Directive (the judgments in K, C‑219/13, EU:C:2014:2207, paragraphs 21 and 22, and Commission v France, C‑479/13, EU:C:2015:141, paragraph 25).
23 It must moreover be observed that Annex III refers in Category 10 thereof, regardless of language version, to the inclusion, in the category of services which may be subject to reduced rates of VAT, not of any provision, construction, renovation and alteration of housing, but only of such operations where they are related to housing or to services supplied as part of a social policy or to social housing. It is therefore apparent from the very wording of that provision that it precludes national measures which amount to permitting the application of the reduced rate of VAT to the provision, construction, renovation and alteration of all housing, with no account being taken of the restriction pertaining to the social context in which such operations must take place.
24 It must be concluded from the provisions of the VAT Directive as a whole relating to the rates system that the reduced rate of VAT cannot be decided on by the Member States except with respect to the only operations for which the EU legislature has permitted the use of that reduced rate and, consequently, with strict regard to the conditions which the legislature laid down for that purpose. In this case, the provisions in question of the VAT Directive therefore preclude national measures which extend the reduced VAT rate system to situations which are outside the social context in which the operations of provision, construction, renovation and alteration of housing, the only operations covered by those provisions, must take place.
25 As regards the purpose of those provisions, it must be recalled that, in establishing Annex III to the VAT Directive, the EU legislature intended that essential commodities and goods and services having social or cultural objectives may be subject to a reduced rate of VAT, provided that those goods or services pose little or no risk of distortion to competition (see, to that effect, the judgment in Commission v Netherlands, C‑41/09, EU:C:2011:108, paragraph 52).
26 It is true that the VAT Directive does not define either which services correspond to social objectives or, again, which services are supplied as part of social policy. It follows that the definition of such objectives or that social policy context is a matter of political choices for the Member States and may not be subject to scrutiny by the European Union except where, by a distortion of those concepts, it results in measures which fall, by virtue of their effect and true objectives, outside those objectives or that context (see judgments in Commission v United Kingdom, 416/85, EU:C:1988:321, paragraph 14, and Commission v Ireland, C‑108/11, EU:C:2013:161, paragraph 37).
27 The Court has previously ruled that it follows from the wording of Article 110 of the VAT Directive that the Member States may invoke social reasons provided that they are ‘well defined’ and that the concept of social interest is not distorted, that is to say used for purposes other than social reasons (see judgment in Commission v Ireland, C‑108/11, EU:C:2013:161, paragraph 38). There is no reason to consider that the Court should depart from such a finding as regards the application of the combined provisions of Article 98 of the VAT Directive and Category 10 of Annex III thereto.
28 It is common ground that the social objectives which may justify the adoption of the reduced rate of VAT with respect to operations relating to housing are not expressly stated in the United Kingdom legislation. No inferences can therefore be made from that legislation to enable the Court to determine that the reduced rate in question was adopted for reasons of exclusively social interest or, at least, for reasons of principally social interest (see, to that effect, the judgment in Commission v Ireland, C‑108/11, EU:C:2013:161, paragraph 42).
29 In that regard, the United Kingdom contends in essence that, by adopting the reduced rate of VAT for supplies of services of installing energy-saving materials and supplies of such materials, its aim was to help to improve the quality of housing for people living in that housing, pursuant to its legitimate right to define a comprehensive social policy, the protection of the health of such people being one objective of that policy.
30 However, legitimate as that right may be, and while it is true that such a policy of housing improvement may produce social effects, the Court must find that the extension of the scope of the reduced rate of VAT at issue to all residential accommodation cannot be described as essentially social, as is however required by the combined provisions of Article 98 of the VAT Directive and Category 10 of Annex III thereto.
31 By providing for the application of the reduced rate of VAT to all supplies of services of installing energy-saving materials and to supplies of such materials, irrespective of the housing concerned and with no differentiation among people living in that housing, in particular with no regard to levels of income, age or other criteria designed to give an advantage to those who have more difficulty in meeting the energy needs of their accommodation, the provisions of national law at issue cannot be regarded as adopted for reasons of exclusively social interest or even for reasons of principally social interest, within the meaning of EU law.
32 The effect therefore of those provisions of national law is to apply the reduced rate of VAT to the provision, construction, renovation and alteration of any housing, with no account being taken of the restriction pertaining to the social context within which such operations must take place, in accordance with the requirements of the VAT Directive.
33 It follows from the foregoing that the complaint relating to the infringement of Category 10 of Annex III to the VAT Directive is well founded.
The complaint relating to the infringement of Category 10a of Annex III to the VAT Directive 34 It must be recalled that, under Category 10a of Annex III to the VAT Directive, a reduced rate of VAT may be applied to the renovation and repairing of private dwellings, excluding materials which account for a significant part of the value of the service supplied.
35 In that regard, it is common ground, first, that, as is, it may be said, accepted by the United Kingdom, Part 2, Group 2, of Schedule 7A to the VAT Act, by providing that supplies of services of installing energy-saving materials in residential accommodation and supplies of such materials may qualify for a reduced rate of VAT, without excluding materials which account for a significant part of the value of the service supplied, does not comply with the conditions governing the application of the VAT Directive, read together with Category 10a of Annex III thereto. The first argument relied on by the Commission in support of the second complaint is therefore well founded.
36 Second, in order to challenge the Commission’s second argument that Part 2, Group 2, of Schedule 7A to the VAT Act does not confine itself to providing for the application of the reduced rate of VAT solely to operations involving renovation and repair of private dwellings as covered by Category 10a of Annex III to the VAT Directive, and allows its application therefore to the operations of provision and construction of those dwellings, the United Kingdom contends that, with respect to the latter operations, it is the so-called ‘zero-rate system’ which is applicable.
37 However, the documents in the file submitted to the Court, without more, make it impossible for the Court to consider that argument, relied on for the first time by the United Kingdom in its rejoinder, to have been made out and to hold that the ‘zero-rate system’ remained, in accordance with Article 110 of the VAT Directive, actually applicable to such operations and covered such operations in their entirety. That argument consequently is not sufficient ground to call into question the Commission’s complaint that the national legislation at issue, with regard to the application of reduced rates of VAT on the conditions laid down in Article 98 of the VAT Directive, read together with Category 10a of Annex III thereto, does not limit its scope to operations of renovation and repair of private dwellings.
38 It follows from the foregoing that the complaint relating to the infringement of Category 10a of Annex III to the VAT Directive is well founded.
39 That being the case, the action brought by the Commission must be held to be well founded.
40 Consequently, the Court must declare that, by applying a reduced rate of VAT to supplies of services of installing ‘energy-saving materials’ and to supplies of such materials by a person who installs those materials in residential accommodation:
– to the extent that those supplies cannot be considered as ‘the provision, construction, renovation and alteration of housing, as part of a social policy’ for the purposes of Category 10 of Annex III to the VAT Directive;
– to the extent that those supplies fall outside the purview of ‘renovation and repairing of private dwellings’ for the purposes of Category 10a of Annex III to the VAT Directive, and
– to the extent that even where those supplies fall within the purview of renovation and repairing of private dwellings for the purposes of Category 10a of Annex III to that directive, those supplies include materials which account for a significant part of the value of the services supplied,
the United Kingdom has failed to fulfil its obligations under Article 98 of the VAT Directive, read together with Annex III to that directive.
Costs 41 Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party must be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Commission has applied for costs and the United Kingdom has been unsuccessful, the latter must be ordered to pay the costs.
On those grounds, the Court (Second Chamber) hereby: 1. Declares that, by applying a reduced rate of value added tax to supplies of services of installing ‘energy-saving materials’ and to supplies of such materials by a person who installs those materials in residential accommodation: – to the extent that those supplies cannot be considered as ‘the provision, construction, renovation and alteration of housing, as part of a social policy’ for the purposes of Category 10 of Annex III to Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/47/EC of 5 May 2009; – to the extent that those supplies fall outside the purview of ‘renovation and repairing of private dwellings’ for the purposes of Category 10a of Annex III to that directive, and – to the extent that even where those supplies fall within the purview of renovation and repairing of private dwellings for the purposes of Category (10a) of Annex III to that directive, those supplies include materials which account for a significant part of the value of the services supplied, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 98 of Directive 2006/112, as amended by Directive 2009/47, read together with Annex III to that directive; 2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (Grand Chamber)
6 October 2015 ( * )
‛Reference for a preliminary ruling — Principles of equivalence and effectiveness — Res judicata — Recovery of undue payments — Recovery of taxes levied by a Member State in breach of EU law — Final decision of a court or tribunal imposing payment of a tax which is incompatible with EU law — Application for revision of such a decision — National legislation allowing the revision, in the light of later preliminary rulings given by the Court, of final decisions of a court or tribunal made exclusively in administrative proceedings’
In Case C‑69/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunalul Sibiu (Regional Court, Sibiu, Romania), made by decision of 16 January 2014, received at the Court on 10 February 2014, in the proceedings
Dragoș Constantin Târșia
v
Statul român,
Serviciul public comunitar regim permise de conducere și înmatriculare a autovehiculelor,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts, Vice-President, M. Ilešič (Rapporteur), L. Bay Larsen, T. von Danwitz, A. Ó Caoimh and J.-C. Bonichot, Presidents of Chambers, A. Arabadjiev, C. Toader, M. Berger, A. Prechal, E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: N. Jääskinen,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 27 January 2015,
after considering the observations submitted on behalf of:
—
Mr Târșia, by himself,
—
the Romanian Government, by R. Radu and V. Angelescu and by D. Bulancea, acting as Agents,
—
the Polish Government, by B. Majczyna and by B. Czech and K. Pawłowska, acting as Agents,
—
the European Commission, by R. Lyal and G.-D. Bălan, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 23 April 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 110 TFEU, Article 6 TEU, Articles 17, 20, 21 and 47 of the Charter of Fundamental Rights of the European Union, and general principles of EU law.
The request has been made in proceedings between Mr Târşia and the Statul român (Romanian State), represented by the Ministry of Economy and Finance (Ministerul Finanţelor şi Economiei), and the Serviciul public comunitar regim permise de conducere şi înmatriculare a autovehiculelor (Local administrative authorities concerned with driving licences and vehicle registrations) concerning an action for the revision of a final decision, made by a national court, obliging Mr Târşia to pay a tax subsequently found to be incompatible with EU law.
Romanian legal context
Article 21 of Law No 554/2004 of 2 December 2004 on administrative proceedings (Legea contenciosului administrativ nr. 554/2004) (Monitorul Oficial al României, Part I, No 1154 of 7 December 2004) (‘the law on administrative proceedings’), in the version in force when the application for revision was submitted, stated:
‘(1) The forms of action provided for by the Code of Civil Procedure can be exercised against irrevocable and definitive decisions made by organs of administrative proceedings.
(2) In addition to those provided for by the Code of Civil Procedure, judgments that have become final and binding and that infringe the primacy of [EU] law laid down by Article 148(2) read in combination with Article 20(2) of the Romanian Constitution, as amended, shall constitute grounds for revision. The application for revision shall be lodged within 15 days of notification, by derogation from the rule set out in Article 17(3), by way of application, with detailed reasons, made by the interested parties within 15 days of the delivery of the judgment. The application for revision shall be examined as a matter of urgency and shall be given priority, within 60 days at most of being lodged.’
The dispute in the main proceedings and the question referred for a preliminary ruling
On 3 May 2007, Mr Târşia, a Romanian national, purchased a second-hand motor car in France. On 5 June 2007, in order to register that vehicle in Romania, he had to pay a sum of RON 6899.51 (around EUR 1560) in respect of the special tax on motor cars payable under Articles 214a and 214b of the Romanian Tax Code, in the version in force when the vehicle in question was registered.
Believing that tax to be incompatible with Article 110 TFEU, Mr Târşia initiated civil proceedings before the Judecătoria Sibiu (District Court, Sibiu) in order to secure the return of the amount of that tax. That court, ruling against the Romanian State by judgment of 13 December 2007, upheld that request, on the ground that the tax in question was contrary to Article 110 TFEU.
The Romanian State, represented by the Ministry of Economy and Finance, brought an appeal in cassation against that judgment. By Decision No 401/2008, the civil section of the Tribunalul Sibiu (Regional Court, Sibiu) limited the repayment of the special tax on motor cars paid by Mr Târşia to a sum equal to the difference between that tax and the later pollution tax payable by virtue of Government Emergency Order No 50/2008 of 21 April 2008 introducing a pollution tax for motor cars (Ordonanţă de urgenţă a Guvernului nr. 50/2008 pentru instituirea taxei pe poluare pentru autovehicule) (Monitorul Oficial al României, Part I, No 327 of 25 April 2008).
That decision was the subject of an action for revision brought before the Tribunalul Sibiu (‘the referring court’) by Mr Târşia on 29 September 2011. On the basis of Article 21(2) of the law on administrative proceedings, Mr Târşia requested that Decision No 401/2008 be annulled and that a new decision be made, on the ground that the Court of Justice had ruled, in its judgment in Tatu (C‑402/09, EU:C:2011:219), that Article 110 TFEU precludes the introduction of a tax such as the pollution tax imposed by Government Emergency Order No 50/2008. Consequently, Mr Târşia considers that the Romanian State’s appeal was allowed in breach of the principle of the primacy of EU law, and that the special tax on motor cars paid by him should be repaid to him in its entirety.
The referring court notes in that regard that the procedural rules applicable to civil proceedings do not offer any opportunity to bring an action for revision of a final judicial decision for a breach of EU law, although such an action may be brought pursuant to the procedural rules governing administrative proceedings.
In those circumstances, the Tribunalul Sibiu (Regional Court, Sibiu) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Can Articles 17, 20, 21 and 47 of the Charter of Fundamental Rights of the European Union, Article 6 of the Treaty on the European Union, Article 110 of the Treaty on the Functioning of the European Union and the principle of legal certainty laid down in EU law and in the case-law of the Court of Justice be interpreted as precluding a rule such as that found in Article 21(2) of [the law on administrative proceedings] which allows for revision of decisions of a national court or tribunal when there is an infringement of the principle of the primacy of [European Union] law exclusively in administrative proceedings and which does not allow for revision of national decisions of a court or tribunal delivered in proceedings other than administrative proceedings (civil or criminal proceedings) when there is an infringement of the same principle of primacy of [European Union] law at issue in those decisions?’
Consideration of the question referred
Admissibility of the request for a preliminary ruling
The Romanian Government contends that the present request for a preliminary ruling is not admissible. In that regard, that government maintains, first, that the legal relationship between Mr Târşia and the Romanian State falls within the area of tax law. Consequently, the procedural law applicable to Mr Târşia’s application would be procedural tax law, which falls under the law relating to administrative proceedings. In those circumstances, even though the action for revision of Decision No 401/2008 has been brought before the formation of the referring court which has jurisdiction in civil matters, that formation also having made the decision in question, the referring court would be required to apply the procedural law relating to administrative proceedings, including the provisions of that procedural law which concern the grounds for bringing an action for revision referred to in Article 21(2) of the law on administrative proceedings.
Secondly, the Romanian Government contends that Mr Târşia could have brought an extraordinary action for annulment of that decision. That remedy would have allowed the case under consideration to be referred to the formation responsible for administrative proceedings, which could have applied Article 21(2) of the law on administrative proceedings. As the Romanian legal system guarantees an effective remedy ensuring Mr Târşia’s situation is compatible with EU law, an answer to the question referred would not be useful for the resolution of the dispute pending before the referring court.
In that regard, it should be noted that, according to settled case-law, questions on the interpretation of EU law referred by a national court in the factual and legislative context which that court is responsible for defining, and the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance (judgments in Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 30, and Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 29).
In particular, it is not for the Court of Justice, in the context of the judicial cooperation established by Article 267 TFEU, to call back into question or to verify the accuracy of the interpretation of national law made by the national court, as such interpretation falls within the exclusive jurisdiction of that court. In addition, when hearing a reference for a preliminary ruling from a national court, the Court of Justice must base its reasoning on the interpretation of national law as described to it by that court (see, to that effect, judgments in Winner Wetten, C‑409/06, EU:C:2010:503, paragraph 35; Padawan, C‑467/08, EU:C:2010:620, paragraph 22; and Logstor ROR Polska, C‑212/10, EU:C:2011:404, paragraph 30).
Furthermore, the Court may refuse to rule on questions referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgments in Nicula, C‑331/13, EU:C:2014:2285, paragraph 23, and Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 29).
In the present case, accepting the Romanian Government’s argument that the referring court would be obliged to apply the procedural rules relating to administrative proceedings even though the case pending before it concerns an application for revision of a decision given in the course of civil proceedings would amount to interpreting national law, which falls within the exclusive jurisdiction of the referring court.
According to that court, Article 21(2) of the law on administrative proceedings, which offers the opportunity to revise final judicial decisions given in the course of administrative proceedings, is not applicable to the dispute in the main proceedings, which is a civil dispute.
Moreover, it follows from the case-law of the Court that the classification, for the purposes of determining the applicable detailed rules for repayment of a national tax levied in breach of EU law, of the legal relationship established when that tax was levied between the tax authorities of a Member State and taxable persons is a matter which falls to be determined under national law (see, to that effect, judgment in IN. CO. GE.’90 and Others, C‑10/97 to C‑22/97, EU:C:1998:498, paragraph 26).
The first plea of inadmissibility raised by the Romanian Government must, therefore, be rejected.
Regarding the plea of inadmissibility based on the purported existence, in the national legal system, of effective remedies which, in any event, would permit Mr Târşia to seek redress, it is sufficient to note that it is solely for the national court, which, in the dispute in the main proceedings, is asking whether it is possible for it to revise a final judicial decision made in the course of civil proceedings, to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to deliver its judgment and the relevance of the questions which it submits to the Court. Where the questions submitted concern the interpretation of EU law, the Court is in principle bound to give a ruling (see, to that effect, judgments in Transportes Urbanos y Servicios Generales, C‑118/08, EU:C:2010:39, paragraph 25, and Nicula, C‑331/13, EU:C:2014:2285, paragraph 21).
As nothing in the case-file made available to the Court permits a conclusion that the interpretation of EU law that is sought would not be of use to the referring court, the Romanian Government’s second plea of inadmissibility cannot succeed.
Nevertheless, according to the case-law cited in paragraph 14 of the present judgment, the interpretation of EU law that is sought must have some bearing on the purpose of the dispute in the main proceedings. By its question, the referring court is asking the Court of Justice to rule on the interpretation of EU law on the basis of the national legislation which does not allow the revision of final judicial decisions given in civil and criminal proceedings which are incompatible with EU law. In so far as it is unequivocally clear from the case-file that the dispute in the main proceedings is not a criminal dispute, it must be found — as the Romanian and Polish Governments contend — that any answer from the Court in that regard would clearly have no bearing on the purpose of that dispute.
In the light of all of the foregoing, it must be found that the request for a preliminary ruling is admissible, except to the extent that it concerns the impossibility of revising final decisions given by courts in criminal proceedings which are incompatible with EU law.
Substance
As a preliminary point, it should be borne in mind that, according to the case-file, Mr Târşia was obliged, by a decision of a court made in the course of civil proceedings, to pay the pollution tax for motor cars which the Court of Justice, in essence, declared to be incompatible with Article 110 TFEU in its judgment in Tatu (C‑402/09, EU:C:2011:219), delivered after the date on which the national decision mentioned above became final.
It is settled case-law that the right to a refund of taxes levied by a Member State in breach of rules of EU law is the consequence and complement of the rights conferred on individuals by provisions of EU law prohibiting such taxes, as interpreted by the Court. The Member States are therefore in principle required to repay taxes levied in breach of EU law (judgments in Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraph 24; Irimie, C‑565/11, EU:C:2013:250, paragraph 20; and Nicula, C‑331/13, EU:C:2014:2285, paragraph 27).
In addition, where a Member State has levied taxes in breach of rules of EU law, individuals are entitled to reimbursement not only of the tax unduly levied but also of the amounts paid to that State or retained by it which relate directly to that tax. Accordingly, the principle of the obligation of Member States to repay with interest amounts of tax levied in breach of EU law follows from that law (see, to that effect, judgments in Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraphs 25 and 26, and Irimie, C‑565/11, EU:C:2013:250, paragraphs 21 and 22).
In the absence of EU legislation on the recovery of national taxes unduly levied, it is for each Member State, in accordance with the principle of procedural autonomy, to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions at law for safeguarding the rights which taxpayers derive from EU law (see, to that effect, judgments in Rewe-Zentralfinanz and Rewe-Zentral, 33/76, EU:C:1976:188, paragraph 5; Aprile, C‑228/96, EU:C:1998:544, paragraph 18; and Test Claimants in the Franked Investment Income Group Litigation, C‑362/12, EU:C:2013:834, paragraph 31).
However, the detailed procedural rules governing actions for safeguarding the rights which taxpayers derive from EU law must not be any less favourable than those governing similar domestic actions (principle of equivalence) and must not be framed in such a way as to render impossible in practice or excessively difficult the exercise of rights conferred by the legal order of the European Union (principle of effectiveness) (see, to that effect, inter alia, judgments in Rewe-Zentralfinanz and Rewe-Zentral, 33/76, EU:C:1976:188, paragraph 5; Transportes Urbanos y Servicios Generales, C‑118/08, EU:C:2010:39, paragraph 31; and Test Claimants in the Franked Investment Income Group Litigation, C‑362/12, EU:C:2013:834, paragraph 32).
In so far as the recovery of a tax declared incompatible with EU law is, in the present case, hindered by the existence of a final decision of a court or tribunal imposing payment of that tax, attention should be drawn to the importance, both in the legal order of the European Union and in national legal systems, of the principle of res judicata. In order to ensure both stability of the law and legal relations and the sound administration of justice, it is important that decisions of courts or tribunals which have become definitive after all rights of appeal have been exhausted or after expiry of the time-limits provided for in that connection can no longer be called into question (judgment in Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraph 58 and the case-law cited).
Therefore, EU law does not require a national court to disapply domestic rules of procedure conferring finality on a judgment, even if to do so would make it possible to remedy a domestic situation which is incompatible with EU law (judgment in Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraph 59 and the case-law cited).
Nevertheless, if the applicable domestic rules of procedure provide the possibility, under certain conditions, for a national court to go back on a decision having the authority of res judicata in order to render the situation compatible with national law, that possibility must prevail if those conditions are met, in accordance with the principles of equivalence and effectiveness, so that the situation at issue is brought back into line with EU law (see, to that effect, judgment in Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraph 62).
Having regard to the foregoing preliminary considerations, it must be found that the referring court is asking, in essence, whether EU law, in particular the principles of equivalence and effectiveness, is to be interpreted as precluding a situation where there is no possibility for a national court to revise a final decision of a court or tribunal made in the course of civil proceedings when that decision is found to be incompatible with an interpretation of EU law upheld by the Court after the date on which that decision became final, although such a possibility does exist as regards final decisions of a court or tribunal incompatible with EU law made in the course of administrative proceedings.
The principle of equivalence
It is clear from the case-law cited in paragraph 27 of the present judgment that the principle of equivalence prohibits a Member State from laying down less favourable procedural rules for claims for repayment of a tax based on a breach of EU law than those applicable to similar proceedings based on a breach of national law (see also judgment in Weber’s Wine World and Others, C‑147/01, EU:C:2003:533, paragraph 104).
However, by its question, the referring court is asking the Court to compare, for the purposes of applying that principle, judicial proceedings of an administrative nature based on a breach of EU law and judicial proceedings of a civil nature based on a breach of that law.
In that regard, as was noted by the Advocate General in point 49 of his Opinion, the principle of equivalence requires equal treatment of claims based on a breach of national law and of similar claims based on a breach of EU law, not equivalence of national procedural rules applicable to different types of proceedings such as — as in the dispute in the main proceedings — civil proceedings on the one hand and administrative proceedings on the other. Furthermore, that principle is not relevant to a situation which — as in the dispute in the main proceedings — concerns two types of actions, both of which are based on a breach of EU law (judgment in ÖBB Personenverkehr, C‑417/13, EU:C:2015:38, paragraph 74).
It follows that the principle of equivalence does not preclude a situation where there is no possibility for a national court to revise a final decision of a court or tribunal made in the course of civil proceedings when that decision is found to be incompatible with an interpretation of EU law upheld by the Court after the date on which that decision became final, even though such a possibility does exist as regards final decisions of a court or tribunal incompatible with EU law made in the course of administrative proceedings.
The principle of effectiveness
Regarding the principle of effectiveness, it should be borne in mind that every case in which the question arises as to whether a provision of national procedural legislation makes the exercise of rights conferred on individuals by the legal order of the European Union impossible in practice or excessively difficult must be analysed by reference to the role of the rules concerned in the proceedings as a whole, the way in which the proceedings are conducted and the special features of those rules, before the various national bodies (see, to that effect, judgment in Asturcom Telecomunicaciones, C‑40/08, EU:C:2009:615, paragraph 39 and the case-law cited).
For those purposes, account must be taken, where appropriate, of the principles which form the basis of the national judicial system concerned, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of proceedings (see, inter alia, judgments in Fallimento Olimpiclub, C‑2/08, EU:C:2009:506, paragraph 27, and Agrokonsulting-04, C‑93/12, EU:C:2013:432, paragraph 48 and the case-law cited).
As is apparent from paragraph 28 of the present judgment, the Court has, on several occasions, emphasised the importance of the principle of res judicata (see also, to that effect, judgment in Köbler, C‑224/01, EU:C:2003:513, paragraph 38). Thus, it has been held that EU law does not require a judicial body automatically to go back on a judgment having the authority of res judicata in order to take into account the interpretation of a relevant provision of EU law adopted by the Court after delivery of that judgment (judgment in Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraph 60).
In the present case, no particular circumstance of the dispute in the main proceedings featured in the case-file available to the Court justifies adopting a different approach to the one accepted by the Court in the case-law cited in paragraphs 28 and 29 of the present judgment, pursuant to which EU law does not require a national court to disapply domestic rules of procedure conferring finality on a judgment, even if to do so would make it possible to remedy a domestic situation which is incompatible with EU law.
None the less, in so far as the final judicial decision obliging Mr Târșia to pay a tax which, in essence, was subsequently declared incompatible with EU law, was taken by a national court adjudicating at last instance, it should be borne in mind that, according to settled case-law, by reason (inter alia) of the fact that an infringement, by such a decision, of rights deriving from EU law cannot thereafter normally be corrected, individuals cannot be deprived of the possibility of rendering the State liable in order to obtain legal protection of their rights (see, to that effect, judgments in Köbler, C‑224/01, EU:C:2003:513, paragraph 34, and Traghetti del Mediterraneo, C‑173/03, EU:C:2006:391, paragraph 31).
It follows from all of the foregoing that the answer to the question referred is that EU law, in particular the principles of equivalence and effectiveness, must be interpreted as not precluding, in circumstances such as those in the dispute in the main proceedings, a situation where there is no possibility for a national court to revise a final decision of a court or tribunal made in the course of civil proceedings when that decision is found to be incompatible with an interpretation of EU law upheld by the Court after the date on which that decision became final, even though such a possibility does exist as regards final decisions of a court or tribunal incompatible with EU law made in the course of administrative proceedings.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Grand Chamber) hereby rules:
European Union law, in particular the principles of equivalence and effectiveness, must be interpreted as not precluding, in circumstances such as those in the dispute in the main proceedings, a situation where there is no possibility for a national court to revise a final decision of a court or tribunal made in the course of civil proceedings when that decision is found to be incompatible with an interpretation of EU law upheld by the Court of Justice of the European Union after the date on which that decision became final, even though such a possibility does exist as regards final decisions of a court or tribunal incompatible with EU law made in the course of administrative proceedings.
[Signatures]
( * ) Language of the case: Romanian. |
OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 20 January 2016 ( )
Case C‑561/14
Caner Genc
v
Integrationsministeriet
(Request for a preliminary ruling from the Østre Landsret (Eastern Regional Courtal Court, Denmark))
‛EEC-Turkey Association Agreement — Decision No 1/80 — Freedom of movement for workers — Family reunification — National legislation laying down new and more restrictive conditions on family reunification for economically inactive family members of economically active Turkish nationals residing and holding a residence permit in the Member State in question — Standstill clause — Scope — New restriction — Justification — Overriding reason in the public interest — Proportionality’
1.
By this request for a preliminary ruling, the referring court asks the Court of Justice to interpret Article 13 of Decision No 1/80 of 19 September 1980 on the development of the Association (‘Decision No 1/80’) adopted by the Association Council set up by the Agreement establishing an Association between the European Economic Community and Turkey, signed at Ankara on 12 September 1963 by the Republic of Turkey, of the one part, and by the Member States of the EEC and the Community, of the other part, and concluded, approved and confirmed on behalf of the Community by Council Decision 64/732/EEC of 23 December 1963 ( ) (‘the Association Agreement’). This request was made in the course of proceedings between Mr Genc, a Turkish national, and the Danish authorities concerning the latter’s rejection of his application for a residence permit for the purposes of family reunification.
I – Introduction
2.
The applicant in the main proceedings, Mr Genc, is a Turkish national who was born in 1991. His father, also a Turkish national, has lived in Denmark since 1997 and has held a permanent residence permit there since 2001. After his parents divorced in 1997, and although his father obtained legal custody of him, Mr Genc continued to live in Turkey with his grandparents and saw his mother regularly. His two older brothers have held a residence permit in Denmark since May 2003.
3.
On 5 January 2005 Mr Genc applied for a residence permit in Denmark in order to join his father, who was then an employed person in that country.
4.
In August 2006, the Udlændingeservice, now the Udlændingestyrelsen (Danish Immigration Service) rejected his application. Mr Genc then lodged an appeal with the Ministry of Integration, which upheld the refusal decision on 18 December 2006. That ministry stated in particular that Mr Genc had never been to Denmark, that he has spent his entire life in Turkey, where he was educated, that he speaks only Turkish and that he had seen his father only very occasionally in the last two years, and went on to conclude that he had no connections with Danish society and neither has nor has the possibility of establishing sufficient ties to Denmark to allow successful integration in that country. That ministry also noted that Mr Genc’s father could not be regarded as particularly well integrated or as himself having sufficient ties to Danish society and that, in any event, he was able to visit his son in Turkey.
5.
On 17 September 2007, the Ministry of Integration refused to review its refusal decision. On 9 December 2011, the court of first instance, before which Mr Genc had brought an application to annul that decision, dismissed the action. Mr Genc then appealed to the referring court.
6.
Both the analysis of the Danish Immigration Service and that of the Ministry of Integration are based on Paragraph 9(13) of the Law on aliens (udlændingeloven, ‘the Law on aliens’). Under that provision, which was introduced in 2004, ( )‘In cases where the applicant and one of the applicant’s parents are resident in their country of origin or another country, a residence permit … can be issued only if the applicant has, or has the possibility of establishing, sufficient ties to Denmark to allow successful integration in that country. However, this shall not apply if the application is submitted no later than two years after the person residing in Denmark satisfies the conditions [for the issue of a residence permit] or if there are particularly compelling reasons which weigh against it, including regard for family unity’. ( )
7.
The discretionary assessment made by the competent authorities in order to determine whether an applicant has, or has the possibility of establishing, sufficient ties to Denmark (that is to say to assess the likelihood of his successful integration into Danish society) must, according to the referring court, take into account a certain number of parameters, including the duration and nature of the child’s previous periods of residence in Denmark, the country in which the child has spent most of his life, the country in which he was educated, the language that he speaks and the level of assimilation, during his childhood, of Danish values and standards. In the course of that assessment, account is also taken of the level of integration into Danish society of the parent whom the child is seeking to join and the links established with Danish society by that parent. The referring court also refers to a number of cases in which evidence of sufficient ties to Denmark is not required, such as when the child or one of the parents is ill or handicapped or when the refusal to authorise reunification would be contrary to Denmark’s international commitments or to the best interests of the child within the meaning of the New York Convention on the Rights of the Child signed on 20 November 1989 and ratified by all the Member States.
8.
The referring court points out that that requirement concerning sufficient ties to Denmark was introduced into the Danish legal order in 2004. It is clear from Article 13 of Decision No 1/80 that ‘The Member States of the Community and Turkey may not introduce new restrictions on the conditions of access to employment applicable to workers and members of their families legally resident and employed in their respective territories’.
9.
It therefore asks whether that standstill clause is also applicable to circumstances in which Turkish employees belonging to the regular labour force may apply to be reunited with economically inactive members of their family in the territory of the Member State concerned. The referring court considers that the Court’s case-law on that point is not very clear. If Paragraph 9(13) of the Law on aliens constitutes a new restriction, within the meaning of Article 13 of Decision No 1/80, the referring court wishes to obtain clarification from the Court concerning the nature of the test to be conducted in order to determine whether that restriction may be justified.
10.
In those circumstances, faced with a difficulty concerning the interpretation of EU law, the Østre Landsret (Eastern Regional Court) decided to stay proceedings and, by order lodged at the Registry of the Court on 5 December 2014, to refer the following questions to the Court for a preliminary ruling:
‘1.
Must the standstill clause in Article 13 of Decision No 1/80 ... and/or the standstill clause in Article 41(1) of the Additional Protocol [of 23 November 1970, and concluded, approved and confirmed on behalf of the Community by Council Regulation (EEC) No 2760/72 of 19 December 1972 (‘the Additional Protocol’) ( )] ... be interpreted as meaning that new and more stringent conditions on access to family reunification for family members who are not economically active, including minor children of economically active Turkish nationals who are resident and have a residence permit in a Member State, are covered by the standstill requirement having regard to:
(a)
the Court of Justice’s interpretation of the standstill clauses in particular in its judgments in Derin [(C‑325/05, EU:C:2007:442)], Ziebell [(C‑371/08, EU:C:2011:809], Dülger [(C‑451/11, EU:C:2012:504)] and Demirkan [(C‑221/11, EU:C:2013:583)]
(b)
the aim and content of the [Association Agreement], as interpreted in particular in the Ziebell [(C‑371/08, EU:C:2011:809)] and Demirkan [(C‑221/11, EU:C:2013:583)] judgments, and having regard to:
—
the fact that the Agreement and the protocols and decisions, etc. attached thereto do not contain provisions on family reunification,
and,
—
the fact that family reunification … has always been governed by secondary law, at present the Free Movement Directive (Directive 2004/38/EC [of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (OJ 2004 L 158, p. 77)])?
2.
In answering Question 1, the Court is asked to indicate whether any derived right to family reunification for family members of economically active Turkish nationals who reside and have a residence permit in a Member State applies to family members of Turkish workers under Article 13 of Decision No 1/80, or whether it applies only to family members of Turkish self-employed persons pursuant to Article 41(1) of the Additional Protocol.
3.
If the answer to Question 1, read in conjunction with Question 2, is in the affirmative, the Court is asked to indicate whether the standstill clause in Article 13 … of Decision No 1/80 must be interpreted as meaning that new restrictions, which are ‘justified by an overriding reason in the public interest, … suitable to achieve the legitimate objective pursued and [do] not go beyond what is necessary in order to attain it’ (beyond what is stated in Article 14 of Decision No 1/80) are lawful.
4.
If the answer to Question 3 is in the affirmative, the Court is asked to indicate:
(a)
The guidelines which should be used to carry out the restriction test and proportionality assessment. The Court is asked, inter alia, to indicate whether the same principles must be followed as those laid down in its case-law on family reunification in connection with the free movement of EU citizens, which are based on the Free Movement Directive (Directive 2004/38) and the provisions of the Treaty, or whether another assessment must be applied.
(b)
If an assessment other than that which stems from the Court’s case-law on family reunification in connection with the freedom of movement of EU citizens must be applied, the Court is asked to indicate whether the proportionality assessment carried out in relation to Article 8 of the European Convention of Human Rights[, signed at Rome on 4 November 1950,] on respect for family life and the case-law of the European Court of Human Rights should be adopted as the point of reference and, if not, what principles must be followed,
(c)
Irrespective of which assessment method is to be applied: Can a rule such as [Paragraph 9(13) of the Law on aliens] — under which it is a condition for family reunification between a person who is a third-country national and has a residence permit and is resident in Denmark, and his minor child, where the child and the child’s other parent is resident in the country of origin or another country, that the child has, or has the possibility of establishing, such ties with Denmark that there is a basis for successful integration in Denmark — be regarded as “justified by an overriding reason in the public interest, … suitable to achieve the legitimate objective pursued and … not go[ing] beyond what is necessary in order to attain it”?’
11.
The Danish Government and the European Commission have submitted written observations in this case. At the hearing which was held before the Court on 20 October 2015, the applicant in the main proceedings, the Danish and Austrian Governments and the Commission presented oral argument.
II – Legal assessment
A – The first and second questions
12.
By its first and second questions, which should be examined together, the referring court asks the Court about the scope of Article 13 of Decision No 1/80 and the extent of the standstill requirement which it contains. In particular, it asks whether a new restriction on access to family reunification for economically inactive family members of a Turkish worker is subject to that requirement and whether the derived right to family reunification seemingly conferred in the judgment in Dogan ( ) on the family members of a Turkish worker exercising the freedom of establishment must also be conferred in the context of the freedom of movement for Turkish workers.
13.
In its written observations, the Danish Government, apparently reflecting the referring court’s concerns, expressly invited the Court to depart from its judgment in Dogan (C‑138/13, EU:C:2014:2066). By analysing a number of the Court’s judgments interpreting the standstill clauses (whether Article 41(1) of the Additional Protocol or Article 13 of Decision No 1/80), that Government tried to show that the position adopted by the Court in that judgment is isolated and does not appear to be consistent with its previous judgments. The right to family reunification was, in its view, always regarded as falling outside the scope of the standstill requirement until the judgment in Dogan. ( ) The Danish Government maintains that the Court must abandon that line of case-law and return to the purely economic essence of the Association Agreement and of the various measures based on it, as was recognised in the judgment in Demirkan. ( )
14.
Before explaining why, in my view, the referring court’s doubts and the Danish Government’s concern are based on a misinterpretation of the case-law of the Court, which has not, in my opinion, established a derived right to family reunification, I should like to return to the standstill requirement as interpreted and defined by the Court.
1. General considerations on the standstill requirement laid down in Article 13 of Decision No 1/80 in the case-law of the Court
15.
It is common ground that Mr Genc’s father was in paid employment at the time when the applicant in the main proceedings submitted his application for a residence permit. The situation of Mr Genc’s father therefore relates to freedom of movement for workers and is subject only to Article 13 of Decision No 1/80. ( )
16.
The Court has held, in respect of that article, that it has direct effect ( ) and that it must be read in the context of all the provisions of that decision. ( )
17.
As regards the context, it is settled case-law that the aim of the Association Agreement is to promote the continuous and balanced strengthening of trade and economic relations between the Contracting Parties, which includes the freedom of movement for workers ( ) which must be secured by progressive stages. ( ) With regard to Decision No 1/80 in particular, the Court has held that it is intended to ‘promote the gradual integration in the host Member State of Turkish nationals who satisfy the conditions laid down in one of the provisions of that decision and thus enjoy the rights conferred on them by the decision’ ( ) and that, ‘without prejudice to the particular position of family members authorised to join a Turkish worker already legally present in the territory of a Member State, that decision is essentially aimed at the progressive integration of Turkish workers into that territory through the pursuit of lawful employment which should be uninterrupted’. ( )
18.
The Court has also examined the relationship between the standstill clause in Article 41(1) of the Additional Protocol and that in Article 13 of Decision No 1/80. In spite of their markedly different wording, ( ) it held that the two clauses pursue the same objective, namely the gradual establishment of freedom of movement for workers, of the right of establishment and of freedom to provide services, by prohibiting the creation of new obstacles to those freedoms so as not to make the gradual achievement of those freedoms more difficult. ( ) Therefore, those two provisions have the same meaning, ( ) are of the same kind ( ) and must be interpreted in a convergent manner. ( ) There is therefore no reason to give to the standstill clause relating to freedom of movement for workers a narrower scope than that given to its equivalent relating to freedom of establishment and freedom to provide services. ( ) As the Court’s considerations relating to the standstill clause in Article 41(1) of the Additional Protocol apply equally to the interpretation of Article 13 of Decision No 1/80, ‘the scope of the standstill obligation in Article 13 extends by analogy to any new obstacle to the exercise of free movement by workers which makes more stringent the conditions which exist at a given time’. ( )
19.
Once the Court had established the direct effect of Article 13 of Decision No 1/80 and explained that its scope was to be the same as that of Article 41(1) of the Additional Protocol, it remained for the Court to determine its significance. For the Court, the standstill clause ‘does not operate in the same way as a substantive rule by rendering inapplicable the relevant substantive law which it replaces, but as a quasi-procedural rule which stipulates, ratione temporis, which are the provisions of a Member State’s legislation that must be referred to for the purposes of assessing the position of a Turkish national who wishes to exercise’ freedom of movement for workers in a Member State. ( ) It contains an obligation entered into by the Contracting Parties which amounts in law to a duty not to act. ( )
20.
The Court has also repeatedly stated that the standstill clause does not, as such, create rights ( ) and is not in itself capable of conferring upon a Turkish national a right to pursue an activity as an employed person or the right of residence which is its corollary, ( ) since the right of entry into the territory of a Member State cannot be inferred from the EU legislation but, on the contrary, remains governed by national law. ( ). The Court has therefore recognised that ‘Decision No 1/80 does not encroach upon the competence of the Member States to refuse Turkish nationals the right of entry into their territories and to take up first employment there’. ( ) However, it does regulate the situation of Turkish workers already lawfully integrated into the labour force of Member States. ( ) Yet the Court has nonetheless accepted that it is only where the activity in question is the corollary of the exercise of an economic activity that the standstill clause may relate to the conditions of entry and residence of Turkish nationals within the territory of the Member States. ( )
21.
In particular, Article 13 of Decision No 1/80 prohibits generally the introduction of any new national measure having the object or effect of making the exercise by a Turkish national in its territory of the freedom of movement for workers subject to conditions more restrictive than those which applied at the time when Decision No 1/80 entered into force with regard to the Member State concerned. ( ) That same provision also precludes the introduction into Member States’ legislation, as from the date of entry into force in the Member State concerned of Decision No 1/80, of any new restrictions on the exercise of the free movement of workers, including those relating to the substantive and/or procedural conditions governing the first admission into the territory of that Member State of Turkish nationals intending to exercise that freedom. ( )
22.
At this stage of the analysis, I note that the Court has not ruled out the possibility that the conditions for entry and residence of economically active Turkish nationals’ family members who do not enjoy any rights under Decision No 1/80 may fall, indirectly, within the scope of the standstill requirement, provided that a link is established between the exercise by those nationals of the economic activity and that entry or residence. It is precisely that link which was confirmed in the judgment in Dogan. ( )
2. The social dimension of Decision No 1/80, ‘economic dimension’ of family reunification and standstill requirement
23.
The subject of family reunification has not, in fact, been overlooked in the Court’s case-law on standstill clauses in the context of the Association between the Economic European Community and Turkey (‘the EEC-Turkey Association’). In view of the inherent link between the exercise of an economic activity and the rights enjoyed by Turkish nationals exercising it in the territory of a Member State, the Court has held that ‘the members of the family of the migrant Turkish worker do not have a right to join him to live as a family; their ability to join him depends rather on a decision of the national authorities taken solely on the basis of the law of the Member State concerned, subject to the requirement of observance of fundamental rights’. ( ) However, Decision No 1/80 has clearly enriched the EEC-Turkey Association in the social field. ( ) Article 13 of Decision No 1/80 also forms part of the ‘social provisions’ of that decision which, according to the Court, is evidence of the fact that freedom of movement for workers, which was to be secured gradually, has reached a ‘further stage’. ( ) In interpreting the ‘social’ provisions of Decision No 1/80, the Court has recognised that the family reunification enjoyed by Turkish workers who belong to the labour force of the Member States contributes both to improving the quality of their stay and to their integration in those Member States and, therefore, promotes economic and social cohesion in the society concerned. ( ) However, such family reunification is not unconditional and the Court’s affirmation must be viewed in the context of its judgment in Dülger. ( ) In that case, the Court ruled on Article 7(1) of Decision No 1/80, which lists the rights of the members of the family of a Turkish worker duly registered as belonging to the labour force of a Member State who have been authorised to join him. Although, in another context, the Court held that Decision No 1/80 does not make the access to the territory of a Member State of family members of a Turkish worker already legally present in that state in order to join the rest of the family conditional on the exercise of paid employment, ( ) it stated, regarding, in particular, Article 13 of that decision, that that provision refers ‘to workers and members of their families legally resident and employed in their respective territories’. ( )
24.
However, I would point out at this stage of the analysis that the applicant in the main proceedings is not yet in Danish territory but is applying to join his father there. His situation is not covered by Article 7(1) of Decision No 1/80 and he, himself, cannot therefore rely on Article 13 of that decision.
25.
The judgment in Dogan, ( ) from which the Danish Government asks the Court to depart on the ground that it constitutes a break with the previous case-law of the Court, is consistent with that case-law. That judgment did not confer an independent right to family reunification on members of the family of Turkish workers any more than it conferred the right to rely on Article 13 of Decision No 1/80 on those workers’ spouses who had not yet entered the territory of the Member State where those workers exercise their economic freedom. In that judgment, the Court recognised, as, moreover, I had invited it to do, that that article could be relied on only by the economically active Turkish national who became established in the territory of a Member State and then alone enjoyed the rights conferred by the legal texts of the Association Agreement. ( ) Also, there is nothing particularly innovative in the Court’s acceptance, again in its judgment in Dogan, ( ) that the standstill clause could be relied on against national legislation regulating the conditions of entry into the territory of the Member State concerned for the purposes of family reunification of the spouse of a Turkish citizen established in that Member State. In fact, the Court had already accepted that it could be relied on in the judgment in Toprak and Oguz. ( )
26.
As to the Danish Government’s wish for a return to the rule in Demirkan, ( ) it must be stated that that precedent is not relevant to the present case. That case concerned a daughter-in-law, of Turkish nationality, who wished to join her father-in-law, who was a German citizen and resident, in Germany and the question whether it could be considered that she could rely on Article 41(1) of the Additional Protocol in so far as, upon arriving in German territory, she would be not a provider but a recipient of services. In that case, unlike in the present proceedings for a preliminary ruling, the person in question was not a Turkish worker who was already established in the territory of a Member State and already exercising an economic freedom there.
27.
In spite of the ‘social’ nature of the provisions contained in Decision No 1/80, the Court has not, therefore, gone so far, in its case-law, as totally to disconnect the exercise of an economic freedom from the right to family reunification. Thus, as I have already observed, it is only in so far as the rules on family reunification affect the situation of Turkish workers that those rules have to be brought within the scope of Article 13 of Decision No 1/80. ( )
28.
However, in the light of the Court’s ruling in Dogan, ( ) the decision of a Turkish national to establish himself in a Member State of the European Union in order to exercise stable employment there could be negatively affected where the legislation of that Member State makes family reunification difficult or impossible, so that that national could find himself obliged to choose between his activity in the Member State concerned and his family life in Turkey.
29.
In the light of all the foregoing considerations, it must be concluded that legislation such as that at issue in the main proceedings, which it is not disputed makes reunification of a Turkish employed person who is legally established in the territory of a Member State with his minor children more difficult by making the conditions of their first admission into the territory of the Member State concerned more stringent than those applicable on the entry into force of Decision No 1/80 ( ) constitutes a new restriction on the exercise of the freedom of movement of Turkish workers within the meaning of Article 13 of that decision.
B – The third and fourth questions
30.
By its third and fourth questions, which I shall also examine together, the referring court asks whether a new restriction within the meaning of Article 13 of Decision No 1/80 can be justified and, if so, under what conditions proportionality must be assessed. Although that task is, in principle, a matter for the national courts, the referring court expressly requests the Court to adopt a position on the proportionality test relating to Paragraph 9(13) of the Law on aliens. However, before adopting a position on that point, it must first be determined whether there is in this case an overriding reason in the public interest capable of justifying the new restriction.
1. The promotion of successful integration as an overriding reason in the public interest
31.
The Court has already held that a restriction whose ‘purpose or effect is to make the exercise by a Turkish national of the freedom of movement of workers in national territory subject to conditions more restrictive than those applicable at the date of entry into force of Decision No 1/80, is prohibited, unless it falls within the restrictions referred to in Article 14 of that decision or in so far as it is justified by an overriding reason in the public interest, is suitable to achieve the legitimate objective pursued and does not go beyond what is necessary in order to attain it’. ( ) By reason of the convergence applicable in the interpretation of the standstill clauses, the Court confirmed that approach in the judgment in Dogan ( ) with respect to new restrictions within the meaning of Article 41(1) of the Additional Protocol. Thus, the Court has expressly accepted that a new restriction can be justified not only on the grounds referred to in Article 14 of Decision No 1/80, namely public policy, public safety and public health, but also for overriding reasons in the public interest which are familiar grounds for justifying obstacles in the Court’s case-law on fundamental freedoms. Although, in the judgment in Demir, ( ) the Court recognised that the purpose of preventing unlawful entry and residence is an overriding reason in the public interest, it left open the question of the prevention of forced marriages and of the promotion of integration in the judgment in Dogan. ( )
32.
However, in the present case, the Danish Government maintains that Paragraph 9(13) of the Law on aliens must be regarded as justified by an overriding reason in the public interest, namely that of ensuring successful integration.
33.
The Court is not particularly demanding in the matter of establishing an overriding reason in the public interest. ( ) I would note that, in the judgment in Demir, ( ) the Court confined itself to a finding which had not previously been established. Moreover, as I have pointed out above, it did not even adopt a position on that point in the judgment in Dogan. ( )
34.
I am inclined to consider that, if the Court acts in that way, it is in order to recognise the discretion which the States enjoy in the matter. In view of those considerations, I am also inclined to accept that, in itself, the promotion of successful integration may constitute an overriding reason in the public interest, in particular since the Gordian knot of the present case lies more in the appropriateness, necessity and proportionality of the new restriction than in the ground justifying it.
35.
So far as is relevant, I shall therefore merely point out that concerns relating to integration are not outside the scope of EU law ( ) and that they do not appear, as such, contrary to the objective pursued by the EEC-Turkey Association. The overriding reason in the public interest relied on by the Danish Government therefore seems to me to be, at first sight, admissible.
2. Is Paragraph 9(13) of the Law on aliens suitable to achieve the objective pursued and does it go beyond what is necessary to attain it?
a) Determination of the scope of the proportionality test
36.
First of all, an answer must be given to the referring court’s question whether the proportionality test to be carried out in order to determine to what extent a new restriction within the meaning of Article 13 of Decision No 1/80 is admissible must be similar to that which may be conducted in order to verify compliance with Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950.
37.
On that point, it seems to me logical to confirm that the test to be applied is indeed the test applicable in cases of infringement of one of the economic freedoms established by the Treaty. This follows clearly from the very wording of the test formulated by the Court in its judgments in Demir ( ) and Dogan. ( ) This can also be explained by the fact that the Court manifestly and voluntarily chose to base its reasoning, in particular in the judgment in Dogan (C‑138/13, EU:C:2014:2066), not on fundamental rights, but, on the contrary, on the economic freedoms as enjoyed by Turkish nationals under the conditions determined by the provisions governing the EEC-Turkey Association in respect of which family reunification appears only to be a ‘corollary’ or an ‘extension’. ( )
38.
I repeat, ( ) to consider that Paragraph 9(13) of the Law on aliens constitutes a new restriction within the meaning of Article 13 of Decision No 1/80 does not mean that the right to family reunification of the father of the applicant in the main proceedings is being directly undermined. It does mean, however, that the possibility offered to him of taking up and continuing in paid employment in the territory of an EU Member State may be affected by the fact that his son, who is a minor and of whom he has legal custody, cannot, or can only with difficulty, join him. Just as the analysis of the existence of a new restriction was conducted from the perspective of the freedom of movement of the Turkish worker who is the father of the applicant in the main proceedings, so too any justification of that restriction must be examined under the same conditions as obstacles to that freedom of movement are examined.
39.
When interpreting Article 13 of Decision No 1/80, transposing the test which the Court applies in the case of an obstacle does not seem to me to be going too far in treating the rights conferred on Turkish workers in the same way as those conferred on EU citizens, given that, in any event, the parties to the Association Agreement have agreed to be guided by the Treaty provisions on freedom of movement for workers ( ) and the Court has held that the principles enshrined in those provisions must be extended, so far as possible, to Turkish nationals who enjoy the rights conferred by Decision No 1/80. ( )
40.
That said, I shall now examine Paragraph 9(13) of the Law on aliens.
b) Application to the present case
41.
According to the statements of the referring court and the Danish Government’s observations, Paragraph 9(13) of the Law on aliens requires a minor child who submits an application for a residence permit in order to join one of his parents already established in Danish territory to have, or have the possibility of establishing, sufficient ties to Denmark to allow successful integration in that country. That requirement, which is imposed on children over six years of age, ( ) applies only to applications made at least two years after the parent resident in Denmark has received his permanent residence permit and where the child is residing in his country of origin with the other parent. According to the Danish legislature, the objective of such a requirement is to prevent parents from choosing to leave the child in the country of origin, so that the child can be educated in accordance with the culture of that country and does not assimilate Danish standards and values.
42.
It is clear both from the explanatory memorandum to the draft Law on aliens and from the practice notes partially reproduced in the case-file that, in order to determine whether the applicant has sufficient ties to Denmark, the assessment which must be conducted by the competent Danish authorities is a discretionary assessment taking into account a number of criteria in order to make a kind of diagnosis and/or prognosis of the applicant’s likelihood of integration.
43.
For that purpose, account must be taken of all the information available on the duration and nature of the child’s periods of residence in Denmark and in his country of origin, the place where he has spent most of his childhood, his place of education ( ) and his language knowledge. The Danish authorities must also decide whether the degree to which the child has assimilated Danish values and standards is sufficient for him to have, or have the possibility of establishing, sufficient ties to Danish society. Account is also taken of the degree of integration and the closeness of the ties with Danish society of the parent already present in Denmark and of the actual nature of that parent’s relationship with the applicant. ( )
44.
The Danish authorities are deprived of their power of assessment in a number of exceptional cases in which it is not necessary to demonstrate sufficient ties to Denmark to allow successful integration in that country. The child is, in principle, granted a residence permit even though the application is submitted more than two years after the parent already present in that Member State has received his residence permit in the following cases: if the child, the parent resident in the State of origin or the parent resident in Denmark is ill or seriously handicapped; if the parent resident in Denmark was until then unaware of the exact place of residence of the child; if the parent resident in Denmark now satisfies the conditions for claiming maintenance or custody; if the parent resident in Denmark cannot, in any event, stay in the child’s State of origin and of residence or if the refusal of reunification appears contrary to Denmark’s international commitments or to the child’s best interests within the meaning of the New York Convention on the Rights of the Child, signed on 20 November 1989 and ratified by all the Member States.
45.
On the other hand, the application must be refused if the authorities find that the parent resident in Denmark deliberately chose to leave the child behind, so that the child could receive an education in accordance with the culture of the country of origin. Account will then be taken of the applicant’s age, it being understood that the possibility of requesting family reunification is open to that applicant up until he is 15 years old.
46.
When set out in that way, the ratio legis of Paragraph 9(13) of the Law on aliens seems reasonable, since the Danish authorities, in exercising their discretion in interpreting each case, must take into account a number of criteria. Moreover, in certain cases, it is not necessary to demonstrate the existence of or possibility of establishing sufficient ties to Danish society.
47.
The Danish Government maintains that the fact that the requirement of sufficient ties is not automatic is sufficient to regard the legislation at issue as proportionate, as the Court held in the judgment in Dogan. ( ) Although it is true that the Court held, in that judgment, that a provision which states that the absence of evidence of sufficient linguistic knowledge automatically leads to the dismissal of the application, without account being taken of the specific circumstances of each case, goes beyond what is necessary in order to attain the objective pursued, ( ) it cannot be inferred from this that a measure providing for such an examination of those circumstances fulfils the proportionality test on that condition alone. ( )
48.
Since the reasoning on the proportionality of Paragraph 9(13) of the Law on aliens needs to be taken further, it should be examined from a systemic perspective. However, it is clear both from the wording of the provision and from national practice that that provision is based on a fundamental — and, in my view, difficult to rebut — assumption of incompatibility of cultures. A child who was born and raised in a third State can, almost by nature, no longer be integrated. I also note that applicants are required to prove that they have, to some degree, assimilated Danish standards and values, which are nowhere defined. Assuming that the Law on aliens is applicable to American nationals, for example, would the Danish authorities view a ‘late’ application for reunification with the same strictness? Would they complain with the same steadfastness that the child was deliberately kept for as long as possible in its culture of origin, thereby negating any likelihood of integration?
49.
I must therefore admit that I am not convinced of the existence of any correlation between a period of prolonged residence in a third State and the impossibility of integration. It should be borne in mind that the economic situation of those families often explains the absence of more frequent stays in Europe and that the choice of residence is determined not solely by a hypothetical cultural preference, but also, and perhaps above all, by real economic constraints.
50.
Nor am I convinced by the distinction which has been made in the rules on residence applications between applications made in the two years after the parent resident in Denmark was granted a residence permit (which are automatically accepted) and those made after that two-year period has elapsed. The expiry of that period does not seem to me to bear any relation to the prospects of future integration, in particular since children of minor age are concerned. It seems to me that there is in this instance a certain lack of consistency between the national measure and the objective which is allegedly being pursued.
51.
Let us imagine that Mr Genc obtained his permanent residence permit when his son was seven and a half years old, that his son has never stayed in Denmark, spent his whole childhood in Turkey and speaks only Turkish, as seems to be the case in the main proceedings. Then let us imagine that that child made his application when he was 10 years old. Are those six additional months ( ) spent in Turkey such as to so change his likelihood of integration in Danish society that he can no longer demonstrate sufficient ties when, up to the age of nine and a half, he would probably have been granted a residence permit without it being possible to say that he had a closer link with Denmark?
52.
If Paragraph 9(13) of the Law on aliens were intended rather to combat late reunification situations, then the establishment of an age criterion would seem to me to be more appropriate, although insufficient.
53.
Finally, although, as I stated above, the Danish authorities are required to make a ‘diagnosis’ of the extent to which the child has been assimilated, I note that that diagnosis is not accompanied by any ‘therapeutic’ measure, to continue the medical metaphor. Rather than deciding to refuse an application on the basis of a pessimistic prediction of non-integration, it would be conceivable to grant a temporary residence permit which could be renewed on condition that the child attend a Danish language or citizenship course.
54.
It is true that, when deciding whether to grant a residence permit on the basis of Paragraph 9(13) of the Law on aliens, the Danish authorities are guided in their assessment by a number of criteria. However, those criteria are both too numerous and insufficiently precise to be foreseeable and prevent an administrative practice of systematic refusal. I would reiterate that I find it, for example, quite problematic that Danish standards and values are not made clear. The criteria on which the Danish authorities are to base their assessment are listed in explanatory remarks but, in respect of most of them, it is stated that they are not, viewed separately, decisive, ( ) so that it may be asked whether they are not cumulative, in which case the extent of the requirement would be very high. Moreover, as I have pointed out, the handling of the criteria is not necessarily fully consistent with the objective pursued, since it is not really demonstrated how non-fulfilment of those criteria constitutes a serious and insurmountable obstacle to the successful integration of the minor child.
55.
For all those reasons, I invite the Court to rule that the new restriction constituted by Paragraph 9(13) of the Law on aliens goes beyond what is necessary to attain the objective of successful integration. Accordingly, it must be held that Article 13 of Decision No 1/80 precludes a provision, introduced after the entry into force of that decision, requiring minor children seeking to be reunited with their Turkish father who is in paid employment in Denmark to demonstrate that they have sufficient ties in that Member State, when a period of two years has elapsed since that parent received his residence permit.
III – Conclusion
56.
In the light of the foregoing considerations, I propose that the Court answer the questions referred by the Østre Landsret (Eastern Regional Court) as follows:
(1)
Legislation such as that at issue in the main proceedings, which it is not disputed makes reunification of a Turkish employed person who is legally established in the territory of a Member State with his minor children more difficult by making the conditions of their first admission into the territory of the Member State concerned more stringent than those applicable on the entry into force of Decision No 1/80 of 19 September 1980 on the development of the Association adopted by the Association Council set up by the Agreement establishing an Association between the European Economic Community and Turkey, signed at Ankara on 12 September 1963 by the Republic of Turkey, of the one part, and by the Member States of the EEC and the Community, of the other part, and concluded, approved and confirmed on behalf of the Community by Council Decision 64/732/EEC of 23 December 1963, constitutes a new restriction on the exercise of the freedom of movement of Turkish workers within the meaning of Article 13 of that decision.
(2)
Article 13 of Decision No 1/80 precludes a provision introduced after the entry into force of that decision requiring minor children seeking to be reunited with their Turkish father who is in paid employment in Denmark to demonstrate that they have sufficient ties in that Member State, when a period of two years has elapsed since that parent received his residence permit.
( ) Original language: French.
( ) OJ 1973 C 113, p. 1.
( ) By Law No 427 amending the Law on aliens and the Law on integration (lov nr. 427 om ændring af udlændingeloven og integrationsloven) of 9 June 2004.
( ) That was the wording of Paragraph 9(13) of the Law on aliens at the time of the facts, following amendment by Law No 324 amending the Law on aliens, the Law on the conclusion and dissolution of marriage and the Law on repatriation (lov nr. 324 af 18. maj 2005 om ændring af udlændingeloven, lov om ægteskabs indgåelse og opløsning og repatrieringsloven) of 18 May 2005. That provision was also amended in 2012, then moved to Paragraph 9(16) of that law. I shall continue to refer, in this Opinion, to Paragraph 9(13) of the Law on aliens, as it embodies the state of Danish law applicable at the time when the authorities decided, for the first time, on Mr Genc’s application. It should also be noted that, since the adoption of that legislative amendment in 2012, that paragraph is no longer applicable to applications for a residence permit submitted by, or on behalf of, children of less than six years of age.
( ) OJ 1977 L 361, p. 60.
( ) C‑138/13, EU:C:2014:2066.
( ) C‑138/13, EU:C:2014:2066.
( ) C‑221/11, EU:C:2013:583.
( ) On the respective scopes of Article 13 of Decision No 1/80 and Article 41(1) of the Additional Protocol, the Court has repeatedly held that, although ‘those two provisions have the same meaning, each of them has been given a very specific scope, with the result that they cannot be applied concurrently’ [judgment in Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 81 and the case-law cited)].
( ) Judgment in Savas (C‑37/98, EU:C:2000:224, paragraph 49 and the case-law cited).
( ) Judgment in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 91).
( ) Judgment in Ziebell (C‑371/08, EU:C:2011:809, paragraph 63).
( ) See Article 12 of the Association Agreement. See, also, judgments in Savas (C‑37/98, EU:C:2000:224, paragraph 63); Ziebell (C‑371/08, EU:C:2011:809, paragraph 65) and Demirkan (C‑221/11, EU:C:2013:583, paragraph 50).
( ) Judgment in Derin (C‑325/05, EU:C:2007:442, paragraph 53 and the case-law cited).
( ) Judgment in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 90).
( ) Judgment in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:570, paragraph 69).
( ) See judgments in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 72); Commission v Netherlands (C‑92/07, EU:C:2010:228, paragraph 48); Toprak and Oguz (C‑300/09 and C‑301/09, EU:C:2010:756, paragraph 52) and Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 94).
( ) Judgments in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 70) and Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 81).
( ) Judgments in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 71) and Commission v Netherlands (C‑92/07, EU:C:2010:228, paragraph 48).
( ) Judgments in Toprak and Oguz (C‑300/09 and C‑301/09, EU:C:2010:756, paragraph 54) and Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 94).
( ) Judgment in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 73).
( ) Judgment in Toprak and Oguz (C‑300/09 and C‑301/09, EU:C:2010:756, paragraph 54).
( ) See, by analogy, judgments in Tum and Dari (C‑16/05, EU:C:2007:530, paragraph 55) and Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 89).
( ) Judgments in Savas (C‑37/98, EU:C:2000:224, paragraph 47); Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 58); Tum and Dari (C‑16/05, EU:C:2007:530, paragraph 46) and Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 87).
( ) Judgment in Demirkan (C‑221/11, EU:C:2013:583, paragraph 58).
( ) See, by analogy, judgments in Savas (C‑37/98, EU:C:2000:224, paragraph 64) and Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 62).
( ) See, by analogy, judgment in Tum and Dari (C‑16/05, EU:C:2007:530, paragraph 54).
( ) Judgment in Unal (C‑187/10, EU:C:2011:623, paragraph 41 and the case-law cited).
( ) See judgment in Savas (C‑37/98, EU:C:2000:224, paragraph 58 and the case-law cited).
( ) See, by analogy, judgment in Demirkan (C‑221/11, EU:C:2013:583, paragraph 55).
( ) See judgment in Demir (C‑225/12, EU:C:2013:725, paragraph 33 and the case-law cited). For a similar conclusion drawn by the Court in relation to the standstill clause in Article 41(1) of the Additional Protocol, see judgments in Savas (C‑37/98, EU:C:2000:224, paragraph 69); Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 66); Soysal and Savatli (C‑228/06, EU:C:2009:101, paragraph 47) and Demirkan (C‑221/11, EU:C:2013:583, paragraph 39). Finally, for the sake of completeness, I should add that the existence of a new restriction is assessed either in relation to the date of entry into force of Decision No 1/80 in the Member State concerned or in relation to the more favourable legislation adopted after that entry into force; see judgments in Toprak and Oguz (C‑300/09 and C‑301/09, EU:C:2010:756, paragraphs 49 and 56) and Dereci and Others (C‑256/11, EU:C:2011:734, paragraph 94.
( ) See judgment in Demir (C‑225/12, EU:C:2013:725, paragraph 34 and the case-law cited).
( ) C‑138/13, EU:C:2014:2066.
( ) Judgment in Derin (C‑325/05, EU:C:2007:442, paragraph 64).
( ) See, in particular, judgment in Pehlivan (C‑484/07, EU:C:2011:395, paragraph 45).
( ) Judgments in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 77) and Dülger (C‑451/11, EU:C:2012:504, paragraph 48).
( ) See judgments in Dülger (C‑451/11, EU:C:2012:504, paragraph 42) and Dogan (C‑138/13, EU:C:2014:2066, paragraph 34).
( ) C‑451/11, EU:C:2012:504.
( ) See judgment in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 82).
( ) Judgment in Abatay and Others (C‑317/01 and C‑369/01, EU:C:2003:572, paragraph 84).
( ) C‑138/13, EU:C:2014:2066.
( ) See paragraph 32 of the judgment in Dogan (C‑138/13, EU:C:2014:2066) and points 20 et seq. of my Opinion in that case (C‑138/13, EU:C:2014:287).
( ) C‑138/13, EU:C:2014:2066.
( ) C‑300/09 and C‑301/09, EU:C:2010:756.
( ) C‑221/11, EU:C:2013:583.
( ) See point 23 and the case-law cited of my Opinion in Dogan (C‑138/13, EU:C:2014:287).
( ) See, by analogy, judgment in Dogan (C‑138/13, EU:C:2014:2066, paragraph 35).
( ) See paragraph 2.6 of the order for reference. Although it disputes that Article 13 of Decision No 1/80 can be applied to that type of legislation, the Danish Government recognises, on the other hand, that Paragraph 9(13) of the Law on aliens, which was introduced in 2004, constitutes a toughening of its previous legislation and, therefore, a new restriction.
( ) Judgment in Demir (C‑225/12, EU:C:2013:725, paragraph 40).
( ) See point 41 of my Opinion in Dogan (C‑138/13, EU:C:2014:287) and paragraph 37 of the judgment in Dogan (C‑138/13, EU:C:2014:2066).
( ) Judgment in Demir (C‑225/12, EU:C:2013:725, paragraph 41).
( ) See paragraph 38 of the judgment in Dogan (C‑138/13, EU:C:2014:2066).
( ) It has been accused of a certain lack of rigour in that regard, see Hatzopoulos, V., ‘Exigences essentielles, impératives ou impérieuses: une théorie, des théories ou pas de théorie du tout?’, Revue trimestrielle de droit européen, 1998, p. 191; Martin, D., ‘Discriminations, entraves et raisons impérieuses dans le traité CE: trois concepts en quête d’identité’, Cahiers de droit européen, 1998, p. 261 and p. 561; Barnard, C., ‘Derogations, justifications and the four freedoms: is state interest really protected?’, in The outer limits of EU law, Hart Publishing, 2009, p. 273.
( ) C‑225/12, EU:C:2013:725.
( ) C‑138/13, EU:C:2014:2066. For a non-exhaustive list of overriding reasons in the public interest, see, in particular, recital 40 of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36).
( ) See, in particular, Article 79(4) TFEU. The promotion of successful integration may be likened to the objective of economic and social cohesion mentioned not only in Article 4(2)(c) TFEU and the first paragraph of Article 174 TFEU but also in recitals 4 and 15 of Council Directive 2003/86/EC of 22 September 2003 on the right to family reunification (OJ 2003 L 251, p. 12). I also note that Advocate General Kokott has accepted, in another context, that legislation aimed at integrating the person coming to join the family pursues legitimate objectives (see points 33 and 34 of the Opinion of Advocate General Kokott in K and A (C‑153/14, EU:C:2015:186)).
( ) C‑225/12, EU:C:2013:725.
( ) C‑138/13, EU:C:2014:2066.
( ) Gazin, F., ‘Regroupement familial dans le cadre de l’accord d’association UE-Turquie’, Europe, October 2014, note 394.
( ) See point 27 of this Opinion.
( ) See Article 12 of the Association Agreement.
( ) See, for example, judgments in Nazli (C‑340/97, EU:C:2000:77, paragraph 55 and the case-law cited) and Ziebell (C‑371/08, EU:C:2011:809, paragraphs 58, 66 and 68).
( ) Following the legislative amendment made in 2012.
( ) It is clear, however, from a note describing the practice relating to Paragraph 9(13) of the Law on aliens, which is partially reproduced in the request for a preliminary ruling, that a period of residence or education in Denmark of less than one year will not be taken into account.
( ) The fact that the parent already present in Denmark has legal custody of the child is not decisive, however. It would also seem that, in practice, no importance is attached to whether or not the children who have already been reunited with their parent present in Danish territory have been successfully integrated.
( ) C‑138/13, EU:C:2014:2066.
( ) See judgment in Dogan (C‑138/13, EU:C:2014:2066, paragraph 38).
( ) It is also interesting to note that Mr Genc’s representative stated at the hearing that no dispensation from demonstrating sufficient ties to Danish society has been granted and that, in practice, all applications based on Paragraph 9(13) of the Law on aliens have been rejected.
( ) After the date until which he could submit an application without having to provide evidence of sufficient ties.
( ) This is, in any event, what is indicated by the note from 2007 describing the practice. |
JUDGMENT OF THE COURT (Eighth Chamber)
20 November 2014 ( *1 )
‛Reference for a preliminary ruling — Customs union and Common Customs Tariff — Importation free of customs duties — Animals specially prepared for laboratory use — Public establishment or an authorised private establishment — Importer whose customers are such establishments — Packing materials or packing containers — Cages used for transportation of animals’
In Case C‑40/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Cour de cassation (France), made by decision of 21 January 2014, received at the Court on 27 January 2014, in the proceedings
Direction générale des douanes et droits indirects,
Chef de l’Agence de poursuites de la Direction nationale du renseignement et des enquêtes douanières,
Direction régionale des douanes et droits indirects de Lyon
v
Utopia SARL
THE COURT (Eighth Chamber),
composed of A. Ó Caoimh, President of the Chamber, C. Toader and C.G. Fernlund (Rapporteur), Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Utopia SARL, by M. Le Berre, avocat,
—
the French Government, by D. Colas and C. Candat, acting as Agents,
—
the European Commission, by A. Caeiros and F. Dintilhac, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 60 of Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system of reliefs from customs duty (OJ 1983 L 105, p. 1), as amended by the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L 236, p. 33) (‘Regulation No 918/83’), and of general rule 5(b) of the Combined Nomenclature contained in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1), as amended by Commission Regulation (EC) No 1789/2003 of 11 September 2003 (OJ 2003 L 281, p. 1) (‘the CN’).
The request has been made in proceedings between the Direction générale des douanes et droits indirects (Directorate-General of Customs and Indirect Duties), the Chef de l’Agence de poursuites de la Direction nationale du renseignement et des enquêtes douanières (Head of the Investigation Agency of the National Directorate of Customs Information and Inquiries) and the Direction régionale des douanes et droits indirects de Lyon (Regional Directorate of Customs and Indirect Taxes, Lyon), on the one hand, and Utopia SARL (‘Utopia’), on the other hand, concerning a recovery notice contested by Utopia.
Legal context
Council Regulation (EC) No 1186/2009 of 16 November 2009 setting up a Community system of reliefs from customs duty (OJ 2009 L 324, p. 23) repealed and replaced Regulation No 918/83, with effect from 1 January 2010. Nevertheless, in view of the dates of the facts of the dispute in the main proceedings, those proceedings are still governed by Regulation No 918/83.
Under the heading ‘Laboratory animals and biological or chemical substances for research’, Article 60 of Regulation No 918/83, which is the only article in Title XIII of that regulation, provides:
‘1. Relief from import duties shall be granted in respect of:
(a)
animals specially prepared for laboratory use;
…
2. The relief referred to in paragraph 1 shall be limited to animals … which are intended for:
—
either public establishments principally engaged in education or scientific research and those departments of public establishments which are principally engaged in education or scientific research,
—
or private establishments principally engaged in education or scientific research and authorised by the competent authorities of the Member States to receive such articles duty-free.
…’
Article 128 of Regulation No 918/83 provides:
‘Where relief from import duties is granted conditional upon goods being put to a particular use by the recipient, only the competent authorities of the Member State in whose territory the said goods are to be put to such a use may grant this relief.’
Article 129 of Regulation No 918/83 provides:
‘The competent authorities of the Member States shall take all appropriate measures to ensure that goods placed in free circulation, where relief from import duties is granted conditional upon goods being put to a particular use by the recipient, may not be used for other purposes without the relevant import duties being paid, unless such alternative use is in conformity with the conditions laid down by this Regulation.’
Article 131 of Regulation No 918/83 provides:
‘Where this Regulation provides that the granting of relief shall be subject to the fulfilment of certain conditions, the person concerned shall, to the satisfaction of the competent authorities, furnish proof that these conditions have been met.’
The CN is based on the international Harmonised Commodity Description and Coding System (‘the HS’), which was drawn up by the Customs Cooperation Council, now the World Customs Organisation, established by the International Convention concluded in Brussels on 14 June 1983, and approved on behalf of the European Economic Community by Council Decision 87/369/EEC of 7 April 1987 (OJ 1987 L 198, p. 1).
Part One of the CN contains a series of preliminary provisions. In that part, Section I, which contains ‘General rules’, includes subsection A, entitled ‘General rules for the interpretation of the [CN]’. Those rules include general rule 5, which provides:
‘In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein:
…
(b)
subject to the provisions of rule 5(a), packing materials and packing containers … presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.’
Footnote 1 to general rule 5(b) of the CN, relating to the terms ‘packing materials’ and ‘packing containers’, states:
‘The terms “packing materials” and “packing containers” mean any external or internal containers, holders, wrappings or supports other than transport devices (e.g. transport containers), tarpaulins, tackle or ancillary transport equipment. The term “packing containers” does not cover the containers referred to in general rule 5(a).’
Save for that footnote, general rule 5(b) of the CN reproduces the exact wording of general rule 5(b) of the HS.
The Explanatory Note relating to general rule 5(b) of the CN, set out in the European Commission communication entitled ‘Explanatory Notes to the Combined Nomenclature of the European Communities’ (OJ 2002, C 256, p. 1), states:
‘Packing containers normally used for marketing beverages, jam, mustard, spices, etc., are to be classified with the goods they contain even if clearly suitable for repetitive use.’
The Explanatory Note to that rule, as it appears in the HS, provides that the rule ‘governs the classification of packing materials and packing containers of a kind normally used for packing the goods to which they relate [but] is not binding when such packing materials or packing containers are clearly suitable for repetitive use, for example, certain metal drums or containers of iron or steel for compressed or liquefied gas’.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Utopia, a company operating under the business name Marshall Bioresources, imports from the United States into France animals intended for laboratory research.
In 2006 the French customs authorities conducted an ex post facto check of imports of live dogs and ferrets by Utopia from March to December 2004. That check revealed that Utopia had made those imports free of customs duties on the basis of Article 60 of Regulation No 918/83.
The customs authorities considered that Utopia, which was not engaged in education or scientific research and did not have the required authorisation, could not claim relief from customs duties under Article 60 of Regulation No 918/83. As a result, they found, in a report of 7 March 2007, various customs infringements by means of which certain amounts of duties had been evaded, and on 27 March 2007 issued a recovery notice for those amounts.
On 26 July 2007, following the rejection by the customs authorities of the Utopia’s objection, that company brought an action for annulment of that report and that recovery notice. By judgment of 10 January 2011, the Tribunal d’instance de Lyon (District Court, Lyon) allowed the action and annulled the notice.
The customs authorities appealed against that judgment to the Cour d’appel de Lyon (Court of Appeal, Lyon), which, by judgment of 20 October 2011, accepted Utopia’s arguments on the application of Article 60 of Regulation No 918/83, ruling that the importation of live animals was to be allowed free of customs duties where those animals were intended for laboratory use. However, in that judgment, the Cour d’appel de Lyon upheld the disputed customs debt relating to the cages for the transportation of the live animals, finding that they did not constitute packing materials or packing containers presented with the goods therein within the meaning of general rule 5(b) of the CN. In that regard, the Cour d’appel de Lyon rejected Utopia’s argument, based on the fact that the cages at issue in the main proceedings were leased by the US supplier, to whom they were returned after the transportation of the animals, and according to which only repeated use of those cages within the European Union could be regarded as repeated use within the meaning of general rule 5(b) of the CN.
The appellants in the main proceedings brought an appeal on a point of law against that judgment of the Cour d’appel de Lyon before the Cour de cassation (Court of Cassation, France), concerning the question of the application, in the present case, of Article 60 of Regulation No 918/83. Utopia brought a cross-appeal before the Cour de cassation on the issue of the application of general rule 5(b) of the CN to cages for the transportation of the animals concerned.
In those circumstances the Cour de cassation decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘1.
Is an importer of animals specially prepared for laboratory use entitled to the relief from import duties provided for in respect of goods of this type in Article 60 of [Regulation No 918/83], when it is not itself a public establishment or an authorised private establishment which is principally engaged in education or scientific research, but its customers are establishments meeting those conditions?
2.
Must general rule 5(b) … be interpreted as meaning that cages used for transportation of live animals intended for laboratory research should be categorised as packing materials or packing containers for the purposes of that rule?
If so, must the words “clearly suitable for repetitive use” in relation to such packing materials or packing containers be assessed in general or only in respect of re-use within the Union?’
The first question
By its first question, the referring court asks whether an importer of animals specially prepared for laboratory use is entitled to the relief from import duties provided for in respect of goods of that type by Article 60 of Regulation No 918/83, when it is not itself a public establishment or an authorised private establishment which is principally engaged in education or scientific research, but its customers are establishments meeting those conditions.
It should be recalled that, under Article 60, relief from import duties is granted in respect of, inter alia, ‘animals specially prepared for laboratory use’ provided that the recipient is principally engaged in education or scientific research and is either a public establishment or a department of such an establishment, or a private establishment. However, if the recipient is a private establishment, it must be authorised by the competent authority of the Member State concerned, in order to receive those animals duty-free.
It is accordingly clear from Article 60 that its application requires that two separate conditions be met. Under the first of these conditions, the imported animals must be specially prepared for laboratory use. Under the second of these conditions, the recipient of those animals must meet specific criteria relating to the type of establishment concerned, the activity carried out and, where necessary, the possession of an authorisation.
It is undisputed that the imports at issue in the main proceedings meet these two conditions, to which the animals concerned and the recipient of those animals, respectively, are subject.
However, the first question asked by the referring court concerns whether the importer of the animals referred to in Article 60 of Regulation No 918/83 must, in order to be entitled to the relief from import duties provided for goods of this type, meet the criteria allowing that importer to be classified as the recipient of those animals for the purposes of that article.
In that regard, it should be noted that the importer of the animals is not mentioned in Article 60.
However, according to the Court’s settled case‑law, in interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part (see, inter alia, judgment in Brain Products, C‑219/11, EU:C:2012:742, paragraph 13 and the case-law cited).
As regards the context of Article 60 of Regulation No 918/83, it should be noted that that regulation provides for a number of reliefs from customs duty, entitlement to which is expressly linked to the fulfilment by the importer of certain conditions. Thus, the duty-free import provided for in Article 2 of that regulation lays down conditions in relation to the importer as well as the nature of the imported goods, according to which the goods must be imported by a natural person transferring his normal place of residence to the customs territory of the European Union (judgment in Treimanis, C‑487/11, EU:C:2012:556, paragraphs 15 and 16).
By contrast, entitlement to other reliefs from customs duty provided for by Regulation No 918/83 depends more on the use by the recipient of the imported goods than on the identity of the importer. This is the case, inter alia, in respect of the relief to which educational, scientific and cultural materials intended for certain research or educational organisations are entitled under Article 51 of Regulation No 918/83.
It is clear that the relief provided for by Article 60 of Regulation No 918/83 falls within that second category of reliefs, the entitlement to which depends more on the use by the recipient of the imported goods than on the identity of the importer.
It should also be noted, as the Commission has argued, that it is clear from the wording of Articles 128 and 129 of Regulation No 918/83 that the EU legislature foresaw the case in which the importer could be a person other than the recipient of the imported goods, in situations such as those provided for in Article 60 of Regulation No 918/83.
In that regard, it must be held that it is clear from the wording of Articles 128 and 129 of Regulation No 918/83, read in conjunction with Article 131, first, that an importer may be entitled to the relief from import duties provided for in Article 60 of that regulation only if it can demonstrate to the satisfaction of the competent authorities that the imported goods are actually intended for the establishments provided for by that article and for the use which is a precondition for that relief from import duties, and, secondly, that only the competent authorities of the Member State in the territory of which the goods are to be assigned to that use may grant such relief. By contrast, it is by no means apparent from the provisions of that article that the importer should itself be able to ensure the use which is a precondition for the grant of the relief in question.
With regard to the objective pursued by Article 60 of Regulation No 918/83, it should be noted that the achievement of that objective, which is to facilitate research activities by allowing certain establishments located in the European Union to import, at minimal cost, animals specially prepared for laboratory use, would not be hindered by allowing those establishments to choose the most appropriate and most advantageous importation solution for them.
As a result, given the context in which Article 60 of Regulation No 918/83 occurs and the objective pursued by that provision, it is not required that the importer of the animals covered by that article, in order to be entitled to the relief from import duties provided for in respect of goods of this type, meet the criteria classifying that importer as the recipient of those animals for the purposes of that provision.
It follows from all the foregoing that the answer to the first question is that Article 60 of Regulation No 918/83 must be interpreted as meaning that, where animals specially prepared for laboratory use, which an importer brings into the European Union, are intended for a public establishment or an authorised private establishment which is principally engaged in education or scientific research, that importer, although it is not itself such an establishment, may be entitled to the relief from import duties provided for by that article for goods of this type.
The second question
By its second question, the referring court asks, in essence, whether general rule 5(b) of the CN must be interpreted as meaning that cages used for transportation of live animals intended for laboratory research should be categorised as packing materials or packing containers which are to be classified with the goods to which they relate.
It must be recalled that, under general rule 5(b), packing materials and packing containers containing goods are classified with those goods only where they are of a kind normally used for packing that type of goods.
Therefore, in order to answer the second question, it is necessary to examine whether cages used for transportation of live animals intended for laboratory research can be considered as being the kind of packaging normally used for packing those types of animals.
In this regard, it is appropriate to recall the examples in the Explanatory Notes to the CN and HS, regarding packing materials and packing containers that must be considered as being of the kind normally used for packing the type of goods to which they relate. According to those Explanatory Notes, such packing materials and packing containers include certain metal drums or containers of iron or steel for compressed or liquefied gas, as well as packing containers normally used for marketing beverages, jam, mustard, spices or others.
As noted by the French Government in its observations, it follows that the packing materials and packing containers normally used for packing the goods to which they relate are either packing materials or packing containers that are strictly necessary for the use of the goods in question, or packing materials or packing containers that are commonly used for the marketing and use of the goods to which they relate. It would be impossible to use compressed or liquefied gases independent of the steel containers holding those gases. Similarly, it would be difficult to conceive of marketing or using jam or mustard other than in containers usually provided as a receptacle for those types of products.
Having regard to the Explanatory Notes to the CN and the HS, it must be held that cages used for transportation of live animals intended for laboratory research cannot be regarded as falling within the kind of packaging normally used for packing those types of animals for the purposes of general rule 5(b). Even assuming that these cages are normally used to transport the animals by air, they are neither strictly necessary nor normally used for the marketing and use of such animals.
In that regard, it is apparent from the documents before the Court that, as a general rule, the transport cages and the animals at issue in the main proceedings are not used together by their recipients. In the present case, it is undisputed that those cages are returned to the importer after the delivery of the animals.
It follows from all of the foregoing that the answer to the second question is that general rule 5(b) of the CN must be interpreted as meaning that cages used for transportation of live animals intended for laboratory research should not be categorised as packing materials or packing containers which are to be classified with the goods to which they relate.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Eighth Chamber) hereby rules that:
1.
Article 60 of Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system of reliefs from customs duty, as amended by the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded, must be interpreted as meaning that, where animals specially prepared for laboratory use, which an importer brings into the European Union, are intended for a public establishment or an authorised private establishment which is principally engaged in education or scientific research, that importer, although it is not itself such an establishment, may be entitled to the relief from import duties provided for by that article for goods of this type.
2.
General rule 5(b) of the Combined Nomenclature contained in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, as amended by Commission Regulation (EC) No 1789/2003 of 11 September 2003, must be interpreted as meaning that cages used for transportation of live animals intended for laboratory research should not be categorised as packing materials or packing containers which are to be classified with the goods to which they relate.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
15 September 2016 ( *1 )
‛Competition — Abuse of a dominant position — Worldwide market for consolidated real-time datafeeds — Decision making the commitments offered by the dominant undertaking binding — Article 9 of Regulation (EC) No 1/2003’
In Case T‑76/14,
Morningstar, Inc., established in Chicago, Illinois (United States of America), represented by S. Kinsella, K. Daly, P. Harrison, Solicitors, and M. Abenhaïm, lawyer,
applicant,
v
European Commission, represented by F. Castilla Contreras, A. Dawes and F. Ronkes Agerbeek, acting as Agents,
defendant,
supported by
Thomson Reuters Corp., established in Toronto (Canada),
and
Reuters Ltd, established in London (United Kingdom),
represented by A. Nourry, G. Olsen and C. Ghosh, Solicitors,
interveners,
APPLICATION under Article 263 TFEU seeking annulment of Commission Decision C(2012) 9635 final of 20 December 2012 relating to a proceeding under Article 102 TFEU and Article 54 of the EEA Agreement (Case COMP/D2/39.654 — Reuters Instrument Codes (RICs)),
THE GENERAL COURT (Eighth Chamber),
composed of D. Gratsias, President, M. Kancheva and C. Wetter (Rapporteur), Judges,
Registrar: L. Grzegorczyk, Administrator,
having regard to the written procedure and further to the hearing on 3 March 2016,
gives the following
Judgment
Background to the dispute
On 30 October 2009, the Commission of the European Communities decided to open proceedings against Thomson Reuters Corporation and companies under its direct or indirect control, including Reuters Limited (‘TR’), for alleged abuse of a dominant position in the worldwide market for consolidated real-time datafeeds.
On 19 September 2011, the Commission adopted a preliminary assessment, pursuant to Article 9(1) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles [101 TFEU] and [102 TFEU] (OJ 2003 L 1, p. 1), which it notified to TR on 20 September 2011.
According to the preliminary assessment, TR occupies a dominant position in the worldwide market for consolidated real-time datafeeds. It may have abused its dominant position by imposing certain restrictions regarding the use of Reuters Instrument Codes (‘RICs’). RICs are short, alphanumerical codes developed by TR that identify securities and their trading locations.
TR prohibits its customers from using RICs to retrieve data from the consolidated real-time datafeeds of other providers and prevents third parties and competing providers from developing and maintaining mapping tables incorporating RICs that would allow its customers’ systems to interoperate with the consolidated real-time datafeeds of other providers. In its preliminary assessment, the Commission reached the conclusion that those practices created substantial barriers to switching datafeed providers and constituted abuse of a dominant position within the meaning of Article 102 TFEU and Article 54 of the Agreement on the European Economic Area (EEA).
On 8 November 2011, pursuant to Article 9(1) of Regulation No 1/2003, TR submitted to the Commission a commitments proposal designed to address the concerns raised by the latter in its preliminary assessment.
In that commitments proposal, TR proposed, inter alia:
—
to allow its customers to enter into an extended licence agreement concerning RICs (‘ERL’). The ERL allows the customer, upon payment of a monthly licence fee, to use RICs to retrieve real-time data from the consolidated real-time datafeeds of competing providers and, in this way, to change one or more of their applications;
—
to provide the information necessary to allow its customers to establish mapping between the RICs and the coding systems of competing providers in order to switch provider.
On 14 December 2011, the Commission published a notice in the Official Journal of the European Union in accordance with Article 27(4) of Regulation No 1/2003, summarising the case and the commitments, and invited interested third parties to submit observations on TR’s proposal.
On 7 March 2012, the Commission informed TR of the observations which it had received from interested third parties, following the publication of the market test notice.
On 27 June 2012, in response to the observations received, TR submitted a revised commitments proposal. The main changes were as follows:
—
the level of the fee for the ERL was reduced;
—
the fee structure for the ERL was no longer linked to any existing rebates for consolidated real-time datafeeds of TR. It was also made less complex and more transparent;
—
the ERL could be used worldwide by customers with genuine business operations in the European Economic Area (EEA);
—
the ERL covered RICs of single source over-the-counter instruments, subject to the consent of the relevant contributor (unless TR is the sole provider of the over-the-counter data at the time of the switch);
—
the ERL covered human interfaces to server-based applications (at no additional cost);
—
in addition to the initial five-year period during which the ERL was available for subscription, there was an option for customers to extend the subscription window for a nominal fee by a further two years;
—
the provision of a separate supplementary licence, in the present case a licence aimed at third-party developers (‘TPDL’), to enable them to develop mapping tables which allow TR’s customers easily to switch providers.
On 12 July 2012, the Commission launched a second market test and published the amended commitments, pursuant to Article 27(4) of Regulation No 1/2003.
On 25 September 2012, the Commission informed TR of the observations which it had received from interested third parties, following the publication of the second market test notice.
On 7 November 2012, TR provided a third set of commitments (‘final commitments’) which contain the following provisions:
—
the clause in paragraph 7.1 of the final commitments contains a revised definition of the term ‘third-party developer’ which allows third-party developers to enter into agreements with other consolidated real-time datafeed providers for the development of mapping tables, allowing TR’s customers to switch provider;
—
third-party developers are allowed not only to ‘develop’ mapping tables but also to ‘maintain and update’ them (clause in paragraph 1.8 of the TPDL);
—
the TPDL annexed to the final commitments no longer contains the clause in paragraph 3.5 of the TPDL annexed to the revised commitments. That clause contained the provisions under which a third-party developer could not ‘represent that using Eligible RICs to retrieve third-party data [would be] practical or feasible in all circumstances or that it [could] give rise to issues of data integrity or other functionality issues’;
—
the clauses in paragraph 3.2.8 of the final commitments and paragraph 1.3(c) of the TDPL authorise third-party developers and other consolidated real-time datafeed providers to cooperate in the development, maintenance, and marketing of mapping tables;
—
the clause in paragraph 3.2.9 of the final commitments and those in paragraphs 1.3(d) and 1.4 of the TPDL increase the level of information that third-party developers and other consolidated real-time datafeed providers may exchange. It follows from this that third-party developers may provide other consolidated real-time datafeed providers with descriptive reference data relating to RICs (but not the RICs themselves) in situations where the third-party developer has not been able to perform the mapping of a competing real-time datafeed provider’s coding system.
TR’s final commitments also provide, in Annex V, for the appointment of an independent trustee responsible for monitoring them. The role of the trustee is to monitor compliance with those commitments and to make a report to the Commission on a regular basis and, where appropriate, to propose to the Commission measures to be taken in order to ensure compliance with those commitments, as well as to report the results of the dispute resolution procedure provided for in Annex IV to the final commitments.
The Commission took the view that those commitments were sufficient to address the competition concerns identified. Accordingly, on 20 December 2012, it adopted, pursuant to Article 9(1) of Regulation No 1/2003, the decision relating to a proceeding under Article 102 TFEU and Article 54 of the EEA Agreement (Case COMP/D2/39.654 — Reuters Instrument Codes (RICs)) (OJ 2013 C 326, p. 4; ‘the contested decision’), a summary of which was published in the Official Journal of the European Union, making binding the commitments proposed by TR. In that decision the Commission also found that, in view of the commitments, it no longer had grounds for action.
Procedure and forms of order sought
By application lodged at the Court Registry on 4 February 2014, the applicant, Morningstar, Inc., brought the present action.
On 16 May 2014, the Commission filed its defence.
The reply was lodged at the Court Registry on 5 August 2014.
By a measure of organisation of procedure of 27 August 2014, the Court (Eighth Chamber) requested the Commission to submit the preliminary assessment, in a non-confidential version, which it had undertaken pursuant to Article 9(1) of Regulation No 1/2003 in the present case. The Commission complied with that request within the prescribed period.
The rejoinder was lodged at the Court Registry on 16 October 2014.
By order of 21 October 2014, the President of the Eighth Chamber of the Court granted TR’s application to intervene, lodged at the Court Registry on 22 May 2014.
On 2 January 2015, TR lodged its statement in intervention.
The observations of the main parties on TR’s statement in intervention were received at the Court Registry within the prescribed period.
Acting on a proposal from the Judge-Rapporteur, the Court (Eighth Chamber) decided to open the oral part of the procedure and, by way of measures of organisation of procedure under Article 89(3)(d) of its Rules of Procedure, asked the Commission to lodge the responses received from market participants, in their non-confidential versions, to the market tests published in the Official Journal of the European Union on 14 December 2011 and 12 July 2012. The Commission complied with that request within the prescribed period.
At the hearing on 3 March 2016, the parties presented oral arguments and replied to oral questions put by the Court.
The applicant claims that the Court should:
—
declare the action admissible;
—
annul the contested decision in its entirety, or in so far as it relates to real-time datafeed providers, or in so far as it relates to the applicant;
—
grant such other relief as the Court considers appropriate; and
—
order the Commission to pay the costs.
The Commission and the intervener contend that the Court should:
—
dismiss the action;
—
order the applicant to pay the costs.
Admissibility
The applicant submits that it has standing to bring the present action as the contested decision concerns it directly and individually, within the meaning of the fourth paragraph of Article 263 TFEU. It was directly affected by the contested decision, which reduces the scope for it to contract with TR regarding RICs, in so far as that decision explicitly excludes competing consolidated real-time datafeed providers from the scope of the relevant licences. As regards individual concern, it claims that it was actively involved in the administrative procedure that led to the adoption of the contested decision. Furthermore, it was part of a closed and identifiable group of persons that participated in the administrative procedure. Moreover, the contested decision authorises a business conduct of its main competitor, thereby affecting its position on the relevant market.
The Commission disputes the applicant’s arguments and contends, without formally raising an objection of inadmissibility within the meaning of Article 130(1) of the Rules of Procedure, that the action is inadmissible.
It should be borne in mind that the fourth paragraph of Article 263 TFEU allows a person other than the person to whom the act is addressed to institute proceedings for annulment of that act if that act is of individual and direct concern to him.
According to the case-law, the question of whether an applicant has locus standi is to be assessed by reference to the effects that the contested act has on its legal situation in so far as that applicant is, first, directly concerned by the contested act, in that the direct concern requires that the measure at issue must directly affect the legal situation and that the act must leave no discretion to the addressees of that measure who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from the EU rules alone without the application of other intermediate rules (judgments of 5 May 1998, Glencore Grain v Commission, C‑404/96 P, EU:C:1998:196, paragraph 42, and of 24 March 1994, Air France v Commission, T‑3/93, EU:T:1994:36, paragraph 80), and, second, individually concerned by that act in that it affects the applicant by reason of certain attributes particular to him or by reason of circumstances in which he is differentiated from all other persons and by virtue of those factors the decision distinguishes him individually just as in the case of the person addressed (see, to that effect, judgment of 15 July 1963, Plaumann v Commission, 25/62, EU:C:1963:17, at p. 107).
In the present case, in accordance with Article 9(1) of Regulation No 1/2003, the contested decision makes TR’s final commitments of 7 November 2012 binding. The Commission examined the effects of the restrictions imposed by TR as regards the RICs and concluded that those restrictions were detrimental to competition, in that they hindered TR’s customers from switching provider and, as a result, reduced the ability of competitors to enter the market or to compete on the basis of the merits of their services. The final commitments, which seek to facilitate the switch of TR’s customers to competing consolidated real-time datafeed providers, explicitly exclude those competing providers from being eligible to enter into either an ERL agreement or a TPDL agreement. In so far as it limits the possibility for the applicant to conclude such contracts, the contested decision directly affects its legal situation.
As regards the question of whether the applicant is individually concerned, it must be recalled that it requested meetings with the Commission in its letters of 5 March and 16 June 2010. Following those requests, a first meeting was organised for 27 July 2010. Subsequently, at the request of both the Commission and the applicant, other meetings and telephone conversations took place between 2010 and 2012. Similarly, following a request by the Commission of 18 April 2012, the applicant produced a non-confidential version of the minutes of the telephone conversations and meetings in question. The applicant also responded and provided its observations in relation to the commitments proposed by TR, through telephone conversations, meetings, emails and responses to the Commission’s formal requests for information.
Furthermore, even though the applicant’s name does not explicitly feature in the contested decision, it is clear from the administrative procedure which resulted in that decision that the Commission took into account the observations made by the applicant.
It should be noted that the applicant participated actively in the procedure not only on its own initiative but also at the invitation of the Commission, which, in particular, requested it to submit its observations on various aspects of the market as well as on the proposed commitments, and outside the framework of the market tests in accordance with Article 27(4) of Regulation No 1/2003, to which the applicant also contributed. It follows that the applicant participated actively in the procedure. Although mere participation in the procedure is, admittedly, insufficient on its own to establish that the contested decision is of individual concern to the applicant, the fact nevertheless remains that its active participation in the administrative procedure is a factor taken into account in the case-law relating to matters of competition, including in the more specific area of commitments under Article 9 of Regulation No 1/2003, to establish, in conjunction with other specific circumstances, whether its action is admissible (see, to that effect and by analogy, judgments of 28 January 1986, Cofaz and Others v Commission, 169/84, EU:C:1986:42, paragraphs 24 and 25; of 31 March 1998, France and Others v Commission (Kali & Salz), C‑68/94 and C‑30/95, EU:C:1998:148, paragraphs 54 to 56; and of 3 April 2003, BaByliss v Commission, T‑114/02, EU:T:2003:100, paragraph 95).
In that regard, such a specific circumstance is constituted, in the present case, by the manner in which the applicant’s position on the market at issue is affected. It is apparent from the case file before the Court that the applicant operates, like TR, in the consolidated real-time datafeed market, a market which is characterised by a limited number of competitors and in which TR occupies a dominant position. It can be inferred that restrictive measures on the part of TR, as the dominant undertaking, such as those forming the subject matter of the Commission’s preliminary assessment, are liable to have significant negative effects on the applicant’s business.
It follows from all of the foregoing that the applicant is also individually concerned. Consequently, the present action is admissible.
Substance
In support of the action, the applicant relies on four pleas in law:
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the first plea alleges a manifest error of assessment in that the Commission accepted commitments which did not address the competition concerns about which it had notified TR in its preliminary assessment;
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the second plea alleges a breach of Article 9(1) of Regulation No 1/2003 in that the Commission, by accepting commitments which were not such as to address the competition concerns, acted beyond the scope of the powers available to it under that article and therefore acted ultra vires;
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the third plea alleges a breach of the principle of proportionality;
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the fourth plea alleges an infringement of the obligation to state reasons in so far as the Commission failed to explain how the final commitments addressed the competition concerns which had been identified.
As a preliminary point, it should be borne in mind that it follows from Article 9 of Regulation No 1/2003 that the Commission may, in cases where it intends to adopt a decision requiring that an infringement be brought to an end, make the commitments offered by the undertakings concerned binding, where they address the competition concerns expressed by the Commission in its preliminary assessment.
The mechanism introduced by Article 9 of Regulation No 1/2003 seeks to ensure that the competition rules in force in the European Union are applied effectively, by means of the adoption of decisions making commitments proposed by the parties and considered appropriate by the Commission binding, in order to provide a more rapid solution to the competition problems identified by the Commission, instead of proceeding by making a formal finding of an infringement. More particularly, Article 9 of that regulation is based on considerations of procedural economy and enables undertakings to participate fully in the procedure by putting forward the solutions which appear to them to be the most appropriate and capable of addressing the Commission’s concerns (judgment of 29 June 2010, Commission v Alrosa, C‑441/07 P, EU:C:2010:377, paragraph 35).
In that context, as regards the acceptance or rejection of the commitments, the Commission enjoys a wide discretion (judgment of 29 June 2010, Commission v Alrosa, C‑441/07 P, EU:C:2010:377, paragraph 94).
Furthermore, it should be noted that, in so far as the Commission is called upon to carry out an analysis that requires numerous economic factors to be taken into account, such as a forward-looking analysis in order to assess the adequacy of the commitments offered by the undertaking concerned, it also enjoys a degree of discretion in this which the Court must take into account when carrying out its review. It follows that, in the exercise of their restricted review of such complex economic situations, the EU Courts cannot substitute their own economic assessment for that of the Commission (judgments of 29 June 2010, Commission v Alrosa, C‑441/07 P, EU:C:2010:377, paragraph 67, and of 11 September 2014, CB v Commission, C‑67/13 P, EU:C:2014:2204, paragraph 46).
However, as the Court has repeatedly held in the context of areas giving rise to complex economic assessments, such as competition law, the discretion enjoyed by the Commission does not mean that the EU Courts must refrain from reviewing the EU institutions’ interpretation of information of an economic nature (judgments of 15 February 2005, Commission v Tetra Laval, C‑12/03 P, EU:C:2005:87, paragraph 39; of 10 July 2008, Bertelsmann and Sony Corporation of America v Impala, C‑413/06 P, EU:C:2008:392, paragraph 145; and of 11 September 2014, CB v Commission, C‑67/13 P, EU:C:2014:2204, paragraph 46). According to the principles established by that case-law, the EU Courts must, in particular, not only establish whether the evidence relied on is factually accurate, reliable and consistent, but also review whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it (see judgments of 11 September 2014, CB v Commission, C‑67/13 P, EU:C:2014:2204, paragraph 46 and the case-law cited; of 11 December 2013, Cisco Systems and Messagenet v Commission, T‑79/12, EU:T:2013:635, paragraph 50 and the case-law cited; and of 13 May 2015, Niki Luftfahrt v Commission, T‑162/10, EU:T:2015:283, paragraph 86 and the case-law cited).
Moreover, it is also clear from the case-law that, even though decisions made under Articles 7 and 9 of Regulation No 1/2003 are subject to the principle of proportionality, the application of that principle nonetheless differs according to which of those provisions is concerned.
Those provisions in fact pursue different objectives. Article 9 of Regulation No 1/2003 aims to address the concerns that the Commission may have raised during its preliminary assessment, while Article 7 of that regulation aims to put an end to the infringement that has been found to exist (judgment of 29 June 2010, Commission v Alrosa, C‑441/07 P, EU:C:2010:377, paragraph 46).
It follows that, as regards the proportionality of the commitments, the test which the Commission must use in proceedings under Article 9 of Regulation No 1/2003 lies in whether the commitments are ‘sufficient’ and can respond ‘adequately’ to the concerns, by taking account of the circumstances of the case, that is to say the seriousness of the concerns, their extent and the interests of third parties (judgment of 29 June 2010, Commission v Alrosa, C‑441/07 P, EU:C:2010:377, paragraphs 41 and 61).
It follows from all of the foregoing that the review by the EU Courts is limited to establishing whether the Commission’s assessment is manifestly wrong, by applying the principles recalled in paragraphs 40 to 45 above.
First plea in law, alleging a manifest error of assessment
In the context of the first plea, the applicant submits that the final commitments do not have the effect of either terminating or significantly limiting the identified abuse, and that they also do not address the concerns raised. The contested decision is therefore, in the applicant’s view, vitiated by a manifest error of assessment.
The applicant observes that both the definition of ‘eligible customer’ and that of ‘third-party developers’ contained, respectively, in the ERL and the TPDL, exclude competing providers. In addition, under the commitments, competing consolidated real-time datafeed providers cannot themselves handle RICs on behalf of eligible licensees. Thus, companies which, like the applicant, have the capacity, knowledge and incentive needed to offer a competing service are directly excluded from doing so. With regard to the terms of the licence agreement at issue, it envisages granting licences only to customers who can use RICs to build, on their own, or through third-party developers, the means to avail of a service that could compete with TR’s offering.
In that regard, firstly, the applicant takes the view that consolidated real-time datafeed providers are incapable of providing an effective change of service provider to TR’s customers because, by excluding them from the ERL and TPDL licence terms, they cannot offer a fully integrated competing service. Secondly, the likelihood of third parties developing mapping tables is theoretical and extremely remote. Thirdly, the entire burden and cost of switching provider fall upon TR’s customers, even though it is manifestly unlikely that they will switch provider due to the cost and complexity entailed in such a switch, the modification of their systems and the additional negotiations with third parties that the modification would entail, the nature of the market for consolidated real-time datafeeds, and the cost and complexity related to using a third party’s mapping table. Fourthly, TR’s customers are unlikely to work with a conversion tool developed by a third party, rather than a competitor, since these tools require a high degree of speed and reliability. The reliance on a third party would in fact be a risk for the integrity and accuracy of the code mapping. Furthermore, possible collaboration with a third-party developer in the design of a mapping table would be ineffective, given the impossibility of exchanging the required information regarding RICs. Fifthly, the reason why competing consolidated real-time datafeed providers cannot offer a comparable service is also connected to the fact that ‘chain RICs’ (a method of accessing a group of instruments by using a single identifier) are excluded from the licences offered by TR, while banks and financial institutions need access to chain RICs since they are one of the key methods of accessing data. As a result of the fact that, in accordance with the commitments, only the most basic data are available, it would be impossible for an alternative provider to rebuild or map to these chains without being able to access the underlying data. Finally, the applicant submits that, to its knowledge, none of TR’s customers have used a competing consolidated real-time datafeed provider. In a situation where a large number of companies seek to obtain and use the licences, there would be proof of that fact on the market. However, according to the applicant, this is not the case, and for that reason it reiterates, as already indicated during the administrative procedure, that such transitions to another provider are very unlikely.
In the first place, the Commission submits that an ERL, authorising TR’s customers to use RICs to retrieve data in the datafeeds of other providers without being obliged to rewrite their applications, is sufficient to address the concerns relating to the restrictions on the use of RICs when switching provider. Second, it takes the view that a TPDL which authorises third-party developers to develop and maintain mapping tables between RICs and the coding systems of other providers is also sufficient to respond to the concerns relating to the restrictions on the use of RICs to develop such tables. The Commission emphasises, by way of example, various terms and conditions contained respectively in the ERL and TPDL that seek to facilitate switching provider. In that context, it notes that an ERL is granted globally to an eligible customer if it undertakes genuine business operations within the EEA, that an ERL is granted in perpetuity on condition that it has been requested during the five years following the commencement date by the eligible customer, that the eligible customer can increase or decrease the eligible number of RICs at any time as required by its business operations, and that TR will provide eligible customers with regular updates of the eligible RICs, as well as with the cross-referencing information required to identify uniquely the underlying real-time market data.
Finally, the Commission submits that none of the arguments raised by the applicant alters the conclusion that the final commitments are sufficient to address the applicant’s concerns.
The Commission argues, in this regard, that a competitor can establish a partnership with a third-party developer to offer TR’s customers a personalised and fully integrated service for switching provider; that, since the IT architecture of each of TR’s customers is generally specific to it, it is inevitable that each customer will carry out rebuilding work and thus incur some costs if it decides to switch consolidated real-time datafeed provider; that TR’s major customers are global financial institutions with the expertise and the financial means necessary to switch providers if they consider that it is in their commercial interest; that cooperation between consolidated real-time datafeed providers and third-party developers could lead to economies of scale; that there is no reason to believe that the mapping tables developed by third-party developers would not be reliable, or would be slower, when compared to using TR’s service, and that the allegations relating to chain RICs are set out for the first time in the reply and are not based upon matters of law or fact which have arisen during the administrative procedure and the proceeding before the Court; and that they therefore must be rejected as inadmissible since, in any event, they are unfounded. Finally, the Commission notes that, since the ERL and TPDL were only introduced on 20 June 2013 and switching provider is a long and complex process, it is unsurprising that there have not yet been many switches during the introductory period of these licences, on the one hand, and the lodging of the application, on the other.
First, as regards the admissibility of the argument relating to chain RICs and the argument relating to the limitations in the descriptive data provided for each RIC, it must be recalled that it is clear from the provisions of Article 44(1)(c), in conjunction with Article 48(2), of the Rules of Procedure of the General Court of 2 May 1991, that the application initiating proceedings must state the subject matter of the proceedings and contain a summary of the pleas in law, and that the introduction of new pleas in law in the course of proceedings is not permitted unless those pleas are based on matters of law or fact which came to light in the course of the procedure.
However, according to settled case-law, a plea which may be regarded as amplifying a previously made plea, whether directly or by implication, in the original application, and which is closely connected to it, must be declared admissible (judgments of 19 September 2000, Dürbeck v Commission, T‑252/97, EU:T:2000:210, paragraph 39, and of 30 September 2003, Cableuropa and Others v Commission, T‑346/02 and T‑347/02, EU:T:2003:256, paragraph 111).
In the present case, it should be noted that, contrary to the Commission’s submission, that plea is an amplification of the first plea, as set out in the application, namely the plea alleging a manifest error of assessment of the final commitments. It should be recalled, in that regard, that the application contains lengthy arguments on the inappropriateness of the final commitments. Consequently, the argument in the reply calling into question the adequacy of the final commitments to address the Commission’s concerns due to the gaps in those commitments, such as those connected to the lack of a rule relating to chain RICs, is admissible.
Next, with regard to the substance of the first plea, as has already been pointed out in paragraph 41 above, and taking into account the discretion enjoyed by the Commission when assessing the appropriateness of the proposed commitments, the role of the Court is limited to establishing that the Commission has not committed a manifest error of assessment. More precisely, its role, in the context of that judicial review, is to determine whether a balance has been struck between the concerns raised by the Commission in its preliminary assessment and the commitments proposed by TR, which must, once again, address those concerns in an adequate manner.
Additionally, the review of the lawfulness of the decision making those commitments binding must be assessed in the light of the Commission’s concerns and not of the demands put forward by competitors in relation to the content of those commitments.
Consequently, the appropriate test to be applied in relation to the Commission’s concerns, as expressed in its preliminary assessment, is to determine whether the commitments are sufficient to address adequately those concerns, which seek, in the present case, to make it easier for customers to switch provider.
Furthermore, the fact that those concerns could be addressed by including TR’s competitors in the licence terms, as the applicant suggests, does not establish in itself that the contested decision is vitiated by a manifest error of assessment. The fact that other commitments could also have been accepted, or might even have been more favourable to competition, cannot justify annulment of the contested decision, in so far as the Commission was reasonably entitled to conclude that the commitments set out in the contested decision served to dispel the concerns which had been identified in the preliminary assessment.
It must be recalled that the contested decision implements a set of commitments proposed by TR, the activities of which gave rise to competition concerns, and that, in essence, the applicant takes the view that the Commission committed a manifest error of assessment by making commitments binding which fail adequately to address those concerns.
The applicant’s claim that competitors are incapable of providing an effective change of service provider on the ground that they cannot offer a fully integrated competing service due to their being excluded from the licence terms at issue must be rejected.
It should be borne in mind that the concerns raised by the Commission related to the restrictions imposed on TR’s customers and the prevention of third parties from establishing mapping between different codes, thus creating substantial barriers to switching provider. The commitments accepted by the Commission therefore focus, essentially, on the opportunities available to customers to switch provider, either on their own or by collaborating with a third-party developer. In that sense, the Commission took the view that the competition concerns could be resolved by requiring behavioural remedies not vis-à-vis its competitors, but rather vis-à-vis its customers and third parties. That finding, that the commitments are proposed in the first instance to customers and third-party developers, is supported by the possibilities offered to third-party developers to collaborate and mutually to assist each other in the development of mapping tables on the basis of the licences proposed by TR. TR’s customers may also opt for third-party developers who have entered into partnerships with competing providers, those partnerships consisting of a cooperation relating to the design, production, maintenance, advertising and aftersales services of mapping tables. Various options are therefore open to TR’s customers for the purpose of switching providers, whether they are internal or external to their infrastructure.
Thus, by accepting those commitments, the Commission took the view that, in order to address the concerns that it had raised, it was not necessary to include TR’s competitors in the licence terms. Furthermore, as is clear from the contested decision, the Commission found that granting TR’s competitors access to RICs would go beyond what was necessary to address its concerns. With regard to the findings of the Court set out in paragraph 62 above, the Commission did not commit a manifest error of assessment in that regard.
The arguments that the likelihood of a third-party developer designing mapping tables is remote and theoretical — mapping tables which, according to the applicant, would not offer the reliability and speed required given that they were designed by third parties — must also be rejected.
Although it is unnecessary to recall the different solutions available to third-party developers in the development of mapping tables, which increase the likelihood of such a design, it may be held, with regard to the alleged lack of reliability and speed of those mapping tables, that the applicant does not present any specific arguments in relation to those assertions. For that reason, those arguments may be rejected at this point.
Moreover, in the event that a customer might require a guarantee as to reliability, a third-party developer and a competing provider could agree to provide that guarantee to that customer, a possibility which has not been excluded by the commitments, in accordance with the clause in paragraph 1.3(c)(iii) of the TPDL. To that extent, it is entirely possible to address the potential misgivings of a customer who will be reassured by a prospective switch of provider. Furthermore, apart from the fact that TR’s customers can enter into an ERL agreement in order to switch consolidated real-time datafeed provider in relation to all of their applications, they may opt, for a period of at least 12 months, for a partial switch. Such a partial switch may allow a customer to assess the reliability of a competing data source by using applications which use TR’s data source and other applications which use a competing data source in parallel, a possibility which facilitates a switch of provider for the customer.
Similarly, the argument that the entire burden and cost of switching provider would be borne by TR’s customers cannot be accepted. It must be recalled that the Commission’s concerns essentially related to the restrictions imposed on TR’s customers in the use of RICs. Those restrictions prohibited them from retrieving data from the feeds of competing providers by using RIC codes, and even by means of mapping tables. Due to the integration of RIC codes into customers’ IT applications, a rewriting of those applications was necessary when those customers wished to switch provider, that switch of provider de facto leading to, under the restrictions imposed by TR, a modification of the symbol system used. That process of modifying applications is considered, according to customers, to be long and costly. It is clear from the market tests carried out by the Commission, the findings of which were included in the preliminary assessment, that the main part of the costs of switching relates to the conversion of the codes. Those costs are at times difficult to quantify, in particular due to the fact that the IT architecture of each customer is specific to that customer. However, the Commission indicated in its preliminary assessment that, for customers who have carried out an extensive assessment of the costs of switching, those costs were considered to be prohibitive and could discourage customers from switching provider. In response to those concerns, TR therefore offered its customers, as well as third-party developers, the possibility to set up mapping tables between the RIC codes and the symbol system used by the new provider, in such a way that a modification of the applications would no longer be necessary. Those commitments therefore represent a genuine improvement for TR’s customers, who no longer face prohibitive costs for the ability to switch provider, in the absence of the need extensively to modify IT applications. Although the creation of a mapping table by the customer, whether internally or by a third-party developer, is also likely to lead to costs, it should be recalled that the commitments do not seek a total elimination of the costs, but seek rather to make switching of providers more accessible with reasonable costs.
Furthermore, it must be stated that a modification of IT systems and applications is liable, in any event, to lead to costs which must be borne by the customer, especially in view of the particularities of each customer’s own IT architecture. Additionally, those customers are normally global institutions or companies and are likely to have the financial wherewithal to meet such costs.
It is also important to state, as the Commission did, that the collaborations between consolidated real-time datafeed providers and third-party developers may lead to economies of scale. Those economies are such as to lower the costs of switching provider, which might represent an additional incentive for customers, including small-sized customers, to switch provider.
Finally, the arguments linked to the lack of data relating to chain RICs and to the limitations on the descriptive data provided for each RIC preventing competing providers from offering an equivalent service are also unfounded. First, it should be noted in that regard that it appears that, throughout the administrative procedure, neither the applicant nor any other third party appeared to express any concerns as regards the exclusion of particular chain RICs from the scope of the licences offered by TR. The only chain RICs about which concerns were expressed during the administrative procedure were the indices and, in accordance with the clause in paragraph 2.8 of the final commitments and in paragraph 1.6 of the ERL, TR is required to provide data relating to indices. Second, it is clear from the case file that the reason why the data provided by TR may, in certain cases, not indicate the mnemonic designation attributed by the Stock Exchange is that that code is not the only sure way to identify an instrument upstream from its source. Relatively simple financial instruments, such as values listed on the Stock Exchange, may be identified through the trading platform concerned, the currency or the official code, or through the trading platform concerned, the currency and their description. TR is required to provide that information to ERL holders in accordance with the clause in paragraph 2.12 of the final commitments. The same is true for more complex financial instruments, such as those traded over-the-counter, for which TR is required to provide the mnemonic code assigned by the Stock Exchange if it is the only way of uniquely identifying them.
Furthermore, apart from a dispute settlement procedure, referred to in paragraph 13 above, in which the trustee responsible for monitoring the commitments plays a particular role, the clause in paragraph 6(f) of Annex V to the final commitments expressly provides that that trustee will assist in resolving any disagreements concerning data queries in respect of the cross-referencing information provided by TR. Thus, if the mnemonic code assigned by the Stock Exchange is essentially the only way of uniquely identifying the underlying real-time market data, the trustee responsible for monitoring will be able to inform TR to that effect.
In conclusion, the question of whether the commitments proposed by TR have been correctly assessed, in the contested decision, as being capable of resolving the Commission’s concerns must be answered in the affirmative. The plea that the decision is vitiated by a manifest error of assessment must therefore be rejected.
Moreover, as regards the applicant’s claim that, up to the present, no switch of provider has taken place, this therefore being an indication that the commitments are not effective, it must be noted that the Commission’s assessment, as is the case with respect to merger control proceedings, is a prospective assessment. It is called upon to make a decision which is a forecast and which leads it to assess how the market will behave once the commitments have been implemented. As has already been stated, the Commission did not commit a manifest error when it took the view that the final commitments are appropriate to address the concerns raised. Regardless of the answer to the question whether the final commitments have, in the meantime, produced a concrete effect on the market concerned, it cannot change the fact that, at the point in time at which the contested decision was adopted, they were in themselves sufficient to remove the competition concerns which had been identified.
In that regard, it must be noted that the final commitments as accepted by the Commission facilitate a switch of provider if that is desired by one of TR’s customers. However, that facility does not imply that a customer must necessarily switch provider if that customer is satisfied, for example, with the services and conditions offered by TR.
It follows from the foregoing that the first plea must be rejected.
The second plea in law, alleging infringement of Article 9(1) of Regulation No 1/2003
The applicant acknowledges that Article 9 of Regulation No 1/2003 authorises the Commission to accept commitments where they address the concerns which it has raised. However, the Commission is not, it argues, authorised to accept commitments which manifestly do not resolve — or appreciably reduce — the concerns raised. By accepting commitments which manifestly do not resolve the concerns raised, the Commission, in the applicant’s view, acted beyond the scope of the powers conferred on it under Article 9 of that regulation and therefore acted ultra vires.
The Commission and the intervener contend that this plea should be rejected.
As has already been noted in paragraph 40 above, the Commission enjoys a wide discretion in the assessment of the commitments. In proceedings under Article 9 of Regulation No 1/2003, as follows from recital 13 of that regulation, the Commission is not required to make a finding of the infringement at issue, its task being confined to examining, and possibly accepting, the commitments offered by the undertakings concerned in the light of the concerns which it identified in its preliminary assessment and having regard to the aims pursued. It is for the Commission, in the exercise of its discretion, to accept the commitments, after verifying whether they address the concerns raised. In that regard, it has already been held that the Commission did not commit any manifest error in its assessment concerning the adequacy of the commitments at issue, with the result that the argument that, by accepting those commitments, it exceeded its powers and, on that basis, acted ultra vires, must be rejected. The rejection of the first plea also results in the rejection of the second plea.
The third plea in law, alleging an infringement of the principle of proportionality
The applicant argues that the contested decision infringes the principle of proportionality given that, first, the Commission accepted inappropriate commitments and, second, it did not take account of third-party interests.
Referring to the judgment of 11 July 2007, Alrosa v Commission (T‑170/06, EU:T:2007:220), and to the judgment, delivered on appeal, of 29 June 2010, Commission v Alrosa (C‑441/07 P, EU:C:2010:377), the applicant submits that the obligation to respect the principle of proportionality when the Commission decides to accept binding commitments offered pursuant to Article 9(1) of Regulation No 1/2003 implies that the measure which it adopts must be appropriate and necessary for achieving the objective pursued. By accepting inappropriate commitments, it submits, the Commission therefore infringed this principle.
The principle of proportionality was, in its view, also infringed by the fact that the Commission disregarded the predictable and predicted ineffectiveness of the commitments, notwithstanding the concerns expressed by third parties, as has already been explained in connection with the first plea.
The Commission and the intervener contend that this plea should be rejected.
It must be stated that it follows from the reply to the first two pleas that the third plea must also be rejected.
The principle of proportionality requires that the measures adopted by EU institutions must not exceed what is appropriate and necessary to attain the objective pursued. When there is a choice between several appropriate measures, the least onerous measure must be used (judgments of 17 May 1984, Denkavit Nederland, 15/83, EU:C:1984:183, paragraph 25, and of 11 July 1989, Schräder HS Kraftfutter, 265/87, EU:C:1989:303, paragraph 21).
The principle of proportionality, as a general principle of EU law, is nonetheless a criterion for the lawfulness of any act of the institutions of the European Union. That being so, in the examination of acts of the Commission, the questions always arise, first, of the precise extent and limits of the obligations which flow from the observance of that principle and, second, of the limits of judicial review (see, to that effect, judgment of 29 June 2010, Commission v Alrosa, C‑441/07 P, EU:C:2010:377, paragraphs 36 and 37).
As is clear from the case-law cited above, application of the principle of proportionality by the Commission in the context of Article 9 of Regulation No 1/2003 is confined to verifying, first, that the commitments in question address the concerns which it expressed to the undertakings concerned and, second, that the latter have not offered less onerous commitments that also address those concerns adequately.
Likewise, judicial review relates solely to whether the Commission’s assessment is manifestly erroneous.
Thus, in the context of the first plea, it has already been observed that the Commission did not commit a manifest error of assessment in finding that the final commitments proposed by TR were appropriate to address the concerns identified by the Commission in its preliminary assessment.
Moreover, if undertakings offer commitments on the basis of Article 9 of Regulation No 1/2003 which go beyond that which the Commission itself could have imposed on them in a decision that it adopted in accordance with Article 7 of that regulation following a thorough review, the Commission can accept those commitments and make them binding. However, it is not entitled to require them under Article 9 of Regulation No 1/2003.
It follows that the third plea in law must be rejected.
The fourth plea in law, alleging a breach of the obligation to state reasons
The applicant submits that the contested decision does not explain how the final commitments adequately address the competition concerns expressed to TR in the preliminary assessment, in so far as those commitments do not authorise competing real-time datafeed providers to enter into a TPDL contract.
The applicant states that it repeatedly pointed out to the Commission, during the procedure leading to the contested decision, that excluding competitors from the licences envisaged in the commitments would render those commitments ineffective. In paragraph 6.3 of the contested decision, the Commission notes that such concerns had been raised, but it does not explain the reasons why those criticisms were not taken into consideration.
The Commission and the intervener take issue with the applicant’s arguments.
It should be noted that, according to the applicant, the contested decision’s statement of reasons does not make it possible for it to understand the grounds on which the Commission found that the exclusion of competitors from the scope of the commitments did not call into question the adequacy of those commitments.
According to settled case-law, the statement of reasons required under Article 296 TFEU must be appropriate to the measure in question and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent EU Court to carry out its review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 296 TFEU must be assessed with regard not only to its wording but also to its context and all the legal rules governing the matter in question (see judgments of 2 April 1998, Commission v Sytraval and Brink’s France, C‑367/95 P, EU:C:1998:154, paragraph 63 and the case-law cited, and of 10 July 2008, Bertelsmann and Sony Corporation of America v Impala, C‑413/06 P, EU:C:2008:392, paragraphs 166 and 178 and the case-law cited).
The Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned; it is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision. In particular, it is not required to define its position on matters which are manifestly irrelevant or insignificant or plainly of secondary importance (judgments of 15 June 2005, Corsica Ferries France v Commission, T‑349/03, EU:T:2005:221, paragraph 64, and of 16 June 2011, Air liquide v Commission, T‑185/06, EU:T:2011:275, paragraph 64).
In relation to decisions making commitments taken pursuant to Article 9 of Regulation No 1/2003 binding, the Commission fulfils its obligation to state reasons by setting out the elements of fact and law which led it to conclude that the commitments offered addressed adequately the competition concerns which it had identified in such a way that it was no longer necessary for it to act.
In the present case, recitals 48 to 90 (paragraphs 5.1 to 6.7) of the contested decision deal with the commitments proposed by TR and with the reactions of third parties to those commitments.
It follows from this that the Commission explained, first, the reasons why the commitments addressed the concerns raised and, second, by addressing observations made by third parties, why the issues raised in those observations went beyond the competition concerns set out in the preliminary assessment (recitals 77, 84, 86 and 89 of the contested decision). As regards more specifically the complaint made by the applicant, it must be stated that recital 77 of the contested decision referred to the fact that a number of third parties believed that competitors should have access to RICs since they would be in the best position to provide mapping tables and technical assistance. It is clear from recital 78 of the contested decision that the Commission considered that granting TR’s competitors access to RICs would go beyond what was necessary to remedy the competition concerns. In recital 79 of the contested decision, the Commission added that, ‘under the Proposed Commitments, third-party developers will be allowed to provide competing market data vendors with descriptive reference data related to RICs (although not the RICs themselves) when the third-party developers have themselves been unable to successfully complete mapping’ and that ‘this exchange of information will allow the competing market data vendors to map their own symbology for the same reference data in a way that permits the third-party developers to undertake accurate and efficient mapping’.
It follows from the foregoing that the Commission fulfilled its obligation to state reasons by setting out, clearly and unequivocally, the factual elements and legal considerations which led it to conclude that the commitments were sufficient to address the competition concerns which had been raised. Since those details enable the Court to review effectively the Commission’s exercise of its discretion in the contested decision, it must be concluded that the contested decision is sufficiently reasoned in that regard.
It may be added that, although the Commission is required to provide reasons for the decision which it adopts, it is not obliged to explain why it refrained from adopting a different decision (see, to that effect, the case-law cited in paragraphs 95 and 96).
Moreover, in so far as the applicant’s arguments may be understood as seeking to criticise the appropriateness of the final commitments, it must be recalled that such a question does not go to the issue of infringement of essential procedural requirements, capable of rendering the contested decision unlawful, but to that of the soundness of the Commission’s assessment of the commitments offered in order to address its competition concerns (see, to that effect, judgment of 2 April 1998, Commission v Sytraval and Brink’s France, C‑367/95 P, EU:C:1998:154, paragraph 67), an issue which has already been addressed in the context of the first, second and third pleas of the present action.
It follows that the fourth plea in law must be rejected and, consequently, the action dismissed in its entirety.
Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the applicant has been unsuccessful, and since the Commission and the intervener have applied for costs, the applicant must be ordered to pay the costs.
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby:
1.
Dismisses the action;
2.
Orders Morningstar, Inc. to pay the costs.
Gratsias
Kancheva
Wetter
Delivered in open court in Luxembourg on 15 September 2016.
[Signatures]
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Grand Chamber)
15 December 2015 ( * )
‛Actions for annulment — Regulation (EU) No 1385/2013 — Directive 2013/62/EU — Directive 2013/64/EU — Legal basis — Article 349 TFEU — Outermost regions of the European Union — Amendment of the status of Mayotte with regard to the European Union’
In Joined Cases C‑132/14 to C‑136/14,
ACTIONS for annulment under Article 263 TFEU, brought on 21 March 2014,
European Parliament, represented by I. Liukkonen (C‑132/14) and by L. Visaggio and J. Rodrigues (C‑132/14 and C‑136/14), acting as Agents,
applicant in Cases C‑132/14 and C‑136/14,
European Commission, represented by R. Lyal (C‑133/14 to C‑135/14), W. Mölls (C‑133/14 to C‑135/14), D. Bianchi (C‑133/14 and C‑135/14) and D. Martin (C‑133/14 and C‑134/14), acting as Agents, with an address for service in Luxembourg,
applicant in Cases C‑133/14 to C‑135/14,
v
Council of the European Union, represented by A. Westerhof Löfflerová, E. Karlsson, F. Florindo Gijón and J. Czuczai, acting as Agents,
defendant,
supported by:
Kingdom of Spain, represented by M. Sampol Pucurull, acting as Agent,
French Republic, represented by G. de Bergues, F. Fize, D. Colas and N. Rouam, acting as Agents,
Portuguese Republic, represented by L. Inez Fernandes, B. Andrade Correia, M. Duarte and S. Marques, acting as Agents,
interveners,
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, M. Ilešič, L. Bay Larsen, T. von Danwitz, J. L. da Cruz Vilaça, A. Arabadjiev (Rapporteur) and C. Toader, Presidents of Chambers, E. Levits, J.-C. Bonichot, A. Prechal, E. Jarašiūnas, C. G. Fernlund and C. Vajda, Judges,
Advocate General: N. Wahl,
Registrar: I. Illéssy, Administrator,
having regard to the written procedure and further to the hearing on 21 April 2015,
after hearing the Opinion of the Advocate General at the sitting on 25 June 2015,
gives the following
Judgment
By their applications in Cases C‑132/14 and C‑135/14 respectively, the European Parliament and the European Commission seek the annulment of Council Regulation (EU) No 1385/2013 of 17 December 2013 amending Council Regulations (EC) No 850/98 and (EC) No 1224/2009, and Regulations (EC) No 1069/2009, (EU) No 1379/2013 and (EU) No 1380/2013 of the European Parliament and of the Council, following the amendment of the status of Mayotte with regard to the European Union (OJ 2013 L 354, p. 86).
By their applications in Cases C‑133/14 and C‑136/14 respectively, the Commission and the Parliament seek the annulment of Council Directive 2013/64/EU of 17 December 2013 amending Council Directives 91/271/EEC and 1999/74/EC, and Directives 2000/60/EC, 2006/7/EC, 2006/25/EC and 2011/24/EU of the European Parliament and of the Council, following the amendment of the status of Mayotte with regard to the European Union (OJ 2013 L 353, p. 8).
By its application in Case C‑134/14, the Commission seeks the annulment of Council Directive 2013/62/EU of 17 December 2013 amending Directive 2010/18/EU implementing the revised Framework Agreement on parental leave concluded by BUSINESSEUROPE, UEAPME, CEEP and ETUC, following the amendment of the status of Mayotte with regard to the European Union (OJ 2013 L 353, p. 7).
The contested acts
Regulation No 1385/2013
Recitals 1, 3, 4, 7 and 8 in the preamble to Regulation No 1385/2013 state:
‘(1)
… Taking account of the particular structural social and economic situation of Mayotte, which is compounded by its remoteness, insularity, small size, difficult topography and climate, certain specific measures should be provided for in a number of areas.
…
(3)
As regards Council Regulation (EC) No 850/98 [of 30 March 1998 for the conservation of fishery resources through technical measures for the protection of juveniles of marine organisms (OJ 1998 L 125, p. 1)], the waters around Mayotte, as a new outermost region, should be included within the scope of that Regulation and the use of purse seines on tuna and tuna-like schools of fish inside the area within 24 miles from the baselines of the island should be prohibited, in order to preserve the shoals of large migratory fish in the vicinity of the island of Mayotte.
(4)
As regards Regulation (EU) No 1379/2013 of the European Parliament and of the Council [of 11 December 2013 on the common organisation of the markets in fishery and aquaculture products, amending Council Regulations (EC) No 1184/2006 and (EC) No 1224/2009 and repealing Council Regulation (EC) No 104/2000 (OJ 2013 L 354, p. 1)], in view of the very fragmented and underdeveloped marketing schemes of Mayotte, the application of the rules on the labelling of fishery products would impose on retailers a burden disproportionate to the information that would be transmitted to the consumer. It is therefore appropriate to provide for a temporary derogation from the rules concerning the labelling of fishery products offered for retail sale to the final consumer in Mayotte.
...
(7)
In view of the fact that France has presented to the Indian Ocean Tuna Commission (IOTC) a development plan describing the indicative size of the fleet of Mayotte and the expected evolution of the underdeveloped fleet of mechanical long-liners which are less than 23 metres in length and of purse-seiners based in Mayotte, as a new outermost region, to which no IOTC contracting party, including the Union, has objected, it is appropriate to use the reference levels of that plan as ceilings for the capacity of the fleet of mechanical long-liners which are less than 23 metres in length and of purse-seiners registered in the ports of Mayotte. By way of derogation from the generally applicable Union rules, and due to the current specific social and economic situation of Mayotte, sufficient time should be provided to allow France to increase the capacities of the underdeveloped segment of its fleet of smaller vessels until 2025.
(8)
As regards Regulation (EC) No 1069/2009 of the European Parliament and of the Council [of 21 October 2009 laying down health rules as regards animal by-products and derived products not intended for human consumption and repealing Regulation (EC) No 1774/2002 (Animal by-products Regulation) (OJ 2009 L 300, p. 1)], it should be noted that Mayotte has no industrial capacity for the processing of animal by-products. It is therefore appropriate to allow France a period of five years in order to establish the infrastructure necessary for the identification, handling, transport, treatment and disposal of animal by-products in Mayotte in full compliance with Regulation (EC) No 1069/2009.’
Articles 1 to 4 of Regulation No 1385/2013 provide:
‘Article 1
Amendments to Regulation (EC) No 850/98
Regulation (EC) No 850/98 is amended as follows:
(1)
In Article 2(1), point (h) is replaced by the following:
“(h)
Region 8
All waters off the coasts of the French departments of Réunion and Mayotte that fall under the sovereignty or jurisdiction of France.”.
(2)
The following article is inserted:
“Article 34g
Restrictions on fishing activities in the 24-mile zone around Mayotte
Vessels shall be prohibited from using any purse seine on tuna and tuna-like schools of fish inside the area within 24 miles of the coasts of Mayotte, as an outermost region within the meaning of Article 349 [TFEU], measured from the baselines from which territorial waters are measured.”.
Article 2
Amendment to Regulation (EU) No 1379/2013
In Article 35 of Regulation (EU) No 1379/2013, the following paragraph is inserted:
“6. Until 31 December 2021, paragraphs 1, 2 and 3 shall not apply to products offered for retail sale to the final consumer in Mayotte, as an outermost region within the meaning of Article 349 TFEU.”.
Article 3
Amendments to Regulation (EU) No 1380/2013
Regulation (EU) No 1380/2013 [of the European Parliament and of the Council of 11 December 2013 on the Common Fisheries Policy, amending Council Regulations (EC) No 1954/2003 and (EC) No 1224/2009 and repealing Council Regulations (EC) No 2371/2002 and (EC) No 639/2004 and Council Decision 2004/585/EC (OJ 2013 L 354, p. 22)] is amended as follows:
(1)
In Article 23, the following paragraph is added:
“4. By way of derogation from paragraph 1, France shall be authorised, until 31 December 2025, to introduce new capacity without the withdrawal of an equivalent capacity for the various segments in Mayotte, as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), referred to in Annex II.”
(2)
In Article 36, the following paragraphs are added:
“5. By way of derogation from paragraph 1, France shall be exempted until 31 December 2021 from the obligation to include in its register of Union fishing vessels those vessels which are less than 10 metres in overall length and which operate from Mayotte.
6. Until 31 December 2021, France shall keep a provisional register of fishing vessels which are less than 10 metres in overall length and which operate from Mayotte. That register shall contain at least the name, overall length and an identification code of each vessel. Vessels registered in the provisional register shall be considered to be vessels registered in Mayotte.”
(3)
The entries concerning Mayotte contained in the Annex to this Regulation shall be inserted into the table in Annex II to the Regulation (EU) No 1380/2013 after the entry “Guadeloupe: Pelagic species. L 12m”.
Article 4
Amendment to Regulation (EC) No 1069/2009
In Regulation (EC) No 1069/2009, Article 56 is replaced by the following:
“Article 56
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
It shall apply from 4 March 2011.
However, Article 4 shall apply to Mayotte, as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), from 1 January 2021. Animal by-products and derived products generated in Mayotte before 1 January 2021 shall be disposed of in accordance with Article 19(1)(b) of this Regulation.
This Regulation shall be binding in its entirety and directly applicable in all Member States.”.’
Directive 2013/62
Article 1 of Directive 2013/62 provides:
‘In Article 3(2) of [Council] Directive 2010/18/EU [of 8 March 2010 implementing the revised Framework Agreement on parental leave concluded by BUSINESSEUROPE, UEAPME, CEEP and ETUC and repealing Directive 96/34/EC (OJ 2010 L 68, p. 13)], the following subparagraph is added:
“By way of derogation from the first subparagraph, the additional period referred to therein shall be extended to 31 December 2018 as regards Mayotte as an outermost region of the Union within the meaning of Article 349 TFEU.”.’
Directive 2013/64
Recitals 1 to 9 in the preamble to Directive 2013/64 state:
‘(1)
… Taking account of the particular structural social and economic situation of Mayotte, certain specific measures should be provided for in a number of areas.
(2)
It is appropriate to take account of the particular situation in Mayotte as regards the state of the environment, which needs to be considerably improved for it to comply with environmental objectives laid down by Union law, and for which additional time is needed. Specific measures in order to gradually improve the environment should be adopted within specific time-limits.
(3)
In order to comply with the requirements of Council Directive 91/271/EEC [of 21 May 1991 concerning urban waste water treatment (OJ 1991 L 135, p. 40)], measures need to be taken in Mayotte to ensure that agglomerations are provided with collecting systems for urban waste water. Such measures call for infrastructure works that should follow appropriate administrative and planning procedures and, furthermore, require the establishment of systems for measuring and monitoring urban waste water discharges. Due to the specific structural and economic situation of Mayotte, a sufficient period of time should be granted to France to allow those requirements to be met.
(4)
In the field of agriculture, as regards Council Directive 1999/74/EC [of 19 July 1999 laying down minimum standards for the protection of laying hens (OJ 1999 L 203, p. 53)], it is noted that, in Mayotte, laying hens are reared in unenriched cages. In view of the considerable investment and preparatory work required to replace unenriched cages by enriched cages or alternative systems, it is necessary to postpone the prohibition of using unenriched cages for a period of up to 48 months from 1 January 2014. In order to prevent distortions of competition, eggs derived from establishments using unenriched cages should be marketed only on the local market of Mayotte. In order to facilitate the necessary controls, eggs produced in unenriched cages should bear a special mark.
(5)
In respect of Directive 2000/60/EC of the European Parliament and of the Council [of 23 October 2000 establishing a framework for Community action in the field of water policy (OJ 2000 L 327, p. 1)], the proper implementation of that Directive as regards river basin management plans requires that France adopts and implements management plans containing technical and administrative measures to achieve good water status for, and to prevent the deterioration of, all bodies of surface waters. Due to the specific structural and economic situation of the new outermost region of Mayotte, a sufficient period of time should be granted for the adoption and implementation of such measures.
(6)
In respect of Directive 2006/7/EC of the European Parliament and of the Council [of 15 February 2006 concerning the management of bathing water quality and repealing Directive 76/160/EEC (OJ 2006 L 64, p. 37)], the current state of surface waters in Mayotte needs to be considerably improved for them to comply with the requirements of that Directive. The quality of bathing waters depends directly upon urban waste water treatment, and the provisions of Directive 2006/7/EC may only be complied with progressively once agglomerations that affect the quality of urban waste waters comply with the requirements of Directive 91/271/EEC. Therefore, specific time-limits need to be adopted in order to allow France to meet the Union standards as regards bathing water quality in Mayotte as a new outermost region and due to its special social and economic situation.
(7)
In the area of social policy, account should be taken of the difficulties to comply with Directive 2006/25/EC of the European Parliament and of the Council [of 5 April 2006 on the minimum health and safety requirements regarding the exposure of workers to risks arising from physical agents (artificial optical radiation) (19th individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC) (OJ 2006 L 114, p. 38)] in Mayotte as of 1 January 2014. Due to its prevailing special social and economic situation, there are no technical facilities available in Mayotte for the implementation of measures necessary to comply with that Directive in the field of artificial optical radiation. Therefore, it is appropriate to grant a derogation to France from certain provisions of that Directive until 31 December 2017, provided that such facilities are not available in Mayotte and without prejudice to the general principles of protection and prevention in the area of health and safety of workers.
(8)
In order to guarantee a high level of protection of the health and safety of workers at work, consultation with the social partners should be ensured, the risks resulting from the derogation should be reduced to a minimum and the workers concerned should benefit from reinforced health surveillance. It is important to reduce the duration of the derogation as much as possible. Therefore, the national derogating measures should be reviewed every year and should be withdrawn as soon as the circumstances justifying them no longer subsist.
(9)
In respect of Directive 2011/24/EU of the European Parliament and of the Council [of 9 March 2011 on the application of patients’ rights in cross-border healthcare (OJ 2011 L 88, p. 45)], its transposition requires a number of adaptations to ensure continuity of care and information to patients. It is therefore appropriate to grant France an additional period of 30 months from 1 January 2014 to bring into force the provisions necessary to comply with that Directive in respect of Mayotte.’
Articles 1 to 6 of Directive 2013/64 provide:
‘Article 1
Amendments to Directive 91/271/EEC
Directive 91/271/EEC is amended as follows:
(1)
In Article 3, the following paragraph is inserted:
“(1a) By way of derogation from the first and second subparagraphs of paragraph 1, in respect of Mayotte as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), France shall ensure that all agglomerations are provided with collecting systems for urban waste water:
—
by 31 December 2020 at the latest for agglomerations of more than 10000 [population equivalent], which will cover at least 70% of the load generated in Mayotte;
—
by 31 December 2027 at the latest for agglomerations of more than 2000 [population equivalent].”.
(2)
In Article 4, the following paragraph is inserted:
“(1a) By way of derogation from paragraph 1, in respect of Mayotte, France shall ensure that urban waste water entering collecting systems is, before discharge, subject to secondary treatment or an equivalent treatment:
—
by 31 December 2020 at the latest for agglomerations of more than 15000 [population equivalent], which, along with the agglomerations referred to in Article 5(2a), will cover at least 70% of the load generated in Mayotte;
—
by 31 December 2027 at the latest for agglomerations of more than 2000 [population equivalent].”.
(3)
In Article 5 the following paragraph is added:
“(2a) By way of derogation from paragraph 2, in respect of Mayotte, France shall ensure that urban waste water entering collecting systems shall before discharge into sensitive areas be subject to more stringent treatment than that described in Article 4 by 31 December 2020 at the latest for agglomerations of more than 10000 [population equivalent], which, along with the agglomerations referred to in Article 4(1a), will cover at least 70% of the load generated in Mayotte.”.
(4)
In Article 7, the following paragraph is added:
“By way of derogation from the first paragraph, in respect of Mayotte, the time-limit defined therein shall be 31 December 2027.”.
(5)
Article 17 is amended as follows:
(a)
In paragraph 1, the following subparagraph is added:
“By way of derogation from the first subparagraph, in respect of Mayotte, France shall establish a programme for the implementation of this Directive by 30 June 2014.”.
(b)
In paragraph 2, the following subparagraph is added:
“By way of derogation from the first subparagraph, in respect of Mayotte, France shall provide the Commission with information on the programme by 31 December 2014.”.
Article 2
Amendment to Directive 1999/74/EC
In Article 5 of Directive 1999/74/EC, the following paragraph is added:
“3. By way of derogation from paragraph 2, in Mayotte as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), laying hens may continue to be reared in cages as referred to in this Chapter until 31 December 2017.
From 1 January 2014, no cages as referred to in this Chapter may be built or brought into service for the first time in Mayotte.
Eggs derived from establishments rearing laying hens in cages as referred to in this Chapter shall only be placed on the local market of Mayotte. Those eggs and their packs shall be clearly identified with a special mark, so as to allow the necessary controls. A clear description of this special mark shall be communicated to the Commission by 1 January 2014.”.
Article 3
Amendments to Directive 2000/60/EC
Directive 2000/60/EC is hereby amended as follows:
(1)
Article 4 is amended as follows:
(a)
in paragraph 1, the following subparagraph is added:
“As regards Mayotte as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), the time-limit referred to in points (a)(ii), (a)(iii), (b)(ii) and (c) shall be 22 December 2021.”.
(b)
in paragraph 4, the introductory sentence is replaced by the following:
“The time-limits laid down in paragraph 1 may be extended for the purposes of phased achievement of the objectives for bodies of water, provided that no further deterioration occurs in the status of the affected body of water when all the following conditions are met:”.
(2)
Article 11 is amended as follows:
(a)
in paragraph 7, the following subparagraph is added:
“As regards Mayotte, the time-limits referred to in the first subparagraph shall be 22 December 2015 and 22 December 2018, respectively.”.
(b)
in paragraph 8, the following subparagraph is added:
“As regards Mayotte, the time-limit referred to in the first subparagraph shall be 22 December 2021.”.
(3)
Article 13 is amended as follows:
(a)
in paragraph 6, the following subparagraph is added:
“As regards Mayotte, the time-limit referred to in the first subparagraph shall be 22 December 2015.”.
(b)
in paragraph 7, the following subparagraph is added:
“As regards Mayotte, the time-limit referred to in the first subparagraph shall be 22 December 2021.”.
Article 4
Amendments to Directive 2006/7/EC
Directive 2006/7/EC is hereby amended as follows:
(1)
Article 5 is amended as follows:
(a)
in paragraph 2, the following subparagraph is added:
“As regards Mayotte as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), the time-limit referred to in the first subparagraph shall be 31 December 2019.”.
(b)
in paragraph 3, the following subparagraph is added:
“As regards Mayotte, the time-limit referred to in the first subparagraph shall be 31 December 2031.”.
(2)
In Article 6(1), the following subparagraph is added:
“As regards Mayotte, the time-limit referred to in the first subparagraph shall be 30 June 2015.”.
(3)
In Article 13(2), the following subparagraph is added:
“As regards Mayotte, the time-limit referred to in the first subparagraph shall be 30 June 2014.”.
Article 5
Amendment to Directive 2006/25/EC
In Directive 2006/25/EC, the following Article is added:
“Article 14a
1. Without prejudice to the general principles of protection and prevention in the area of health and safety of workers, France may, until 31 December 2017, derogate from the application of the provisions necessary to comply with this Directive in Mayotte as an outermost region within the meaning of Article 349 [TFEU] (hereinafter ‘Mayotte’), provided that such application requires specific technical facilities that are not available in Mayotte.
The first subparagraph does not apply to the obligations set out in Article 5(1) of this Directive, or to the provisions of this Directive which reflect the general principles laid down in [Council] Directive [89/391/EEC of 12 June 1989 on the introduction of measures to encourage improvements in the safety and health of workers at work (OJ 1989 L 183, p. 1)].
2. All derogations from this Directive resulting from the application of measures existing on 1 January 2014 or from the adoption of new measures shall be preceded by a consultation with the social partners in accordance with national law and practice. Such derogations shall be applied under conditions which, taking into account the particular circumstances prevailing in Mayotte, guarantee that the resulting risks for workers are reduced to a minimum and that the workers concerned benefit from reinforced health surveillance.
3. The national derogating measures shall be reviewed every year, after consultation with the social partners, and shall be withdrawn as soon as the circumstances justifying them no longer subsist.”.
Article 6
Amendment to Directive 2011/24/EU
In Article 21 of Directive 2011/24/EU, the following paragraph is added:
“3. By way of derogation from the first sentence of paragraph 1, France shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive in respect of Mayotte as an outermost region within the meaning of Article 349 TFEU by 30 June 2016.”.’
Background to the dispute
Pursuant to European Council Decision 2012/419/EU of 11 July 2012 amending the status of Mayotte with regard to the European Union (OJ 2012 L 204, p. 131), Mayotte ceased, from 1 January 2014, to be one of the overseas countries and territories within the meaning of Article 355(2) TFEU and became an outermost region within the meaning of Article 349 TFEU. By that decision, references to Mayotte were inserted in the first paragraph of Article 349 TFEU and in Article 355(1) TFEU, whilst in Annex II to the FEU Treaty, which lays down the list of ‘overseas countries and territories to which the provisions of Part Four of [that Treaty] apply’, the sixth indent, worded ‘Mayotte’ was deleted.
Following a number of requests from the French authorities, the Commission acknowledged that the French Republic, which was required by Decision 2012/419 to apply the entire acquis of EU law in Mayotte from 1 January 2014, nevertheless had to be granted additional periods to comply with that obligation.
To that end, the Commission adopted on 13 June 2013 the proposal for a Regulation of the European Parliament and of the Council amending certain Regulations in the field of fisheries and animal health by reason of the change of status of Mayotte with regard to the Union (COM(2013) 417 final), the proposal for a Council Decision amending Directive 2010/18/EU because of the change in status of Mayotte (COM(2013) 413 final) and the proposal for a Directive of the European Parliament and of the Council amending certain Directives in the fields of environment, agriculture, social policy and public health by reason of the change of status of Mayotte with regard to the Union (COM(2013) 418 final). Those proposals were respectively founded on:
—
Articles 43(2) TFEU and 168(4)(b) TFEU, which prescribe the ordinary legislative procedure and require the European Economic and Social Committee (EESC) and the Committee of the Regions of the European Union to be consulted;
—
Article 155(2) TFEU, which provides that the Council is to act on a proposal from the Commission, the European Parliament being informed; and
—
Articles 43(2) TFEU, 114 TFEU, 153(2) TFEU, 168 TFEU and 192(1) TFEU, which prescribe the ordinary legislative procedure and require the EESC and the Committee of the Regions to be consulted.
Since the Council took the view that the forthcoming acts all had to be adopted on the basis of Article 349 TFEU and in accordance with a special legislative procedure, it submitted the Commission’s proposals to the Parliament for an opinion. Those proposals were also sent to the national parliaments.
On 12 December 2013, the Parliament adopted its ‘position[s] at first reading’ on the proposal for a regulation COM(2013) 417 final and the proposal for a directive COM(2013) 418 final. In those positions, the Parliament indicated that the forthcoming acts had to be adopted ‘in accordance with the ordinary legislative procedure’ but that, as specifically regards the forthcoming regulation, the legal basis had to comprise Article 349 TFEU in addition to Articles 43(2) TFEU and 168(4)(b) TFEU. So far as concerns the forthcoming act in respect of the proposal for a decision COM(2013) 413 final, the Parliament, noting that it had been ‘consulted’ in accordance with Article 349 TFEU on the Council draft, approved, by a legislative resolution of the same date, ‘the Council draft as amended’.
On 17 December 2013, the Council, ‘[a]cting in accordance with a special legislative procedure’, adopted — citing ‘the [FEU Treaty], and in particular 349 thereof’, as legal basis and after an ‘opinion of the … Parliament [of 12 December 2013]’ — Regulation No 1385/2013, Directive 2013/62 and Directive 2013/64 (collectively ‘the contested acts’).
Procedure before the Court and forms of order sought
By decision of the President of the Court of 29 April 2014, the present cases were joined for the purposes of the written and oral parts of the procedure and of the judgment.
The Parliament claims that the Court should:
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annul Regulation No 1385/2013 and Directive 2013/64;
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maintain the effects of the aforesaid regulation and directive until acts replacing them founded on the appropriate legal bases have entered into force; and
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order the Council to pay the costs.
The Commission claims that the Court should:
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annul the contested acts;
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maintain the effects of the contested acts until acts replacing them founded on the appropriate legal bases have entered into force; and
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order the Council to pay the costs.
The Council contends that the Court should:
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dismiss the actions;
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in the alternative, if the contested acts are wholly or partially annulled, maintain their effects until acts replacing them founded on the appropriate legal bases have entered into force; and
—
order the Parliament and the Commission to pay the costs.
By decision of the President of the Court of 29 July 2014, the Kingdom of Spain, the French Republic and the Portuguese Republic were granted leave to intervene in support of the form of order sought by the Council.
The actions
In support of their respective actions, the Parliament and the Commission put forward a single plea, to the effect that the Council, by adopting the contested acts on the basis of Article 349 TFEU, chose the wrong legal basis.
Arguments of the parties
Arguments of the Commission
The Commission submits that Article 349 TFEU applies only where derogation from the application of primary law to the outermost regions is involved. Where there is no such derogation, the legal basis for an act that merely adapts a policy to those regions, as was the case in respect of the contested acts, should be sought in the provisions relating to that policy.
The Commission points out that Article 355(1) TFEU states that ‘[t]he provisions of the Treaty shall apply’ to the outermost regions ‘in accordance with Article 349 [TFEU]’. It follows that Article 349 TFEU enables only derogation from the application of the ‘provisions of the Treaty’ to those regions.
In this connection, it follows from Article 52 TEU that, whilst ‘the Treaties’ are applicable to all the Member States, their territorial scope is specified in Article 355 TFEU. Thus, in the Commission’s view, the links between those two provisions mean that the term ‘Treaties’ which they use excludes secondary legislation. Indeed, details relating to the geographical scope of a rule of secondary law are normally set out in that rule itself and are not affected by either Article 355 TFEU or Article 52 TEU.
As regards Article 349 TFEU more specifically, the Commission states that it cannot be read as authorising the Council to adopt any ‘specific measure’ advantageous to the outermost regions referred to in it. It permits only the adoption of measures in the light of the ‘structural social and economic situation’ of those regions and of the factors, exhaustively listed in its first paragraph, which compound that situation.
In so far as the ‘specific measures’ provided for in Article 349 TFEU are ‘aimed, in particular, at laying down the conditions of application of the Treaties’ to the regions concerned, the term ‘in particular’ denotes that that article covers any measure derogating from the Treaties, whether or not it consists in laying down such ‘conditions of application’. On the other hand, that article does not permit the Council to lay down ‘conditions of application’ of secondary legislation.
Such an interpretation cannot be affected either by the words ‘including common policies’ used in the first paragraph of Article 349 TFEU or by the non-exhaustive list of those policies in the second paragraph of Article 349 TFEU. The use of those words and the presence of that list merely underscore that the scope of Article 349 TFEU is not restricted to certain specific policy areas, and does not mean that the field of application of that article should be extended to an extent such that the Council would be empowered, on the basis thereof, to adopt measures derogating from secondary legislation.
The Commission submits that the system of legal bases in the FEU Treaty supports its line of argument. Each of those legal bases, with the exception of Article 349 TFEU, relates to a given policy, taken as a whole, and grants the EU legislature a wide discretion, with a view to taking account of any relevant factor. It follows that geographical differentiation is permitted, provided that the principle of equal treatment is observed. Therefore, differential treatment in favour of an outermost region can be justified by the existence in that region of one or more of the factors listed in Article 349 TFEU without that affecting the legal basis applicable to that treatment.
Finally, the Commission requests the Court to maintain the effects of the contested acts, since its actions do not concern their actual content.
Arguments of the Parliament
The Parliament submits that Regulation No 1385/2013 and Directive 2013/64 simultaneously pursue a number of objectives and have several components that are indissociably linked, without some being secondary and indirect in relation to the others. Thus those acts should have been founded on the various corresponding legal bases.
According to the Parliament, Article 349 TFEU cannot have any supremacy over the sectoral legal bases as regards measures intended to implement a given policy, albeit in one or more outermost regions, as otherwise the structure of the FEU Treaty, and the institutional balance in the adoption of the measures envisaged by it, would be undermined. The provisions governing EU policies apply also to the outermost regions.
It follows, in the Parliament’s view, that the measures implementing those policies must be adopted on the legal bases established in Part Three of the FEU Treaty. The fact that a measure relates, in whole or in part, to one or more outermost regions is immaterial in this regard. The decisive criterion is whether that measure pursues objectives particular to the policy concerned, without however constituting a specific measure for outermost regions within the meaning of Article 349 TFEU.
In this regard, the Parliament submits that it follows from the wording of Article 349 TFEU that that provision enables only the adoption of ‘specific measures’ designed to compensate for the disadvantages caused by the ‘special characteristics and constraints’ which differentiate the region or regions concerned from the rest of the territory of the European Union.
It follows in particular from the purpose stated in the first paragraph of Article 349 TFEU, according to which those measures are aimed, ‘in particular, at laying down the conditions of application of the Treaties to those regions, including common policies’, and from the safeguard laid down in the third paragraph of Article 349 TFEU, which provides that those measures must be adopted ‘without undermining the integrity and the coherence of the Union legal order, including … common policies’, that Article 349 TFEU concerns only derogations from the full application of EU law.
Therefore, the scope of that article does not encompass measures which do not introduce any derogation from otherwise applicable rules but merely postpone the application of certain provisions of EU law to an outermost region.
In the case of Directive 2013/64, it is apparent from its recitals that it has the objective, by granting transitional periods, of facilitating the full application so far as concerns Mayotte of various directives in the fields of the environment, agriculture, social policy and public health.
The difficulties encountered in respect of full application of those directives in that region do not stem either from its ‘structural social and economic situation’ or from the existence of one or more aggravating factors, as exhaustively listed in the first paragraph of Article 349 TFEU. Such difficulties could concern any region subject to the obligation to comply, from a specified date, with requirements which were not applicable to it previously.
Therefore, according to the Parliament, the amendments made by Directive 2013/64 should have had as their legal basis the bases corresponding to the sectoral directives concerned and could not be founded on Article 349 TFEU.
So far as concerns Regulation No 1385/2013, the Parliament states that Article 1 is intended to implement the objectives of the common fisheries policy. The fact that the fragile marine environment which must be protected is located in the waters of an outermost region is not relevant, as such a situation may arise in any other region of the European Union. Thus, the measures adopted by the Council in that regulation are not designed to compensate for the disadvantages due to ‘the structural social and economic situation’ of Mayotte.
The Parliament adds that the fact that a given measure, adopted in the field of the common fisheries policy, may also be designed to have positive effects economically and socially and in the employment field is not such as to take the measure outside that policy.
As regards Article 2 of Regulation No 1385/2013, the amendment in question is only a transitional measure designed to enable full application of secondary legislation in Mayotte and should therefore, according to the Parliament, have been adopted on the sectoral basis constituted by Article 43(2) TFEU.
As to Article 3 of Regulation No 1385/2013, the Parliament concedes that the measures in Article 3(1) and (2) represent a derogation and were adopted in the light of the particular ‘economic and structural situation’ of Mayotte. Accordingly, Article 349 TFEU did in fact constitute the appropriate legal basis for the adoption of those measures.
On the other hand, in amending, by Article 3(3) of Regulation No 1385/2013, the table on fishing capacity ceilings set out in Annex II to Regulation No 1380/2013 without limiting the number of fishing vessels operating from Mayotte, the Council did not adopt a ‘specific measure’ in the light of the ‘structural social and economic situation’ of Mayotte and of the aggravating factors exhaustively listed in the first paragraph of Article 349 TFEU. That measure should therefore have had Article 43(2) TFEU as its legal basis.
Since Article 4 of Regulation No 1385/2013 merely deferred the entry into force of Article 4 of Regulation No 1069/2009 in Mayotte until 1 January 2021, the Parliament submits that that measure should have been adopted on the basis of Article 168(4)(b) TFEU. In particular, a situation similar to that affecting Mayotte, that is to say, the lack of an animal by-product processing industry, could arise in any other region of the European Union.
The Parliament observes that Article 5 of Regulation No 1385/2013 provides for a temporary exemption from certain rules so far as concerns control of the segment of Mayotte’s fleet comprising vessels less than 10 metres in length, while imposing a simplified and provisional scheme of control. As such a measure is justified by the need, first, ‘to train fishermen and controllers and to set up the appropriate administrative and physical infrastructure’, and, secondly, to attain ‘at least some of the most important objectives of [Council] Regulation (EC) No 1224/2009 [of 20 November 2009 establishing a Community control system for ensuring compliance with the rules of the common fisheries policy, amending Regulations (EC) No 847/96, (EC) No 2371/2002, (EC) No 811/2004, (EC) No 768/2005, (EC) No 2115/2005, (EC) No 2166/2005, (EC) No 388/2006, (EC) No 509/2007, (EC) No 676/2007, (EC) No 1098/2007, (EC) No 1300/2008, (EC) No 1342/2008 and repealing Regulations (EEC) No 2847/93, (EC) No 1627/94 and (EC) No 1966/2006 (OJ 2009 L 343, p. 1)]’, it constitutes a derogation, so that it could be covered by Article 349 TFEU.
In the light of those considerations, the Parliament submits that, in the case of Regulation No 1385/2013, the conditions for applying simultaneously the various legal bases provided for in Articles 43(2) TFEU, 168(4)(b) TFEU and 349 TFEU were met.
Arguments of the Council
The Council contends that Article 349 TFEU constitutes a specific legal basis, having a limited geographical scope, which prevails over sectoral legal bases and which should be used when it is a matter of adopting specific measures aimed at laying down, in particular, the conditions of application of EU law, including secondary legislation, while taking account of the adverse situation, as described in that article, of the outermost regions.
According to the Council, all the measures set out in the contested acts, whatever their duration, are designed to assist Mayotte in accordance with the requirements laid down in Article 349 TFEU and the fact that transitional periods might be granted on a sectoral legal basis does not affect that analysis in the slightest.
The Council further submits that the conditions for using multiple legal bases in order to adopt Regulation No 1385/2013 and Directive 2013/64 were not met. First, the measures that they set out, which relate to a number of distinct fields and are not indissociably linked with one another, were brought together in those acts only in the ‘interest of simplicity and rapidity’. Secondly, that regulation and that directive pursue a main and predominant objective, namely the adoption of specific measures having regard to the situation of Mayotte, a fact which justified use of Article 349 TFEU alone.
The Council disputes, in particular, that Article 1 of Regulation No 1385/2013 and Directives 2013/62 and 2013/64 contain sectoral policy measures. The objective pursued by the restriction on fishing activities which that article lays down is to ‘preserve the shoals of large migratory fish in the vicinity of the island of Mayotte’ for the benefit of Mayotte’s artisanal fleet of longline fishing vessels and thereby to permit development of the local industry.
As that fleet cannot compete effectively with more efficient vessels using purse seines, the aim of that measure is to allow it to have a limited area reserved for it in order to be able to benefit from the passing of shoals of large migratory fish in that area.
The Council adds that Article 1 of Regulation No 1385/2013 seeks, in so doing, to compensate for the handicaps arising from the structural social and economic situation of Mayotte and thus falls within the scope of Article 349 TFEU.
Finally, the Council observes that Directive 2013/62 was addressed to the French Republic, that neither Article 151 TFEU nor Article 153 TFEU mentions the specific objective consisting in assisting the outermost regions and that the legal conditions set out in Article 155(2) TFEU were not met in this instance.
Arguments of the interveners
The French Government submits that the objective pursued by Article 349 TFEU is to permit the adoption of specific measures on account of structural handicaps and that, consequently, that article may serve as a basis for measures designed to take account of particular factors which, without being economic or social in the strict sense, specifically affect an outermost region, such as environmental factors like climate or the fragility of its marine areas. Article 349 TFEU does not require that the specific measures for which it provides be adopted in order to ‘deal with’ the specific social or economic situation of the region concerned but only that they be adopted ‘[t]aking account’ of that situation.
The French Government explains that the measures laid down by Regulation No 1385/2013 were dictated by characteristics and constraints specific to Mayotte and that the structural economic, social and environmental situation of that region provides their justification. They are necessary in order, in particular, to protect the local ecosystem given its fragility and to safeguard the local economy, in the light of the fragmented and underdeveloped nature of the systems for processing and marketing fishery products, the characteristics of the Mayotte fleet, and the lack of training of fishermen and controllers for the controlling of fishing activities.
The measures laid down by Directive 2013/64 are also designed to respond to the specific features of Mayotte so far as concerns, in particular, the state of the environment, economic backwardness and the lack of infrastructure, features which constitute structural handicaps.
As for the measure introduced by Directive 2013/62, it is apparent from the preamble to the directive that it is designed to take account of the difficult social and economic situation of Mayotte, which is characterised by an underdeveloped labour market, by a low employment rate due to Mayotte’s remoteness, insularity, topography and difficult climate, by a low domestic product and by the need to avoid any destabilisation of the local economy.
The French Government adds that, contrary to the Parliament’s assertions, the contested acts do not have as their main objective the guaranteeing of the application of the acquis of EU law in Mayotte at the end of the transitional periods which they lay down, since such application flows directly from Article 355(1) TFEU.
The Spanish Government states that the interpretation of Article 349 TFEU put forward by the Commission would prevent that provision from being given practical effect since, if that interpretation were upheld, it would be impossible to adopt specific measures in the fields, governed by secondary legislation, of ‘free zones’ and ‘horizontal … programmes’.
Furthermore, according to the Spanish Government, if the aim of Article 349 TFEU is to define the specific measures which may be adopted in relation to the application of the Treaties, provisional or transitional measures taking account of the characteristics of the regions concerned and designed to ensure full application of the acquis of EU law to them eventually can for all the more reason be adopted on the basis of that provision. In this regard, Article 349 TFEU does not distinguish between measures having substantive content and measures of a temporary nature.
As regards the contested acts, the Spanish Government observes that their main objective, as recital 1 of each of them underscores, is to adapt secondary legislation to the structural social and economic situation of Mayotte. Furthermore, since the measures introduced by those acts have the aim of laying down the conditions of application of the Treaties, including as regards secondary legislation, Article 349 TFEU is the predominant legal basis.
The Portuguese Government submits that it is clear on reading various provisions of the Treaties that in the absence of an express provision to the contrary the terms ‘Treaties’ and ‘application of the Treaties’ must be understood as denoting ‘EU law’ and ‘EU legal acquis’, including secondary legislation.
Furthermore, the criterion put forward by the Parliament which would enable a distinction to be drawn between permanent and temporary derogations is not in any way supported by the wording of Article 349 TFEU.
Therefore, Article 349 TFEU is presented as a specific legal basis whose significance is apparent from the fact that that article (i) defines the concept of ‘outermost region’ (identification of the territories), (ii) specifies the substantive field of application of the differentiating measures (any area where EU law applies), (iii) sets the limits of the Council’s decision-making power (the measures may not ‘undermin[e] the integrity and the coherence of the Union legal order’) and (iv) constitutes an authorising provision furnishing a legal basis and identifying both the procedure to be followed (decision of the Council, on a proposal from the Commission and after consulting the Parliament) and the nature of the specific measures to be adopted (they must have the aim of alleviating the structural inequality of the regions concerned).
Findings of the Court
It should be noted first of all that Article 52 TEU provides, in its first paragraph, that the Treaties are to apply to the Member States and, in its second paragraph, that the territorial scope of the Treaties is specified in Article 355 TFEU.
Under Article 355(1) TFEU, as amended by Article 2 of Decision 2012/419, the provisions of the Treaties are to apply to the outermost regions, one of which is Mayotte, in accordance with Article 349 TFEU.
The first paragraph of Article 349 TFEU, as amended by Article 2 of Decision 2012/419, provides that the Council ’shall adopt specific measures aimed, in particular, at laying down the conditions of application of the Treaties to those regions, including common policies’.
It is also apparent from the first paragraph of Article 349 TFEU that the ‘specific measures’ which it concerns are adopted ‘[t]aking account’ of the ‘structural social and economic situation’ of the outermost regions, which ‘is compounded’ by a number of factors ‘the permanence and combination of which severely restrain their development’.
Those factors are thus presented in the first paragraph of Article 349 TFEU as matters that compound the structural social and economic situation of the outermost regions which the Council must take into consideration, under the third paragraph of Article 349 TFEU, when adopting the specific measures.
Whilst, accordingly, the Parliament is not correct in asserting that any specific measure, within the meaning of Article 349 TFEU, must be justified not only by the structural social and economic situation of the outermost region concerned but also by the existence of at least one of the factors exhaustively listed in the first paragraph of Article 349 TFEU particular to that region, the fact remains that the Council must be able, in accordance with the third paragraph of Article 349 TFEU, to put forward matters establishing a connecting factor between the specific measure envisaged and special characteristics and constraints of the outermost region at issue.
In addition, it is stated in the second paragraph of Article 349 TFEU that specific measures adopted by the Council pursuant to its first paragraph concern ‘in particular areas such as customs and trade policies, fiscal policy, free zones, agriculture and fisheries policies, conditions for supply of raw materials and essential consumer goods, State aids and conditions of access to structural funds and to horizontal Union programmes’.
Thus, it is clear from the wording of Article 349 TFEU that it enables the Council to adopt, in particular in the areas referred to in the preceding paragraph of the present judgment, specific measures designed to take account of the structural social and economic situation of the outermost regions.
As regards the Commission’s argument that Article 349 TFEU enables only derogation from the application of primary law to the outermost regions and not, as was the case in this instance, adaptation of acts of secondary legislation to the particular situation of those regions, it should first of all be pointed out that the ‘conditions of application of the Treaties’, within the meaning of that article, must be understood as covering both the conditions relating to the application of primary EU law and those relating to the application of the acts of secondary legislation adopted on the basis of that primary law.
This interpretation is borne out by the Court’s interpretation of Article 227(2) of the EC Treaty (which became Article 299(2) EC, and now Article 349 TFEU), according to which the authorisation conferred on the Council by that provision to lay down specific measures designed to meet the needs of overseas territories concerns both the provisions of the Treaty and those of secondary legislation (judgment in Hansen & Balle, 148/77, EU:C:1978:173, paragraph 11).
Next, as the Council has observed, a number of the areas referred to in the second paragraph of Article 349 TFEU are governed for the most part by acts of secondary legislation. Therefore, the practical effect of that provision would be affected if, in those areas, it authorised only the adoption of specific measures aimed at laying down the conditions of application of primary law.
Finally, as the Advocate General has observed in point 57 of his Opinion, acts of secondary legislation, contrary to what the Commission seems to assert, do not all define their territorial scope.
It follows that, in the absence of detail in that respect, the scope of an act of secondary legislation must, as the French Government in particular has submitted, be determined on the basis of Articles 52 TEU and 355 TFEU.
Indeed, the Court has already had occasion to state that secondary legislation applies in principle to the same area as the Treaties themselves and applies automatically in that area (see, to this effect, judgments in Commission v Ireland, 61/77, EU:C:1978:29, paragraph 46, and Hansen & Balle, 148/77, EU:C:1978:173, paragraph 11).
Consequently, it follows from the wording and the objectives of Article 349 TFEU and from the scheme of the Treaties that, as regards the outermost regions, the territorial scope of the entire acquis of EU law is defined in particular by Article 52 TEU read in conjunction with Article 355(1) TFEU and by the measures adopted pursuant to Article 349 TFEU.
Therefore, contrary to the Commission’s assertions, Article 349 TFEU empowers the Council to adopt specific measures aimed at laying down the conditions of application to those regions not only of the provisions of the Treaties but also of provisions of secondary legislation.
Accordingly, the Commission’s actions in Cases C‑133/14 to C‑135/14, which are based exclusively on the contrary proposition, must be dismissed.
So far as concerns the Parliament’s line of argument that Article 349 TFEU does not empower the Council to adopt measures whose sole aim is to defer the application of certain provisions of EU law to outermost regions, it must be stated that that article does not restrict the Council’s decision-making power to a particular category of measures.
Apart from the fact that the word ‘measure’ covers any type of action that may be carried out by the Council, the use of the words ‘in particular’ in Article 349 TFEU signifies that the authors of the FEU Treaty did not intend to lay down an exhaustive list of the types of measures that may be adopted on the basis of that article.
Consequently, the Council and the Spanish and Portuguese Governments are justified in asserting that the distinction drawn by the Parliament between derogations from provisions of EU law, on the one hand, and mere postponements of their applicability, on the other, is not in any way supported by the wording of that article.
Such a limitation would also be contrary to the objectives pursued by Article 349 TFEU, since there is nothing to preclude postponement of the full applicability of a provision of EU law from proving to be the most appropriate measure for taking account of the structural social and economic situation of an outermost region.
It must be examined in the present case whether the contested acts satisfy the requirements set out in paragraphs 67 to 69 of the present judgment.
As regards, in the first place, Regulation No 1385/2013, it should be noted, first, that Article 1(1) of that regulation added to ‘Region 8’, as defined by Regulation No 850/98, the waters off the coasts of Mayotte that fall under the sovereignty or jurisdiction of the French Republic and that Article 2(2) inserted in Regulation No 850/98 Article 34g prohibiting vessels from using any purse seine on tuna and tuna-like shoals of fish inside the area within 24 miles of the coasts of Mayotte, measured from the baselines from which territorial waters are measured.
It is apparent from recitals 3 and 7 of Regulation No 1385/2013, read together and as explained by the Council before the Court, that the objective of those measures is to preserve the shoals of large migratory fish in the vicinity of Mayotte for the benefit of the local fleet which, being an underdeveloped fleet of longliners, cannot match foreign fleets. It follows that those measures were adopted taking account of the structural social and economic situation of Mayotte. Therefore, the Council could lawfully act on the basis of Article 349 TFEU in order to adopt them.
Secondly, Article 2 of Regulation No 1385/2013 amended Article 35 of Regulation No 1379/2013 by adding paragraph 6, which provides that until 31 December 2021 Article 35(1), (2) and (3) will not apply to products offered for retail sale to the final consumer in Mayotte.
As is apparent from recital 4 of Regulation No 1385/2013, that measure was justified by the Council by the need to take account of the ‘very fragmented and underdeveloped marketing schemes of Mayotte’ and to prevent the premature application of the rules on the labelling of fishery products from imposing on retailers a burden disproportionate to the information that would be transmitted to the consumer.
That measure was therefore adopted taking account of the structural social and economic situation of Mayotte. It follows that the Council was able to act on the basis of Article 349 TFEU in order to adopt it.
Thirdly, given that the Parliament does not dispute that the measures set out in Article 3(1) and (2) of Regulation No 1385/2013 could be founded on Article 349 TFEU, it is not incumbent on the Court to verify whether those measures were adopted in compliance with the requirements set out in paragraphs 67 to 69 of the present judgment.
In so far as the Parliament contests that Article 349 TFEU could be the basis for inserting, as provided for by Article 3(3) of Regulation No 1385/2013, the entries concerning Mayotte set out in the annex to that regulation into the table in Annex II to Regulation No 1380/2013, it must be stated that that measure constitutes, together with the measures laid down in Article 3(1) and (2) of Regulation No 1385/2013, an inseparable whole and that, as the Advocate General has observed in point 81 of his Opinion, it is ancillary to those measures.
Accordingly, the Parliament cannot criticise the Council for acting on the basis of Article 349 TFEU in order to adopt the body of measures laid down in Article 3 of Regulation No 1385/2013.
Fourthly, the postponement, by Article 4 of Regulation No 1385/2013, of the entry into force of Article 4 of Regulation No 1069/2009 in Mayotte until 1 January 2021 was justified by the Council, as stated in recital 8 of Regulation No 1385/2013, by the fact that Mayotte has no industrial capacity for the processing of animal by-products.
That measure was therefore adopted taking account of the structural social and economic situation of Mayotte. It follows that the use of Article 349 TFEU as the legal basis for that measure complied with EU law.
As regards, in the second place, the question whether the provisions of Directive 2013/64 meet the requirements set out in paragraphs 67 to 69 of the present judgment, in Articles 1 to 6 of that directive, as the Parliament correctly points out, the Council amended Directives 91/271, 1999/74, 2000/60, 2006/7, 2006/25 and 2011/24 in order to postpone the full application, so far as concerns Mayotte, of certain provisions which they contain.
Those amendments were justified generally, as stated in recital 2 of Directive 2013/64, by the need to ‘take account of the particular situation in Mayotte as regards the state of the environment, which needs to be considerably improved for it to comply with environmental objectives laid down by Union law, and for which additional time is needed’.
Furthermore, justifications specific to each of those amendments were set out by the Council in recitals 3 to 9 of that directive.
Thus, in recital 3 of Directive 2013/64, which concerns the amendments to Directive 91/271, it was indicated that the specific structural and economic situation of Mayotte, so far as concerns the treatment of urban waste water, did not meet the requirements of Directive 91/271.
In recital 4 of Directive 2013/64, relating to the amendments to Directive 1999/74, it was noted in respect of the protection of laying hens that considerable investment and preparatory work were necessary to make the situation in Mayotte consistent with the requirements of Directive 1999/74.
In recital 5 of Directive 2013/64, regarding the amendments to Directive 2000/60, the Council stated that, due to the specific structural and economic situation of Mayotte, the French Republic had to be granted a sufficient period of time for the adoption and implementation of measures ensuring that river basin management plans comply with the requirements of Directive 2000/60.
In recital 6 of Directive 2013/64, relating to the amendments to Directive 2006/7, it was pointed out that the state of surface waters in Mayotte needed to be considerably improved for them to comply with the requirements of Directive 2006/7, bathing water quality being affected due to the special social and economic situation of that region.
In recital 7 of Directive 2013/64, concerning the amendments to Directive 2006/25, the Council noted that, due to Mayotte’s special social and economic situation, there were no technical facilities available there for the implementation of measures necessary to comply with Directive 2006/25 in the field of artificial optical radiation.
Finally, in recital 9 of Directive 2013/64, concerning the amendment to Directive 2011/24, the Council explained that the transposition of Directive 2011/24 required a number of adaptations to ensure continuity of care and information to patients.
It is clear that the measures that Directive 2013/64 sets out, by which the Council amended Directives 91/271, 1999/74, 2000/60, 2006/7, 2006/25 and 2011/24, were adopted taking account of the structural social and economic situation of Mayotte. Therefore, the Council was entitled to act on the basis of Article 349 TFEU in order to adopt those measures.
In the light of the foregoing considerations, it is apparent from the objectives and content of the contested acts that the measures set out in them were adopted taking account of the structural social and economic situation of Mayotte, within the meaning of the first paragraph of Article 349 TFEU.
Accordingly, the Parliament is not justified in asserting that neither Articles 1, 2 and 4 of Regulation No 1385/2013 nor Directive 2013/64 could lawfully have Article 349 TFEU as their legal basis.
Consequently, the actions of the Parliament in Cases C‑132/14 and C‑136/14 must also be dismissed.
Costs
Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the Council has applied for costs and the Parliament and the Commission have been unsuccessful in Cases C‑132/14 to C‑136/14, they must be ordered to pay the Council’s costs relating to those cases.
In accordance with Article 140(1) of the Rules of Procedure, the Kingdom of Spain, the French Republic and the Portuguese Republic are to bear their own costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Dismisses the actions in Cases C‑132/14 to C‑136/14;
2.
Orders the European Parliament to pay the costs of the Council of the European Union relating to Cases C‑132/14 and C‑136/14;
3.
Orders the European Commission to pay the costs of the Council of the European Union relating to Cases C‑133/14 to C‑135/14;
4.
Orders the Kingdom of Spain, the French Republic and the Portuguese Republic to bear their own costs.
[Signatures]
( * ) Language of the case: French. |
JUDGMENT OF THE COURT (Seventh Chamber) 10 December 2015 (*)
(Appeal — Customs Union and Common Customs Tariff — Regulation (EU) No 861/2010 — Actions for annulment — Fourth paragraph of Article 263 TFEU — Regulatory act not entailing implementing measures — Release of goods and communication of the amount of the duties — Use of simplified procedures or data-processing techniques) In Case C‑552/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 1 December 2014, Canon Europa NV, established in Amsterdam (Netherlands), represented by P. De Baere, avocat, and P. Muñiz, advogado,
appellant, the other party to the proceedings being: European Commission, represented by R. Lyal, acting as Agent,
defendant at first instance, THE COURT (Seventh Chamber), composed of A. Arabadjiev, President of the Sixth Chamber, acting as President of the Seventh Chamber, C. Lycourgos (Rapporteur) and J.-C. Bonichot, Judges,
Advocate General: Y. Bot, Registrar: A. Calot Escobar, having regard to the written procedure, having decided, after hearing the Advocate General, to proceed to judgment without an Opinion, gives the following Judgment 1 By its appeal, Canon Europa NV (‘Canon Europa’) seeks to have set aside the order of the General Court of the European Union of 16 September 2014 in Canon Europa v Commission (T‑34/11, EU:T:2014:797; ‘the order under appeal’), by which it declared inadmissible its action seeking the annulment in part of the annex to Commission Regulation (EU) No 861/2010 of 5 October 2010 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 2010 L 284, p. 1; ‘the contested regulation’).
Legal context Regulation (EEC) No 2913/92 2 The sixth and eighth recitals in the preamble to Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), as amended by Council Regulation (EC) No 1186/2009 of 16 November 2009 (OJ 2009 L 324, p. 23; ‘the Customs Code’) state:
‘… in view of the paramount importance of external trade for the Community, customs formalities and controls should be abolished or at least kept to a minimum;
… … in adopting the measures required to implement this Code, the utmost care must be taken to prevent any fraud or irregularity liable to affect adversely the General Budget of the European Communities …’.
3 Article 4 of the Customs Code provides:
‘For the purposes of this Code, the following definitions shall apply: … (5) “Decision” means any official act by the customs authorities pertaining to customs rules giving a ruling on a particular case, such act having legal effects on one or more specific or identifiable persons; this term covers, inter alia, binding information within the meaning of Article 12.
… (17) “Customs declaration” means the act whereby a person indicates in the prescribed form and manner a wish to place goods under the common transit procedure.
… (20) “Release of goods” means the act whereby the customs authorities make goods available for the purposes stipulated by the customs procedure under which they are placed.
…’ 4 Article 59(1) of that code states:
‘All goods intended to be placed under a customs procedure shall be covered by a declaration for that customs procedure.’ 5 Article 61 of that code is worded as follows:
‘The customs declaration shall be made: (a) in writing; or (b) using a data-processing technique where provided for by provisions laid down in accordance with the committee procedure or where authorised by the customs authorities; or
(c) by means of a normal declaration or any other act whereby the holder of the goods expresses his wish to place them under a customs procedure, where such a possibility is provided for by the rules adopted in accordance with the committee procedure.’
6 Article 62 of that code provides:
‘1. Declarations in writing shall be made on a form corresponding to the official specimen prescribed for that purpose. They shall be signed and contain all the particulars necessary for implementation of the provisions governing the customs procedure for which the goods are declared.
2. The declaration shall be accompanied by all the documents required for implementation of the provisions governing the customs procedure for which the goods are declared.’
7 Under Article 63 of the Customs Code:
‘Declarations which comply with the conditions laid down in Article 62 shall be accepted by the customs authorities immediately, provided that the goods to which they refer are presented to customs.’
8 Article 66 of that code is worded as follows:
‘1. The customs authorities shall, at the request of the declarant, invalidate a declaration already accepted where the declarant furnishes proof that goods were declared in error for the customs procedure covered by that declaration or that, as a result of special circumstances, the placing of the goods under the customs procedure for which they were declared is no longer justified.
Nevertheless, where the customs authorities have informed the declarant of their intention to examine the goods, a request for invalidation of the declaration shall not be accepted until after the examination has taken place.
2. The declaration shall not be invalidated after the goods have been released, expect in cases defined in accordance with the committee procedure.
3. Invalidation of the declaration shall be without prejudice to the application of the penal provisions in force.’ 9 Under Article 73(1) of that code:
‘Without prejudice to Article 74, where the conditions for placing the goods under the procedure in question are fulfilled and provided the goods are not subject to any prohibitive or restrictive measures, the customs authorities shall release the goods as soon as the particulars in the declaration have been verified or accepted without verification. The same shall apply where such verification cannot be completed within a reasonable period of time and the goods are no longer required to be present for verification purposes.’
10 Under Article 74 of that code:
‘1. Where acceptance of a customs declaration gives rise to a customs debt, the goods covered by the declaration shall not be released unless the customs debt has been paid or secured. However, without prejudice to paragraph 2, this provision shall not apply to the temporary importation procedure with partial relief from import duties.
2. Where, pursuant to the provisions governing the customs procedure for which the goods are declared, the customs authorities require the provision of a security, the said goods shall not be released for the customs procedure in question until such security is provided.’
11 Article 76 of the Customs Code provides:
‘1. In order to simplify completion of formalities and procedures as far as possible while ensuring that operations are conducted in a proper manner, the customs authorities shall, under conditions laid down in accordance with the committee procedure, grant permission for:
(a) the declaration referred to in Article 62 to omit certain of the particulars referred to in paragraph 1 of that Article [or] for some of the documents referred to in paragraph 2 of that Article not to be attached thereto;
(b) a commercial or administrative document, accompanied by request for the goods to be placed under the customs procedure in question, to be lodged in place of the declaration referred to in Article 62;
(c) the goods to be entered for the procedure in question by means of an entry in the records; in this case, the customs authorities may waive the requirement that the declarant presents the goods to customs.
The simplified declaration, commercial or administrative document or entry in the records must contain at least the particulars necessary for identification of the goods. Where the goods are entered in the records, the date of such entry must be included.
2. Except in cases to be determined in accordance with the committee procedure, the declarant shall furnish a supplementary declaration which may be of a general, periodic or recapitulative nature.
3. Supplementary declarations and the simplified declarations referred to in subparagraphs 1(a), (b) and (c), shall be deemed to constitute a single, indivisible instrument taking effect on the date of acceptance of the simplified declarations; in the cases referred to in subparagraph 1(c), entry in the records shall have the same legal force as acceptance of the declaration referred to in Article 62.
4. Special simplified procedures for the Community transit procedure shall be laid down in accordance with the committee procedure.’ 12 Article 77(1) of that code is worded as follows:
‘Where the customs declaration is made by means of a data-processing technique within the meaning of Article 61(b), or by an oral declaration or any other act within the meaning of Article 61(c), Articles 62 to 76 shall apply mutatis mutandis without prejudice to the principles set out therein.’
13 Under Article 78(1) of the Customs Code, in the section entitled ‘Post-clearance examination of declarations’:
‘The customs authorities may, on their own initiative or at the request of the declarant, amend the declaration after release of the goods.’
14 Article 217(1) of that code is worded as follows:
‘Each and every amount of import duty or export duty resulting from a customs debt, hereinafter called “amount of duty”, shall be calculated by the customs authorities as soon as they have the necessary particulars, and entered by those authorities in the accounting records or on any other equivalent medium (entry in the accounts).
…’ 15 Under Article 221(1) and (2) of the code:
‘1. As soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor in accordance with appropriate procedures.
2. Where the amount of duty payable has been entered, for guidance, in the customs declaration, the customs authorities may specify that it shall not be communicated in accordance with paragraph 1 unless the amount of duty indicated does not correspond to the amount determined by the authorities.
… [W]here use is made of the possibility provided for in the preceding subparagraph, release of the goods by the customs authorities shall be equivalent to communication to the debtor of the amount of duty entered in the accounts.’
16 Procedures for the repayment or remission of duties are governed by Article 236 of the Customs Code, which provides as follows:
‘1. Import duties … shall be repaid in so far as it is established that when they were paid the amount of such duties was not legally owed or that the amount has been entered in the accounts contrary to Article 220(2).
Import duties … shall be remitted in so far as it is established that when they were entered in the accounts the amount of such duties was not legally owed or that the amount has been entered in the accounts contrary to Article 220(2).
No repayment or remission shall be granted when the facts which led to the payment or entry in the accounts of an amount which was not legally owed are the result of deliberate action by the person concerned.
2. Import duties or export duties shall be repaid or remitted upon submission of an application to the appropriate customs office within a period of three years from the date on which the amount of those duties was communicated to the debtor.
That period shall be extended if the person concerned provides evidence that he was prevented from submitting his application within the said period as a result of unforeseeable circumstances or force majeure.
Where the customs authorities themselves discover within this period that one or other of the situations described in the first and second subparagraphs of paragraph 1 exists, they shall repay or remit on their own initiative.’
17 Articles 243 to 246 of the Customs Code form Title VIII thereof, entitled ‘Appeals’. Article 243 is worded as follows:
‘1. Any person shall have the right to appeal against decisions taken by the customs authorities which relate to the application of customs legislation, and which concern him directly and individually.
Any person who has applied to the customs authorities for a decision relating to the application of customs legislation and has not obtained a ruling on that request within the period referred to in Article 6(2) shall also be entitled to exercise the right of appeal.
The appeal must be lodged in the Member State where the decision has been taken or applied for. 2. The right of appeal may be exercised: (a) initially, before the customs authorities designated for that purpose by the Member States; (b) subsequently, before an independent body, which may be a judicial authority or an equivalent specialised body, according to the provisions in force in the Member States.’
18 Article 244 of that code provides:
‘The submission of an appeal shall not cause implementation of the disputed decision to be suspended. The customs authorities shall, however, suspend implementation of such decision in whole or in part where they have good reason to believe that the disputed decision is inconsistent with customs legislation or that irreparable damage is to be feared for the person concerned.
Where the disputed decision has the effect of causing import duties … to be charged, suspension of implementation of that decision shall be subject to the existence or lodging of a security. However, such security need not be required where such a requirement would be likely, owing to the debtor’s circumstances, to cause serious economic or social difficulties.’
19 Article 245 of that code is worded as follows:
‘The provisions for the implementation of the appeals procedure shall be determined by the Member States.’ 20 Article 246 of that code provides:
‘This title shall not apply to appeals lodged with a view to the annulment or revision of a decision taken by the customs authorities on the basis of criminal law.’
The contested regulation 21 Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1) put in place a complete nomenclature of products imported and exported in the European Union. That combined nomenclature is in Annex I to that regulation.
22 In accordance with Article 12(1) of Regulation No 2658/87, the Commission is to adopt each year by means of a regulation a complete version of the Combined Nomenclature together with the rates of excise duty, as it results from measures adopted by the Council of the European Union or by the Commission. That regulation is to apply from 1 January of the following year.
23 Thus, the Combined Nomenclature was replaced, with effect from 1 January 2011, by that in the annex to the contested regulation (‘the CN’).
24 Subheading 8443 31 of the CN, included in Chapter 84 thereof, concerns multifunctional machines, that is to say printers, copying or facsimile machines which ‘perform two or more of the functions of printing, copying or facsimile transmission, capable of connecting to an automatic data-processing machine or to a network’ (‘MFMs’). That subheading includes the following three subdivisions:
‘8443 31 10
– – – Machines performing the functions of copying and facsimile transmission, whether or not with a printing function, with a copying speed not exceeding 12 monochrome pages per minute
– – – Other:
8443 31 91
8443 31 99
– – – – Machines performing a copying function by scanning the original and printing the copies by means of an electrostatic print engine
– – – – Other’
25 Under the CN, the import of MFMs falling within code 8443 31 91 is subject to a ‘conventional duty’ the rate of which is 6%. However, MFMs falling within the two other subdivisions of subheading 8443 31 of the CN benefit from an exemption.
The procedure before the General Court and the order under appeal 26 By application registered at the Registry of the General Court on 24 January 2011, Canon Europa, a company importing and distributing in the EU digital office equipment, in particular MFMs, brought an action seeking the annulment in part of the contested regulation, being of the view, inter alia, that that regulation was invalid in that it amended the rates of customs duty applicable to certain MFMs.
27 By a document registered at the Registry of the General Court on 13 April 2011, the Commission raised a plea of inadmissibility under Article 114 of the Rules of Procedure of the General Court on the ground, in essence, that the contested regulation did not directly affect Canon Europa and that, in any event, that regulation entailed implementing measures. Furthermore, Canon Europa accepted that the contested regulation was not addressed to it and that it was not individually affected by it. Accordingly, in the view of the Commission, it did not have standing to bring proceedings under the fourth paragraph of Article 263 TFEU. Canon Europa submitted its observations on that plea of inadmissibility on 8 June 2011.
28 Under Article 114(4) of the Rules of Procedure of the General Court, that Court decided to rule on the plea of inadmissibility raised by the Commission without examining the substance of the case.
29 In the order under appeal, the General Court dismissed the action as inadmissible. In paragraph 47 of that order, it held that the introduction of subdivisions in a subheading of the Combined Nomenclature such as that effected by the contested regulation was liable to produce real and definitive legal effects on the situation of importers only through the intervention of individual measures taken by the national customs authorities following submission of the customs declaration, since those measures could, depending on the case, lead to the release of the goods or the communication to the debtor of the amount of duty payable.
30 The General Court thus decided, in paragraph 55 of the order under appeal, that the contested regulation did not constitute a regulatory act which does not entail implementing measures within the meaning of the fourth paragraph of Article 263 TFEU and that since Canon Europa was not able to show that it was individually concerned by the provisions of the contested regulation which it challenged, it did not have standing to bring an action for the annulment of those provisions.
Forms of order sought by the parties and the procedure before the Court of Justice 31 Canon Europa claims that the Court of Justice should:
– hold that the appeal is admissible and set aside the order under appeal; – refer the action back to the General Court for the dispute to be decided on the merits; and – order the Commission to pay all the costs at first instance and on appeal. 32 The Commission contends that the Court of Justice should:
– dismiss the appeal; and – order Canon Europa to pay the costs of the proceedings. 33 By order of 19 December 2011, the President of the Court of Justice decided to join Cases C‑552/14 P and C‑553/14 P for the purposes of the written procedure and the oral procedure. He granted the appellant’s application not to join the cases for the purposes of the judgment.
The appeal 34 Canon Europa puts forward two grounds in support of its appeal.
The first ground of appeal 35 By the first ground of appeal, divided into five parts, Canon Europa argues that the General Court erred in law in its interpretation and application of Article 263 TFEU in that it concluded that the contested regulation entailed implementing measures within the meaning of that provision.
36 The first and second parts of the ground of appeal should be examined together.
The first and second parts – Arguments of the parties 37 By the first part of the first ground of appeal, Canon Europa submits that, in paragraphs 35 and 36 and 38 to 46 of the order under appeal, the General Court erred in law by imprecisely identifying or interpreting the conditions which must, in law, be satisfied by the contested regulation to entail implementing measures.
38 Canon Europa is of the opinion that the General Court was incorrect to hold that the contested regulation did not produce concrete and definitive effects with regard to it and that any obligation following from the contested regulation had to take the form of a decision concerning the tariff classification. Canon Europa submits that the tariff classification of the MFMs and the obligations which follow therefrom with regard to it are clearly provided for in the contested regulation and that accordingly it is not necessary for the measures to be taken to tailor the effects of that regulation to it. Furthermore, in the view of the appellant, implementing measures, within the meaning of Article 263 TFEU, cannot constitute optional measures. The checks carried out by the customs authorities are optional and therefore irrelevant to the examination of the admissibility of the action for annulment.
39 According to Canon Europa, the General Court’s analysis of the various stages of the import procedure is also irrelevant. In any event, the General Court erred in law by mixing the existence and the recovery of the customs debt. In that regard, Canon Europa submits that it is the acceptance of the customs declaration which crystallises the effects of the contested regulation and that, since the General Court accepted that that acceptance did not constitute an implementing measure within the meaning of Article 263 TFEU, that regulation therefore produces concrete and definitive obligations, while not entailing implementing measures.
40 By the second part of the first ground of appeal, Canon Europa argues that, in paragraphs 42 to 47 of the order under appeal, the General Court erred in law and gave contradictory and insufficient reasons for its decision when declaring that the release of the goods and the communication of the amount of the duties to be paid constituted decisions concerning the tariff classification.
41 Canon Europa submits that the General Court’s reasoning is contradictory, given that it does not give the same reasons for its decision, as regards the release of the goods, as those in paragraph 39 of the order under appeal, according to which acceptance of the customs declaration does not imply any decision. Furthermore, Canon Europa is of the view that the General Court does not explain on what basis the release of the goods constitutes a decision concerning tariff classification and, in paragraphs 41 and 43 of the order under appeal, seems only to suppose that to be the case, which equates to a failure to state reasons.
42 In addition, it follows from the first subparagraph of Article 221(2) of the Customs Code that the communication of the amount of the duties to be paid is not always made. Accordingly, if the release of the goods is the only act adopted and if it does not constitute a decision concerning tariff classification, Canon Europa argues that there is no decision concerning tariff classification for the goods in that hypothetical case. Furthermore, the mere ‘agreement’ of the customs authorities on the tariff classification, as set out in paragraph 43 of the order under appeal, cannot constitute such a decision.
43 In any event, Canon Europa submits that the General Court erred in law, given that Articles 217(1) and 221 of the Customs Code are not such as to establish that the communication of the amount of the duties to be paid contains a decision concerning the tariff classification of the goods in question.
44 The Commission disputes Canon Europa’s line of argument.
– Findings of the Court 45 It must be borne in mind that, in order to assess whether a regulatory act entails implementing measures, it should be assessed by reference to the position of the person pleading the right to bring proceedings under the final limb of the fourth paragraph of Article 263 TFEU. It is therefore irrelevant whether the act in question entails implementing measures with regard to other persons (judgments in Telefónica v Commission, C‑274/12 P, EU:C:2013:852, paragraph 30, and T & L Sugars and Sidul Açúcares v Commission, C‑456/13 P, EU:C:2015:284, paragraph 32).
46 In addition, in that assessment, reference should be made exclusively to the subject-matter of the action and, where an applicant seeks only the partial annulment of an act, it is solely any implementing measures which that part of the act may entail that must, as the case may be, be taken into consideration (judgment in Telefónica v Commission, C‑274/12 P, EU:C:2013:852, paragraph 31, and order in Forgital Italy v Council, C‑84/14 P, EU:C:2015:517, paragraph 52).
47 The Court has, moreover, held that it is irrelevant to ascertaining whether or not those measures are mechanical in nature (see, to that effect, judgment in T & L Sugars and Sidul Açúcares v Commission, C‑456/13 P, EU:C:2015:284, paragraphs 41 and 42).
48 In the present case, in order to determine whether the contested regulation entails implementing measures, it is necessary to ascertain whether that regulation, in particular the part of its annex concerned by the appellant’s imports, determines itself the tariff classification of the MFMs imported by Canon Europa and, accordingly, the duties applicable on their import or whether a decision of an administrative authority is needed for the purposes of that classification.
49 In that regard, in paragraphs 35 and 36 of the order under appeal, the General Court rightly held that, although the contested regulation requires Canon Europa to state, in its customs declarations, the subdivisions of subheading 8443 31 when importing MFMs, that regulation does not, however, imply either a decision as regards the tariff classification stated by Canon Europa in its customs declaration or, in consequence, a decision on the amount of customs duties which may be due.
50 The customs system, as instituted by the Customs Code and of which the contested regulation forms part, provides that the receipt of duties fixed by the latter regulation is carried out, in all cases, on the basis of measures adopted by the national authorities.
51 Clearly, therefore, Article 221(1) of the Customs Code provides that ‘[a]s soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor’. The communication allows persons liable for customs debts to have full knowledge of their rights (see, to that effect, judgment in Molenbergnatie, C‑201/04, EU:C:2006:136, paragraph 53). By communicating the amount of the duty payable, the customs authorities thus communicate their decision concerning the tariff classification stated by the debtor in its customs declaration. In addition, that communication enables the debtor, as necessary, to defend his rights (see, to that effect, judgment in Direct Parcel Distribution Belgium, C‑264/08, EU:C:2010:43, paragraph 29).
52 Accordingly, the General Court was right to hold, in paragraph 42 of the judgment under appeal, that the communication of the amount of duty contains a decision concerning the tariff classification of the goods concerned.
53 Furthermore, by holding that, under Article 221(2) of the Customs Code, the release of the goods can be equated to the communication of the amount of the duty, the General Court merely read that provision and, in so doing, gave reasons sufficient in law for its decision that the release of the goods could also constitute a decision concerning the tariff classification (see, to that effect, order in Forgital Italy v Council, C‑84/14 P, EU:C:2015:517, paragraphs 61 and 62).
54 Contrary to the appellant’s submissions, the acceptance of a customs declaration does not ‘bring into being’ the effects of the contested regulation in so far as, firstly, such an acceptance does not equate to a decision concerning the tariff classification of the goods in question and, secondly, it does not determine the duty to which the import of those goods is subject. When a customs declaration is accepted, the customs authorities do not take a decision on the accuracy of the information provided by the declarant, but merely verifies that the conditions laid down in Articles 62 and 63 of the Customs Code have been satisfied (see, to that effect, judgment in DP grup, C‑138/10, EU:C:2011:587, paragraph 39).
55 The appellant’s argument that the implementing measures, within the meaning of Article 263 TFEU, should not constitute optional measures such as the checks carried out by the customs authorities cannot succeed. It must be noted that the General Court does not state at all in the order under appeal that those checks imply a decision concerning the tariff classification of the goods imported, such as indicated in the customs declaration and that such checks constitute, accordingly, implementing measures within the meaning of Article 263 TFEU.
56 Consequently, it must be held that the General Court was correct to decide that the contested regulation entailed implementing measures after having shown that, depending on the situation, the communication to the debtor of the amount of duty or the grant of the release of the goods implies a decision concerning the tariff classification of the goods in question.
57 It follows that the first and second parts of the first ground of appeal must be rejected as unfounded.
The third part – Arguments of the parties 58 By the third part of the first ground of appeal, Canon Europa submits that the General Court, in paragraph 52 of the order under appeal, erred in law and failed to state sufficient reasons for the finding that the release of the goods or the communication of the amount of duty payable had legal effects and ought to be open to challenge at national level.
59 Canon Europa submits, in particular, that the General Court is wrong to assume that any act which produces certain effects is necessarily open to challenge. According to the appellant, neither the release of the goods nor the communication of the amount of the duty payable is such as to change its legal position since they are not acts requiring an assessment on the part of the customs administration open to challenge. It argues that the only way to obtain a decision open to challenge would be to submit an incorrect declaration and thus to contravene the law.
60 Canon Europa also notes that it cannot challenge an act which simply confirms what it has stated in its customs declaration and argues that, from the point of view of both national and EU law, confirmatory acts cannot be challenged.
61 The Commission disputes Canon Europa’s line of argument.
– Findings of the Court 62 It must be borne in mind that where a regulatory act entails implementing measures, judicial review of compliance with the EU legal order was ensured irrespective of whether those measures were adopted by the European Union or the Member States. Natural or legal persons who are unable, because of the conditions governing admissibility laid down in the fourth paragraph of Article 263 TFEU, to challenge a regulatory act of the European Union directly before the EU judicature are protected against the application to them of such an act by the ability to challenge the implementing measures which the act entails (judgments in Telefónica v Commission, C‑274/12 P, EU:C:2013:852, paragraph 28, and T & L Sugars and Sidul Açúcares v Commission, C‑456/13 P, EU:C:2015:284, paragraph 30).
63 In that regard, it must be borne in mind that the second subparagraph of Article 19(1) TEU states that Member States are to provide remedies sufficient to ensure effective legal protection in the fields covered by EU law.
64 Thus, as the General Court rightly points out in paragraph 51 of the order under appeal, secondary EU law has expressly prescribed the remedy available to import duty debtors who consider that such duties have been wrongly imposed on them by the customs authorities. That remedy is exercisable at national level, in accordance with the appeals procedure implemented by the Member State in question in compliance with the principles set out in Articles 243 to 246 of the Customs Code which form Title VIII of that code.
65 Accordingly, and in the light of the findings made in respect of the first and second parts of this ground of appeal, it must be held that, in paragraph 52 of the order under appeal, the General Court correctly decided that the release of the goods or, depending on the case, the communication of the amount of duty payable, being implementing measures within the meaning of the fourth paragraph of Article 263 TFEU, must be open to challenge at national level.
66 Furthermore, paragraph 52 of the order under appeal must be read in conjunction with the preceding paragraphs 50 and 51. That reading enables it to be found that the General Court gave reasons sufficient in law for the considerations in paragraph 52 thereof which are disputed by the appellant.
67 Furthermore, with regard to the appellant’s assertion that it cannot challenge an act which confirms information which it gave in its customs declaration, it suffices to note that the fact that a decision concerning the tariff classification of imported goods repeats information provided by the importer in its declaration does not make that decision a confirmatory act, since that presupposes the existence of a prior decision and so does not deprive it of its challengeable nature (see, to that effect, order Forgital Italy v Council, C‑84/14 P, EU:C:2015:517, paragraphs 60 to 62).
68 Accordingly, the third part of the first ground of appeal is unfounded.
The fourth part – Arguments of the parties 69 By the fourth part of the first ground of appeal, Canon Europa argues that the General Court erred in law and failed to state reasons sufficient in law for the consideration in paragraph 54 of the order under appeal that the use of simplified procedures or data-processing techniques did not permit any derogation from the powers devolved to national authorities and that, in that case, the contested regulation also entailed implementing measures.
70 Canon Europa submits that since simplified procedures, provided for in particular in Article 76 of the Customs Code, and data-processing techniques, referred to in particular in Article 61(b) of that code, were used for the import of goods into the European Union, the admissibility of the action should be examined in the sole light of the provisions applicable to the procedures and techniques in question and that, accordingly, the review carried out by the General Court in the light of the normal customs procedure could not enable it to be determined whether Canon Europa had standing to bring an action, within the meaning of Article 263 TFEU. That review ought to have taken account of the substantive differences between the simplified procedures and data-processing techniques used by Canon Europa.
71 Moreover, Canon Europa is of the opinion that the General Court, in paragraph 54 of the order under appeal, fails to identify the simplified customs formalities and merely cites the order in BSI v Council (T‑551/11, EU:T:2013:60) which does not concern the procedures referred to in Articles 61 and 76 of the Customs Code, with the result that it fails to give reasons sufficient in law in that regard.
72 The Commission disputes Canon Europa’s line of argument.
– Findings of the Court 73 With regard to the General Court’s statement, in paragraph 54 of the order under appeal, that the use of simplified procedures does not mean that no measure is adopted by the customs authorities, it is clear from the sixth and eighth recitals in the preamble to the Customs Code that the aim of the simplified customs procedures is that ‘customs formalities and controls should be … kept to a minimum’ whilst ensuring that the simplifications provided for are not liable to affect adversely the customs interests of the European Union (see, to that effect, judgment in Göritz Intransco International, C‑292/96, EU:C:1998:8, paragraph 22). The use of data-processing techniques, which is part of the wish to simplify customs procedures, meets the same objective.
74 There is nothing in Article 76 of the Customs Code, which lays down procedures simplifying the formalities relating to the customs declaration or, more generally, in that code which leads to the conclusion that the use of those simplified procedures has the result that no decision concerning the tariff classification of the imported goods as regards the declarant. That article states, furthermore, that that simplification of the procedure is made ‘while ensuring that operations are conducted in a proper manner’.
75 It is also appropriate to deduce from the wording of Article 61 of the Customs Cost that the customs declaration made by means of a data-processing technique is equivalent to that made in writing. Article 77 of the Customs Code provides, in that regard, that, where the customs declaration is made by means of a data-processing technique, Articles 62 to 76, dealing with declarations made in writing, are to apply mutatis mutandis without prejudice to the principles set out therein.
76 Moreover, it must be noted that Article 78 of the Customs Code, which allows national customs authorities to make post-clearance checks of the declarations, makes no distinction between the declarations made under the normal procedure and those made under the simplified procedure or using data-processing techniques.
77 It follows from the foregoing considerations that the aim of using simplified procedures and data-processing techniques is not to derogate from the powers conferred on the national customs authorities but to facilitate the customs formalities, particularly in order to accelerate the transport of goods.
78 Thus, it was without erring in law that the General Court held that the use of simplified procedures or data-processing techniques did not permit derogations from the powers devolved to the national authorities and that the contested regulation entailed implementing measures.
79 Concerning the allegation that reasons insufficient in law are given for the considerations in paragraph 54 of the order under appeal, it must be borne in mind that, in accordance with the settled case-law of the Court of Justice, the duty of the General Court to state reasons for its judgments does not require it to provide a statement of reasons which follows, exhaustively and one by one, all the arguments put forward by the parties to the dispute. The reasoning may therefore be implied, on condition that it enables the persons concerned to understand the grounds of the General Court’s judgment and provides the Court of Justice with sufficient evidence to exercise its powers of review on appeal (see, inter alia, judgments in A2A v Commission, C‑318/09 P, EU:C:2011:856, paragraph 97, and Greece v Commission, C‑391/13 P, EU:C:2014:2061, paragraph 58).
80 Although the General Court, in paragraph 54 of the order under appeal, does not identify in detail the formalities to the simplification of which it refers, it is nevertheless appropriate to note that the appellant, at first instance, raised the fact that its declarations had been made using the simplified procedure and using a data-processing technique. It follows that the General Court was clearly referring to those formalities.
81 With respect to the reference in paragraph 54 of the order under appeal to the order in BSI v Council (T‑551/11, EU:T:2013:60), although it is true that that order did not refer to Articles 61 and 76 of the Customs Code but to Article 221 of that code, the reference in paragraph 49 of that precedent, which states that the simplification of a customs procedure does not mean that no measure is adopted by the customs authorities, is relevant to the present case since such a consideration applies to both the simplification provided for in Article 221 of the Customs Code and to the simplifications referred to in Articles 61 and 76 of that code.
82 Accordingly, Canon Europa’s argument that reasons insufficient in law have been given for the General Court’s considerations in paragraph 54 of the order under appeal is unfounded.
83 It follows that the fourth part of the first ground of appeal is unfounded.
The fifth part – Arguments of the parties 84 By the fifth part of the first ground of appeal, Canon Europa submits that the General Court erred in law, in paragraph 53 of the order under appeal, by taking into account the request to invalidate a customs declaration, provided for in Article 66 of the Customs Code, or the request for reimbursement of the duty, provided for in Article 236 of that code, as factors relevant to ascertaining whether the contested regulation entailed implementing measures.
85 Canon Europa submits that those requests are optional procedures and that the aim of the criterion laid down in Article 263 TFEU is not to seek every national measure open to challenge before the national courts. Furthermore, those procedures are not necessary in order for the contested regulation to produce effects.
86 The Commission disputes Canon Europa’s line of argument.
– Findings of the Court 87 It is apparent from paragraph 52 of the order under appeal that the General Court held that there were procedures for appeal at national level available to the appellant to challenge the tariff classification made following its customs declaration. In paragraph 53 of that order, the General Court set out the courses of action open to the appellant to challenge national implementing measures, such as the procedures for the invalidation of a customs declaration and for reimbursement of duty paid. That indication serves only to illustrate the conclusions reached by the General Court in paragraphs 51 and 52 of the order under appeal.
88 It was thus for the sake of completeness that the General Court noted, in paragraph 53 of the order under appeal, that an importer could rely on Articles 66 or 236 of the Customs Code to show that it had available to it measures enabling it to mount a challenge at national level.
89 In accordance with the settled case-law of the Court, complaints directed against the grounds of a decision of the General Court included purely for the sake of completeness cannot lead to the decision being set aside and are therefore nugatory (judgments in Dansk Rørindustri and Others v Commission, C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P, EU:C:2005:408, paragraph 148, and Wünsche Handelsgesellschaft International v Commission, C‑7/14 P, EU:C:2015:205, paragraph 72).
90 In those circumstances, the fifth part of the first ground of appeal must be rejected as nugatory and the first ground of appeal must be rejected in its entirety as being in part unfounded and in part nugatory.
The second ground of appeal Arguments of the parties 91 By the second ground in support of its appeal, Canon Europa argues, principally, that it adduced evidence in respect of each of the stages of an import procedure carried out in Spain which enabled, in its view, the conclusion to be reached that neither the release of the goods concerned nor the communication of the amount of duty payable contained a decision concerning the tariff classification of those goods which was open to challenge before the national courts. The appellant is of the opinion that the fact that the General Court did not address that evidence infringes its right to be heard, since if that evidence had been taken into account, in its submission, it would have affected the outcome of the proceedings.
92 If it were to be accepted that the evidence was examined by the General Court, Canon Europa argues, in the alternative, that the General Court incorrectly established or classified the facts and that, consequently, its conclusions were also incorrect in law.
93 Canon Europa also submits, in the alternative, that the General Court distorted the evidence since, in its view, a simple interpretation of that evidence shows that, in the present case, no decision was adopted as part of the customs import procedure to determine the tariff classification of the MFMs and none of the stages of the import procedure is open to challenge before the national courts.
94 The Commission disputes Canon Europa’s line of argument.
Findings of the Court 95 Firstly, it should be pointed out that the right to be heard in judicial proceedings does not mean that the court has to incorporate in full in its decision all the submissions put forward by each party. The court, after listening to the submissions of the parties and assessing the evidence, has to decide whether or not to grant the relief sought in the application and give reasons for its decision (see judgments in Schröder and Others v Commission, C‑221/97 P, EU:C:1998:597, paragraph 24, and Lito Maieftiko Gynaikologiko kai Cheirourgiko Kentro v Commission, C‑506/13 P, EU:C:2015:562, paragraph 48).
96 In those circumstances, it is appropriate to ascertain whether, in the order under appeal, the General Court complied with those requirements.
97 In that regard, the General Court, in paragraphs 35 to 46 of the order under appeal, first of all, gave detailed reasons for its conclusions that, depending on the case, the release of the goods or the communication of the amount of duty payable contained a decision concerning the tariff classification of the goods in question. Taking that conclusion as its basis, the General Court then, in paragraph 52 of the order under appeal, set out the reasons for its taking the view that both the release of those goods and the communication of the amount of duty payable could be challenged at national level. Finally, in paragraph 54 of that order, the General Court held that the use of simplified procedures and data-processing techniques did not enable those findings to be called into question.
98 It follows therefrom that the General Court took a position on the evidence adduced by the appellant, referred to in paragraph 91 of the present judgment. In any event, Canon Europa does not give details, in the second ground of appeal, of the way in which the General Court’s taking that evidence into account led it to decided that neither the release of the MFMs nor the communication of the amount of duty payable did not contain a decision concerning the tariff classification of those goods open to challenge before the national courts.
99 Accordingly, the complaint alleging an infringement of the appellant’s right to be heard is unfounded.
100 Secondly, with regard to the argument raised in the alternative by Canon Europa that, even if it were to be accepted that the General Court took account of the evidence which Canon Europa adduced, it incorrectly established and classified the facts, it must be noted that the appellant, without supporting its allegation, seeks in truth to have a fresh assessment of that evidence carried out by the Court of Justice.
101 It is clear from the second subparagraph of Article 256(1) TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union that an appeal lies on points of law only. The General Court thus has exclusive jurisdiction to find and appraise the relevant facts and to assess the evidence. The appraisal of those facts and the assessment of that evidence thus do not, save where the facts or evidence are distorted, constitute points of law which are subject, as such, to review by the Court of Justice on appeal (see, inter alia, judgment in Les Éditions Albert René v OHIM, C‑16/06 P, EU:C:2008:739, paragraph 68, and order in Repsol YPF v OHIM, C‑466/13 P, EU:C:2014:2331, paragraph 54).
102 Accordingly, the second complaint must be rejected as inadmissible.
103 Thirdly, with regard to the alleged distortion of that evidence, it is appropriate to note that the arguments raised in support of that complaint are mixed with those raised in support of the first to third parts of the first ground of appeal raised by Canon Europa. Since it follows from paragraphs 37 to 68 of the present judgment that those arguments are unfounded, the allegation of distortion of evidence in the present ground of appeal cannot succeed and must be considered unfounded.
104 Accordingly, the second ground of appeal must be rejected as being in part inadmissible and in part unfounded.
105 Since both grounds of appeal raised by Canon Europa in support of its appeal have been rejected, the appeal must be dismissed in its entirety.
Costs 106 In accordance with Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is unfounded, the Court shall make a decision as to costs. Under Article 138(1) of those rules, which apply to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party must be ordered to pay the costs if they have been applied for in the successful party’s pleadings. As the Commission has applied for costs and Canon Europa has been unsuccessful, the appellant must be ordered to pay the costs relating to the present proceedings.
On those grounds, the Court (Seventh Chamber) hereby: 1. Dismisses the appeal; 2. Orders Canon Europa NV to pay the costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (First Chamber)
26 January 2017 ( *1 )
‛Reference for a preliminary ruling — Directive 93/13/EEC — Contracts concluded between sellers or suppliers and consumers — Unfair terms — Mortgage loan agreements — Mortgage enforcement proceedings — Limitation period — Function of the national courts — Res judicata’
In Case C‑421/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Juzgado de Primera Instancia No 2 de Santander (Court of First Instance No 2, Santander, Spain), made by decision of 10 September 2014, received at the Court on 10 September 2014, in the proceedings
Banco Primus SA
v
Jesús Gutiérrez García,
THE COURT (First Chamber),
composed of A. Tizzano, Vice-President of the Court, acting as President of the First Chamber, M. Berger, A. Borg Barthet, S. Rodin (Rapporteur) and F. Biltgen, Judges,
Advocate General: M. Szpunar,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 24 September 2015,
after considering the observations submitted on behalf of:
—
Banco Primus SA, by E. Vázquez Martín, abogado,
—
the Spanish Government, by M.J. García-Valdecasas Dorrego, acting as Agent,
—
the European Commission, by J. Baquero Cruz and M. van Beek, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 2 February 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).
The request has been made in proceedings between Banco Primus SA and Mr Jesús Gutiérrez García concerning enforcement proceedings in respect of immovable property owned by the latter and used as security for a loan granted by Banco Primus.
Legal context
EU law
The 16th and 24th recitals of Directive 93/13 state:
‘Whereas … the requirement of good faith may be satisfied by the trader where he deals fairly and equitably with the other party whose legitimate interests he should take into account;
…
Whereas the courts or administrative authorities of the Member States must have at their disposal adequate and effective means of preventing the continued application of unfair terms in consumer contracts.’
Article 1(1) of that directive provides:
‘The purpose of this Directive is to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer.’
Article 3 of that directive is worded as follows:
‘1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.
2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract.
…’
Article 4 of Directive 93/13 states:
‘1. Without prejudice to Article 7, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.
2. Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies in exchange, on the other, in so far as these terms are in plain intelligible language.’
Article 6(1) of that directive provides:
‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.’
Under Article 7(1) of the directive:
‘Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.’
Spanish law
Ley 1/2000, de Enjuiciamiento Civil (Law 1/2000 on the Civil Procedure Code), of 7 January 2000 (BOE No 7 of 8 January 2000, p. 575), as amended by Ley 1/2013, de medidas para reforzar la protección a los deudores hipotecarios, reestructuración de deuda y alquiler social (Law 1/2013 on the protection of mortgagors, restructuring of debt and social rent), of 14 May 2013 (BOE No 116 of 15 May 2013, p. 36373), then by Real Decreto-Ley 7/2013, de medidas urgentes de naturaleza tributaria, presupuestaria y de fomento de la investigación, el desarrollo y la innovación (Decree-Law 7/2013 on urgent fiscal and budgetary measures and promoting research, development and innovation), of 28 June 2013 (BOE No 155 of 29 June 2013, p. 48767), then by Real Decreto-Ley 11/2014, de medidas urgentes en materia concursal (Decree-Law 11/2014 on urgent measures in the area of bankruptcy), of 5 September 2014 (BOE No 217 of 6 September 2014, p. 69767) (‘the LEC’).
Article 695 of the LEC, relating to the procedure for objecting to mortgage enforcement proceedings, reads as follows:
‘1. In proceedings under this chapter, an objection to enforcement by the party against whom enforcement is sought may be admitted only if it is based on the following grounds:
…
(4)
the unfairness of a contractual term constituting the basis for enforcement or which has enabled the amount due to be calculated.
…
4. An appeal may lie against an order … rejecting an objection on the ground laid down in paragraph 1(4).
Save in those circumstances, no appeal shall lie against orders adjudicating upon the objection to enforcement referred to in the present article and the effects of those orders shall be confined exclusively to the enforcement proceedings in which they are made.’
Pursuant to Article 556(1) of the LEC, an objection to enforcement on one of the grounds set out in Article 695 of the LEC must be lodged within 10 days of notification of the enforcement order.
According to Article 557(1) of the LEC, relating to the procedure for objecting to enforcement based on instruments that are neither judicial nor arbitral:
‘Where enforcement is ordered in respect of the enforceable orders referred to in Article 517.2(4), (5), (6) and (7), and for other enforceable orders mentioned in Article 517.2(9), the party against whom enforcement is sought may, within the periods and in the forms prescribed in the preceding article, object to enforcement only if he relies on one of the following grounds:
…
(7)
The document contains unfair terms.’
Pursuant to Article 693(2) of the LEC, concerning the accelerated repayment of debts repayable in instalments:
‘The total amount owed by way of principal and interest may be claimed where it has been agreed that repayment in full is due in the event of non-payment of a number of instalments such that the debtor has failed to fulfil his obligation for a period of at least three months, and provided that such agreement is recorded in the instrument creating the mortgage.’
The First Transitional Provision of Law 1/2013 states:
‘This Law shall apply to judicial and extrajudicial mortgage enforcement proceedings in progress on the date of entry into force of the Law, provided that eviction has not taken place.’
Pursuant to the fourth transitional provision of that law:
‘1.
The amendments to [Law 1/2000 of 7 January 2000 on the Civil Procedure Code] introduced by the present Law shall apply to enforcement proceedings already in progress at the date of entry into force of the present Law, only in respect of those enforcement measures still to be taken.
2.
In any event, in enforcement proceedings in progress on the date of the entry into force of the present Law, in which the 10-day period for lodging an objection to enforcement laid down by Article 556.1 of [Law 1/2000 of 7 January 2000 on the Civil Procedure Code] has expired, the parties against whom enforcement is sought shall have a period of one month within which to submit an extraordinary application objecting to enforcement based on the existence of new grounds for opposition, set out in Article 557.1(7) and Article 695.1(4) of [Law 1/2000 of 7 January 2000 on the Civil Procedure Code].
In accordance with the provisions of Article 558 et seq. and Article 695 of [Law 1/2000 of 7 January 2000 on the Civil Procedure Code], the time limit of one month shall start to run from the day following the entry into force of the present Law, and the effect of the lodging by the parties of the application objecting to enforcement shall be to suspend proceedings until the application has been adjudicated upon.
The present transitional provision shall be applicable to all enforcement proceedings that have not led to the buyer’s taking possession of the property in accordance with the provisions of Article 675 of [Law 1/2000 of 7 January 2000 on the Civil Procedure Code].
3.
Likewise, in enforcement proceedings in progress in which, on the entry into force of the present Law, the 10-day period for objecting to enforcement laid down by Article 556.1 of [Law 1/2000 of 7 January 2000 on the Civil Procedure Code] has already started to run, the parties against whom enforcement is sought shall enjoy the same period of one month provided for in the previous paragraph in order to submit an application on the basis of the existence of any of the grounds for objecting to enforcement provided for under Articles 557 and 695 of [Law 1/2000 of 7 January 2000 on the Civil Procedure Code].
4.
Publication of the present provision shall be considered full and valid notification for the purposes of notifying and calculating the periods provided for in paragraphs 2 and 3 of the present article, without its being necessary in any circumstances expressly to make an order in that respect.
…’
Furthermore, Article 136 of the LEC provides:
‘Once the time limit for carrying out a procedural step has elapsed, the step in question shall become time-barred and the opportunity to carry it out shall be lost. The Court Clerk shall leave a record of the elapse of the time limit in an official document and shall order the measures to be adopted or shall serve notice to the court so the corresponding decision can be ordered.’
Article 207(3) and (4) of the LEC adds:
‘3. Final decisions become res judicata and the court hearing the case in which they were delivered shall in any event abide by their terms.
4. Once the period for lodging an appeal against a decision has elapsed without any appeal having been brought, the decision shall become final and res judicata and the court hearing the case in which it was delivered shall in any event abide by its terms.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
On 12 June 2008, Banco Primus granted a loan to Mr Gutiérrez García which was secured by a mortgage on his home. The loan was granted for a term of 47 years, and was repayable in 564 monthly instalments. Following the failure of Mr Gutiérrez García to pay seven successive monthly instalments in repayment of the loan, the bank triggered the accelerated repayment procedure on 23 March 2010 in accordance with Clause 6a of the loan agreement. Banco Primus sought payment of the outstanding total principal plus ordinary and default interest and costs. It also proceeded to auction the mortgaged property. Since there were no bidders for the property at the auction which took place on 11 January 2011, on 21 March 2011 and by enforceable decision the referring court awarded the property to Banco Primus at a price which represented 50% of its estimated value. On 6 April 2011, Banco Primus sought to obtain possession of the property, which was deferred as a result of three successive incidents, including the one which led to the adoption of the order of 12 June 2013 which deemed Clause 6 of the loan agreement, relating to default interest, to be unfair. The adoption of the decision of 8 April 2014, following the third objection, terminated the suspension of the eviction.
On 11 June 2014, Mr Gutiérrez García lodged, before the referring court, an extraordinary application objecting to the mortgage enforcement proceedings on the ground that Clause 6 of the loan agreement was unfair.
Following that opposition, the referring court, after having suspended the eviction proceedings by a decision of 16 June 2014, expressed doubts relating to the unfairness, within the meaning of Directive 93/13, of certain terms of the loan agreement other than the term concerning default interest, namely:
—
Clause 3 relating to ordinary interest, which provides for the calculation thereof on the basis of a formula, by which the outstanding loan principal and interest accrued is divided by the number of days in a financial year, namely 360 days, and
—
Clause 6a relating to accelerated repayment, pursuant to which Banco Primus may demand the immediate repayment of the principal, of the interest and other costs, in particular in the event that the borrower fails to pay, on the agreed date, any amount owed by way of principal, interest or amounts advanced by the bank.
However, that court found, first of all, that Mr Gutiérrez García’s opposition was filed out of time, since it was made after the limitation period laid down by the Fourth Transitional Provision of Law 1/2013 had expired.
The referring court found, secondly, that Article 207 of the LEC, which governs the principle of res judicata, precludes it from re-examining the unfair nature of the terms of the loan agreement at issue in the main proceedings, since the lawfulness of that agreement, with regard to Directive 93/13, had already been ascertained in the context of the decision of 12 June 2013, which has become final.
Moreover, the referring court noted that, even if Clause 6a of the loan agreement at issue in the main proceedings were be found to be unfair, the case-law of the Tribunal Supremo (Supreme Court, Spain) would prevent it from finding that term to be null and void and from rejecting it, since Banco Primus did not apply that term in the case at hand. Rather, it complied with the requirements of Article 693(2) of the LEC in waiting for Mr Gutiérrez García to default on payment of seven monthly instalments before triggering the accelerated repayment procedure.
Accordingly, in order to determine the extent of its powers in the light of Directive 93/13, the referring court, first, harbours doubts as to the compatibility of the Fourth Transitional Provision of Law 1/2013 with that directive and, second, as to whether, in complex mortgage enforcement proceedings, such as those at issue in the main proceedings, it is obliged by that directive, in spite of the requirements of Article 207 of the LEC, to examine of its own motion the terms of a loan agreement which has already been put to such an examination with regard to Directive 93/13 in the context of a decision which has become res judicata. Third, that court also seeks details as to the assessment criteria to be used to determine whether Clauses 3 and 6a of the loan agreement at issue in the main proceedings are unfair and the consequences to be drawn from such a finding.
In those circumstances, the Juzgado de Primeria Instancia No 2 de Santander (Court of First Instance No 2, Santander, Spain), decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Must the Fourth Transitional Provision of Law No 1/2013 be interpreted so as not to constitute an obstacle to the protection of the consumer?
(2)
Under Directive 93/13, and in particular Articles 6(1) and 7(1) thereof, and in order to ensure the protection of consumers and users in accordance with the principles of equivalence and effectiveness, is a consumer permitted to raise a complaint regarding the presence of unfair terms outside the period specified under national legislation for raising such a complaint, and is the national court required to examine such terms?
(3)
Under Directive 93/13, and in particular Articles 6(1) and 7(1) thereof, and in order to ensure the protection of consumers and users in accordance with the principles of equivalence and effectiveness, is a national court required to assess, of its own motion, whether a term is unfair and to determine the appropriate consequences, even where an earlier decision of that court reached the opposite conclusion or declined to make such an assessment and that decision was final under national procedural law?
(4)
In what way may the quality/price ratio affect the review of the unfairness of non-essential terms of a contract? When conducting an indirect review of such factors, is it relevant to have regard to the limits imposed on prices under national legislation? Is it possible that terms that are valid when viewed in abstract cease to be so where it is found that the price of the transaction is very high by comparison with the market standard?
(5)
For the purposes of Article 4 of Directive 93/13, can circumstances arising after the conclusion of the contract be taken into account if an examination of the national legislation suggests that this is required?
(6)
Must Article 693(2) [of the LEC] be interpreted so as not to constitute an obstacle to the protection of consumer interests?
(7)
Under Directive 93/13, and in particular Articles 6(1) and 7(1) thereof, and in order to ensure the protection of consumers and users in accordance with the principles of equivalence and effectiveness, must a national court, when it finds there to be an unfair term concerning accelerated repayment, declare that that term does not form part of the contract and determine the consequences inherent in such a finding, even where the seller or supplier has waited the minimum time provided for in the national provision?’
The referring court requested the Court of Justice to determine the case pursuant to an expedited procedure in accordance with Article 105(1) of the Rules of Procedure of the Court of Justice. That request was rejected by order of the President of the Court of 11 November 2014, Banco Primus (C‑421/14, not published, EU:C:2014:2367), on the ground that, inter alia, as indicated by the referring court to the Court of Justice in a letter of 29 September 2014, the former had stayed the enforcement proceedings by decision of 16 June 2014, with the result that Mr Gutiérrez García was not at immediate risk of losing his home.
Consideration of the questions referred
Admissibility
In its written observations, the Spanish Government expresses doubts as to the admissibility of the questions referred, on the ground that the Court of Justice would not be able to provide the referring court with answers which will be of use to it and enable it to determine the case before it. The mortgage enforcement proceedings have been definitely terminated and the referring court will no longer be able to take any measures in relation to them, since it closed those proceedings by ordering the eviction of the debtor and the other occupants by means of an order dated 8 April 2014 which has become res judicata.
Banco Primus does not expressly claim that the request for a preliminary ruling is inadmissible, but raises arguments similar to those on which that plea of inadmissibility is based.
In that regard, it is necessary to state at the outset that, in accordance with settled case-law, in proceedings under Article 267 TFEU, which are based on a clear separation of functions between the national courts and the Court of Justice, the national court alone has jurisdiction to find and assess the facts in the case before it and to interpret and apply national law. Similarly, it is solely for the national court, before which the dispute has been brought and which must assume responsibility for the judicial decision to be made, to determine, in the light of the particular circumstances of the case, both the need for and the relevance of the questions that it submits to the Court. Consequently, where the questions submitted concern the interpretation of EU law, the Court is in principle bound to give a ruling (judgment of 14 June 2012, Banco Español de Crédito, C‑618/10, EU:C:2012:349, paragraph 76 and the case-law cited).
The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 14 June 2012, Banco Español de Crédito, C‑618/10, EU:C:2012:349, paragraph 77 and the case-law cited).
That is not the case in this instance.
As stated by the Advocate General in point 30 of his Opinion, it is apparent, from the national legislation submitted by the referring court, that the mortgage enforcement proceedings at issue in the main proceedings have not been completed since possession has not been taken of the property, as the Spanish Government confirmed in its written observations. Accordingly, the Fourth Transitional Provision of Law 1/2013 provides that the provision is applicable ‘to all enforcement proceedings that have not led to the buyer’s taking possession of the property’.
In those circumstances, and taking into account the fact that it is for the Court to provide the referring court with an answer which will be of use to it and enable it to determine the case before it (see judgments of 28 November 2000, Roquette Frères, C‑88/99, EU:C:2000:652, paragraph 18, and of 11 March 2010, Attanasio Group, C‑384/08, EU:C:2010:133, paragraph 19), it must be concluded that it is not obvious from the arguments raised by the Spanish Government that the interpretation of EU law sought bears no relation to the actual facts of the main action or its purpose.
Consequently, and subject to the assessment of each of the questions referred, the request for a preliminary ruling at hand must be deemed admissible.
Substance
Questions 1, 2 and 3
By its first, second and third questions, which it is appropriate to examine together, the referring court asks, in essence, whether Articles 6 and 7 of Directive 93/13 must be interpreted as precluding a provision of national law, such as the Fourth Transitional Provision of Law 1/2013, which makes consumers, against whom mortgage repossession proceedings have been instituted but which have not been concluded at the time of entry into force of that law, subject to a one-month time limit, calculated from the day following the publication of that law, to bring an objection to those enforcement proceedings on the basis of the alleged unfairness of contractual terms. The referring court also asks, where appropriate, whether that directive requires it to examine of its own motion the unfairness of terms of a contract which has already been the subject of such an examination with regard to Directive 93/13 in the context of a court decision which has become final, notwithstanding the fact that the domestic rules of procedure apply the principle of res judicata.
In so far as concerns the issue whether Articles 6 and 7 of Directive 93/13 preclude a provision of national law such as the Fourth Transitional Provision of Law 1/2013, it should be pointed out that that question has already been examined by the Court of Justice, which answered in the affirmative in its judgment of 29 October 2015, BBVA (C‑8/14, EU:C:2015:731).
In particular, it is apparent from that judgment that the Fourth Transitional Provision of Law 1/2013, in so far as it provides that consumers, against whom mortgage repossession proceedings have been instituted before the date of entry into force of that law and which have not been concluded at that date, are subject to a one-month time limit, calculated from the day following the publication of that law, to bring an objection to those enforcement proceedings on the basis of the alleged unfairness of the contractual terms, is not such as to guarantee consumers full enjoyment of that period and, therefore, the effective exercise of their rights (see, to that effect, judgment of 29 October 2015, BBVA, C‑8/14, EU:C:2015:731, paragraph 39).
Moreover, in the case in the main proceedings, it is apparent from the file before the Court of Justice that, by the decision of 12 June 2013, which has become res judicata, the referring court has already examined the loan agreement at issue in the main proceedings with regard to Directive 93/13 and found that Clause 6 thereof, relating to default interest, was unfair.
In that context, the referring court raises the question whether Directive 93/13 precludes a rule of national law, such as that resulting from Article 207 of the LEC, which prohibits it from examining of its own motion certain contractual terms which have already been the subject of an examination before the courts and which was closed by a decision which has become res judicata.
In that regard, it should be observed that, according to settled case-law of the Court, the system of protection introduced by Directive 93/13 is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge (see, inter alia, judgment of 17 July 2014, Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 22 and the case-law cited).
As regards that weaker position, Article 6(1) of the directive provides that unfair terms are not binding on consumers. It is a mandatory provision which aims to replace the formal balance which the contract establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them (see, inter alia, judgments of 17 July 2014, Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 23, and of 21 December 2016, Gutiérrez Naranjo and Others, C‑154/15, C‑307/15 and C‑308/15, EU:C:2016:980, paragraphs 53 and 55).
According to settled case-law, Article 6(1) must be regarded as a provision of equal standing to national rules which rank, within the domestic legal system, as rules of public policy (see judgments of 6 October 2009, Asturcom Telecommunicaciones, C‑40/08, EU:C:2009:615, paragraphs 51 and 52, and of 21 December 2016, Gutiérrez Naranjo and Others, C‑154/15, C‑307/15 and C‑308/15, EU:C:2016:980, paragraph 54).
In that context, the Court has stated on several occasions that the national court is required to assess of its own motion whether a contractual term falling within the scope of Directive 93/13 is unfair, compensating in this way for the imbalance which exists between the consumer and the seller or supplier, where it has available to it the legal and factual elements necessary for that task (judgments of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 46 and the case-law cited, and of 21 December 2016, Gutiérrez Naranjo and Others, C‑154/15, C‑307/15 and C‑308/15, EU:C:2016:980, paragraph 58).
However, as stated in paragraph 38 above, in the present case, the national court has already examined the loan agreement at issue in the main proceedings with regard to Directive 93/13, following which it found, by a decision which has become res judicata, that one of the terms of the contract was unfair.
Accordingly, it needs to be determined whether, in such circumstances, the need to replace the formal balance which the agreement establishes between the rights and obligations of the seller or supplier and the consumer with an effective balance which re-establishes equality between them requires the referring court to carry out a new appraisal of that agreement of its own motion, notwithstanding the fact that the domestic rules of procedure apply the principle of res judicata.
In that connection, attention should be drawn, at the outset, to the importance, both for the EU legal order and for the national legal systems, of the principle of res judicata. Indeed, the Court has already had occasion to observe that, in order to ensure stability of the law and legal relations, as well as the sound administration of justice, it is important that judicial decisions which have become definitive after all rights of appeal have been exhausted or after expiry of the time limits provided to exercise those rights can no longer be called into question (see, inter alia, judgment of 6 October 2009, Asturcom Telecomunicaciones, C‑40/08, EU:C:2009:615, paragraphs 35 and 36).
Moreover, the Court has already recognised that consumer protection is not absolute. In particular, it has considered that EU law does not require a national court to disapply domestic rules of procedure conferring finality on a decision, even if to do so would make it possible to remedy an infringement of a provision, regardless of its nature, contained in Directive 93/13 (see, to that effect, judgments of 6 October 2009, Asturcom Telecomunicaciones, C‑40/08, EU:C:2009:615, paragraph 37, and of 21 December 2016, Gutiérrez Naranjo and Others, C‑154/15, C‑307/15 and C‑308/15, EU:C:2016:980, paragraph 68), unless national law does not grant such a court that power in the event of infringement of national rules relating to public policy (see, to that effect, judgment of 6 October 2009, Asturcom Telecomunicaciones, C‑40/08, EU:C:2009:615, paragraph 53).
Furthermore, the Court has already pointed out that, according to EU law, the principle of effective judicial protection of consumers does not afford a right of access to a second level of jurisdiction but only to a court or tribunal (see, to that effect, judgment of 17 July 2014, Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 36 and the case-law cited).
It results from the foregoing that Directive 93/13 must be interpreted as not precluding a rule of national law, such as that resulting from Article 207 of the LEC, which prohibits the national courts from examining of their own motion the unfairness of contractual terms which have been entered into with a seller or supplier, where a ruling has already been given on the lawfulness of the terms of the contract, taken as a whole, with regard to Directive 93/13 in a decision which has become res judicata, which is a matter to be ascertained by the referring court.
That said, it is apparent from the order for reference that, in the present case, the procedural rule relating to res judicata, laid down in Article 207 of the LEC, prohibits national courts not only from re-examining the lawfulness, with regard to Directive 93/13, of contractual terms in respect of which a definitive decision has already been delivered, but also from assessing the potential unfairness of other terms of the same contract.
It follows from the principles resulting from paragraphs 40 to 43 above that the conditions laid down in the national laws to which Article 6(1) of Directive 93/13 refers may not adversely affect the substance of the right that consumers acquire under that provision not to be bound by a term deemed to be unfair (judgment of 21 December 2016, Gutiérrez Naranjo and Others, C‑154/15, C‑307/15 and C‑308/15, EU:C:2016:980, paragraph 71).
Thus, in the case where, in a previous examination of a contract in dispute which led to the adoption of a decision which has become res judicata, the national court limited itself to examining of its own motion, with regard to Directive 93/13, one or certain terms of that contract, that directive requires a national court, such as the one in the main proceedings, before which a consumer has properly lodged an objection to enforcement proceedings, to assess, at the request of the parties or of its own motion where it is in possession of the legal and factual elements necessary for that purpose, the potential unfairness of other terms of that contract. In the absence of such a review, consumer protection would be incomplete and insufficient and would not constitute either an adequate or effective means of preventing the continued use of that term, contrary to Article 7(1) of Directive 93/13 (see, to that effect, judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 60).
In the case at hand, in the absence of precise information in that regard in the file before the Court, it is for the national court to assess whether, in the decision of 12 June 2013 which has become res judicata, the lawfulness, with regard to Directive 93/13, of all the terms of the loan agreement at issue in the main proceedings have been reviewed or just Clause 6 thereof.
In the light of all of the foregoing considerations, the answers to questions 1, 2 and 3 are as follows:
—
Articles 6 and 7 of Directive 93/13 must be interpreted as precluding a provision of national law, such as the Fourth Transitional Provision of Law 1/2013, which, as regards mortgage enforcement proceedings which were instituted before the date of entry into force of the law of which that provision forms part and which were not concluded at that date, imposes a time limit of one month on consumers, calculated from the day following the publication of that law, within which to object to enforcement on the basis of the alleged unfairness of contractual terms;
—
Directive 93/13 must be interpreted as not precluding a rule of national law, such as that resulting from Article 207 of the LEC, which prohibits national courts from examining of their own motion the unfairness of contractual terms where a ruling has already been given on the lawfulness of the terms of the contract, taken as a whole, with regard to that directive in a decision which has become res judicata.
By contrast, where there are one or more contractual terms the potential unfair nature of which has not been examined during an earlier judicial review of the contract in dispute which has been closed by a decision which has become res judicata, Directive 93/13 must be interpreted as meaning that a national court, before which a consumer has properly lodged an objection, is required to assess the potential unfairness of those terms, whether at the request of the parties or of its own motion where it is in possession of the legal and factual elements necessary for that purpose.
Questions 4 and 5
By its fourth and fifth questions, which it is appropriate to examine jointly, the referring court seeks, in essence, clarification of the criteria to be taken into account, in accordance with Article 3(1) and Article 4 of Directive 93/13, in order to evaluate the potential unfairness of terms such as those at issue in the main proceedings, relating to the calculation of ordinary interest and accelerated repayment resulting from a failure on the part of the debtor to comply with his obligations during a limited specific period.
It should be pointed out, at the outset, that those questions are, in the light of the case-law set out in paragraph 30 above, inadmissible in as much as they seek to determine whether the national court may, in the context of its examination of the potential unfairness of a contractual term and, more specifically Clause 6a of the contract at issue in the main proceedings, take account of circumstances which arose after the conclusion of the contract. The order for reference does not specify in a clear manner the nature of the circumstances which arose after the conclusion of the contract. In those circumstances, the Court is not in possession of the necessary facts to be able to carry out its analysis and is not, therefore, in a position to provide the referring court with a reply which may be of use to it in determining the outcome of the dispute in the main proceedings.
In so far as concerns the other aspects raised in the fourth and fifth questions, the Court points out, first of all, that, in accordance with settled case-law, the jurisdiction of the Court of Justice extends to the interpretation of the concept of ‘unfair term’ used in Article 3(1) of Directive 93/13 and in the annex thereto, and to the criteria which the national court may or must apply when examining a contractual term in the light of the provisions of the directive, bearing in mind that it is for that court to determine, in the light of those criteria, whether a particular contractual term is actually unfair in the circumstances of the case. It is thus clear that the Court must limit itself to providing the referring court with guidance which the latter must take into account in order to assess whether the term at issue is unfair (judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 66 and the case-law cited).
That being so, it should be noted that, in referring to concepts of ‘good faith’ and ‘significant imbalance’ in the parties’ rights and obligations arising under the contract, to the detriment of the consumer, Article 3(1) of Directive 93/13 merely defines in a general way the factors that render unfair a contractual term that has not been individually negotiated (judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 67 and the case-law cited).
In order to ascertain whether a term causes a ‘significant imbalance’ in the parties’ rights and obligations under a contract to the detriment of the consumer, particular account must be taken of which rules of national law would apply in the absence of an agreement by the parties in that regard. Such a comparative analysis will enable the national court to evaluate whether and, as the case may be, to what extent, the contract places the consumer in a legal situation less favourable than that provided for by the national law in force. Similarly, it is appropriate, to that end, to carry out an assessment of the legal situation of that consumer having regard to the means at his disposal, under national legislation, to prevent continued use of unfair terms (judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 68).
With regard to the question of the circumstances in which such an imbalance arises ‘contrary to the requirement of good faith’, it should be stated that, having regard to the 16th recital of Directive 93/13, the national court must assess for those purposes whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations (judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 69).
In addition, pursuant to Article 4(1) of the directive, the unfairness of a contractual term must be assessed taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all of the circumstances attending its conclusion (judgments of 4 June 2009, Pannon GSM, C‑243/08, EU:C:2009:350, paragraph 39, and of 9 November 2010, VB Pénzügyi Lízing, C‑137/08, EU:C:2010:659, paragraph 42). It follows that, in that respect, the consequences of the term under the law applicable to the contract must also be taken into account, requiring consideration to be given to the national legal system (judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 71 and the case-law cited).
Secondly, the Court points out that, in accordance with Article 4(2) of Directive 93/13, the terms relating to the main subject matter of the contract or the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, although following within the scope of that directive, are exempt from the assessment as to whether they are unfair only in so far as the competent national court considers, following an examination on a case-by-case basis, that they have been drafted by the seller or supplier in plain, intelligible language (see, to that effect, judgments of 30 April 2014, Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 41, and of 9 July 2015, Bucura, C‑348/14, EU:C:2015:447, paragraph 50).
It is in the light of those considerations that the referring court is required to assess the unfairness of the terms concerned by the fourth and fifth questions referred.
As regards, first, Clause 3 of the loan agreement at issue in the main proceedings, relating to the calculation of ordinary interest, the referring court has pointed out that, although covered by Article 4(2) of Directive 93/13, that term was not in plain intelligible language within the meaning of that provision. In those circumstances, as stated by the Advocate General in point 61 of his Opinion, it is for the referring court to examine whether that term is unfair and, in particular, whether, in the light of the considerations set out in paragraphs 58 to 61 above, it causes a significant imbalance in the parties’ rights and obligations under the agreement, to the detriment of the consumer.
The referring court will be required, inter alia, to compare the method of calculation of the rate of ordinary interest laid down in that term and the actual sum resulting from that rate with the methods of calculation generally used, the statutory interest rate and the interest rates applied on the market at the date of conclusion of the agreement at issue in the main proceedings for a loan of a comparable sum and term to those of the loan agreement under consideration. In particular, it will be required to ascertain whether the fact that ordinary interest is calculated by using a 360-day year as a basis, instead of a 365-day calendar year, is such as to render Clause 3 unfair.
As regards, secondly, Clause 6a of the contract at issue in the main proceedings, relating to the accelerated repayment procedure resulting from a failure on the part of the debtor to comply with his obligations during a limited specific period, it is for the referring court to examine, inter alia, whether the right of the seller or supplier to call in the totality of the loan is conditional upon the non-compliance by the consumer with an obligation which is of essential importance in the context of the contractual relationship in question, whether that right is provided for in cases in which such non-compliance is sufficiently serious in the light of the term and amount of the loan, whether that right derogates from the applicable common law rules, where specific contractual provisions are lacking, and whether national law provides for adequate and effective means enabling the consumer subject to such a term to remedy the effects of the loan being called in (see, to that effect, judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 73).
It follows from all of the foregoing considerations that the answer to the fourth and fifth questions referred is that Article 3(1) and Article 4 of Directive 93/13 must be interpreted as meaning that:
—
the examination of the potential unfairness of a term of a contract concluded between a seller or supplier and a consumer requires it to be determined whether that term causes a significant imbalance in the parties’ rights and obligations under a contract to the detriment of the consumer. That examination must be carried out in the light of national rules which, in the absence of an agreement between the parties, are applicable, the means which the consumer has at his disposal under national law to bring an end to the use of that type of term, the nature of the goods or services covered by the contract at issue and all the circumstances surrounding the conclusion of the contract;
—
where the national court considers that a contractual term relating to the calculation of ordinary interest, such as that at issue in the main proceedings, is not in plain intelligible language, within the meaning of Article 4(2) of that directive, it is required to examine whether that term is unfair within the meaning of Article 3(1) of the directive. In the context of that examination, it is the duty of the referring court, inter alia, to compare the method of calculation of the rate of ordinary interest laid down in that term and the actual sum resulting from that rate with the methods of calculation generally used, the statutory interest rate and the interest rates applied on the market at the date of conclusion of the agreement at issue in the main proceedings for a loan of a comparable sum and term to those of the loan agreement under consideration; and
—
as regards the assessment by a national court of the potential unfairness of the term relating to accelerated repayment resulting from a failure on the part of the debtor to comply with his obligations during a limited specific period, it is for the referring court to examine whether the right of the seller or supplier to call in the totality of the loan is conditional upon the non-compliance by the consumer with an obligation which is of essential importance in the context of the contractual relationship in question, whether that right is provided for in cases in which such non-compliance is sufficiently serious in the light of the term and amount of the loan, whether that right derogates from the applicable common law rules, where specific contractual provisions are lacking, and whether national law provides for adequate and effective means enabling the consumer subject to such a term to remedy the effects of the loan being called in.
The sixth and seventh questions
By its sixth and seventh questions, which it is appropriate to examine together, the referring court asks, in essence, whether Directive 93/13 must be interpreted as precluding an interpretation in the case-law of a provision of national law governing accelerated repayment clauses in loan agreements, such as Article 693(2) of the LEC which prohibits the national court which has found such a contractual term to be unfair from declaring that term null and void and removing it where the seller or supplier did not in fact apply it, but complied with the requirements laid down in that provision of national law.
It should be noted, at the outset, that although, pursuant to Article 1(2) of that directive, ‘the contractual terms which reflect mandatory statutory or regulatory provisions … shall not be subject to the provisions of this directive’, Clause 6a of the agreement at issue in the main proceedings, which lays down the conditions for accelerated repayment, to which the sixth and seventh questions refer, does not reflect Article 693(2) of the LEC. That clause provides that the lender may seek accelerated repayment and order immediate reimbursement of the principal, interest and other costs where the debtor defaults on payment, on the agreed date, of any sums by way of principal, interest or amounts advanced and not, as provided for in Article 693(2) of the LEC, after a failure to fulfil his obligation for a period of three months. Moreover, that clause contains the terms ‘in addition to the cases laid down by law’ and ‘besides the cases laid down by law’. It can be inferred from that wording that, by that clause, the parties sought not to limit the causes of accelerated repayment to that provided for in Article 693(2) of the LEC.
Therefore, that clause falls within the scope of the directive (see, a contrario, judgment of 30 April 2014, Barclays Bank, C‑280/13, EU:C:2014:279, paragraph 41) and the national court is required to assess of its own motion whether that clause is potentially unfair (see, inter alia, judgment of 14 March 2013, Aziz, C‑415/11, EU:C:2013:164, paragraph 46 and the case-law cited).
As regards the inferences to be drawn from the finding that such a term is unfair, it should be pointed out that it follows from the wording of Article 6(1) of Directive 93/13 that national courts are merely required to exclude the application of an unfair contractual term in order that it may not produce binding effects with regard to the consumer, without being empowered to revise the content of that term. That contract must continue in existence, in principle, without any amendment other than that resulting from the deletion of the unfair terms, in so far as, in accordance with the rules of domestic law, such continuity of the contract is legally possible (see, inter alia, judgments of 14 June 2012, Banco Español de Crédito, C‑618/10, EU:C:2012:349, paragraph 65; of 30 May 2013, Asbeek Brusse and de Man Garabito, C‑488/11, EU:C:2013:341, paragraph 57; and of 21 January 2015, Unicaja Banco and Caixabank, C‑482/13, C‑484/13, C‑485/13 and C‑487/13, EU:C:2015:21, paragraph 28).
Moreover, given the nature and significance of the public interest constituted by the protection of consumers, who are in a position of weakness vis-à-vis sellers or suppliers, Directive 93/13, as is apparent from Article 7(1) thereof, read in conjunction with its 24th recital, requires the Member States to provide for adequate and effective means to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers (see, inter alia, judgments of 14 June 2012, Banco Español de Crédito, C‑618/10, EU:C:2012:349, paragraph 68, and of 21 January 2015, Unicaja Banco and Caixabank, C‑482/13, C‑484/13, C‑485/13 and C‑487/13, EU:C:2015:21, paragraph 30).
Therefore, and in order to ensure the dissuasive effect inherent in Article 7 of Directive 93/13, the prerogatives of the national court ruling on whether a term is unfair, within the meaning of Article 3(1) of that directive, cannot be contingent on whether that term was actually applied or not. Accordingly, the Court has already held that Directive 93/13 must be interpreted as meaning that, where the national court has established the ‘unfairness’ within the meaning of Article 3(1) of Directive 93/13 of a term in a contract between a consumer and a seller or a supplier, the fact that that term has not been executed cannot, in itself, prevent the national court drawing the appropriate conclusions from the ‘unfair’ nature of that term (see, to that effect, order of 11 June 2015, Banco Bilbao Vizcaya Argentaria, C‑602/13, not published, EU:C:2015, 397, paragraphs 50 and 54).
In those circumstances, as the Advocate General pointed out in point 85 of his Opinion, the fact that, in the present case, the bank in fact satisfied the requirements of Article 693(2) of the LEC and initiated the mortgage enforcement proceedings only after non-payment of seven successive monthly instalments and not, as provided for in Clause 6a of the loan agreement at issue in the main proceedings, as a result of failure to pay any amount owed, cannot exonerate the national court from its obligation to draw the appropriate conclusions from the potentially unfair nature of that term.
In the light of all of the foregoing considerations, the answer to the sixth and seventh questions is that Directive 93/13 must be interpreted as precluding an interpretation in the case-law of a provision of national law governing accelerated repayment clauses in loan agreements, such as Article 693(2) of the LEC, which prohibits the national court which has found such a contractual term to be unfair from declaring that term null and void and removing it where the seller or supplier did not in fact apply it, but complied with the requirements laid down in that provision of national law.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (First Chamber) hereby rules:
1.
Articles 6 and 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as precluding a provision of national law, such as the Fourth Transitional Provision of Ley 1/2013, de medidas para reforzar la protección a los deudores hipotecarios, reestructuración de deuda y alquiler social (Law 1/2013 on the protection of mortgagors, restructuring of debt and social rent) of 14 May 2013, which, as regards mortgage enforcement proceedings which were instituted before the date of entry into force of the law of which that provision forms part and which were not concluded at that date, imposes a time limit of one month on consumers, calculated from the day following the publication of that law, within which to object to enforcement on the basis of the alleged unfairness of contractual terms.
2.
Directive 93/13 must be interpreted as not precluding a rule of national law, such as that resulting from Article 207 of Ley 1/2000, de Enjuiciamiento Civil (Law 1/2000 on the Civil Procedure Code), of 7 January 2000, as amended by Ley 1/2013, de medidas para reforzar la protección a los deudores hipotecarios, reestructuración de deuda y alquiler social (Law 1/2013 on the protection of mortgagors, restructuring of debt and social rent), of 14 May 2013, then by Real Decreto-Ley 7/2013, de medidas urgentes de naturaleza tributaria, presupuestaria y de fomento de la investigación, el desarrollo y la innovación (Decree-Law 7/2013 on urgent fiscal and budgetary measures and promoting research, development and innovation), of 28 June 2013, then by Real Decreto-Ley 11/2014, de medidas urgentes en materia concursal (Decree-Law 11/2014 on urgent measures in the area of bankruptcy), of5 September 2014, which prohibits national courts from examining of their own motion the unfairness of contractual terms where a ruling has already been given on the lawfulness of the terms of the contract, taken as a whole, with regard to that directive in a decision which has become res judicata.
By contrast, where there are one or more contractual terms the potential unfair nature of which has not been examined during an earlier judicial review of the contract in dispute which has been closed by a decision which has become res judicata, Directive 93/13 must be interpreted as meaning that a national court, before which a consumer has properly lodged an objection, is required to assess the potential unfairness of those terms, whether at the request of the parties or of its own motion where it is in possession of the legal and factual elements necessary for that purpose.
3.
Article 3(1) and Article 4 of Directive 93/13 must be interpreted as meaning that:
—
the examination of the potential unfairness of a term of a contract concluded between a seller or supplier and a consumer requires it to be determined whether that term causes a significant imbalance in the parties’ rights and obligations under a contract to the detriment of the consumer. That examination must be carried out in the light of national rules which, in the absence of an agreement between the parties, are applicable, the means which the consumer has at his disposal under national law to bring an end to the use of that type of term, the nature of the goods or services covered by the contract at issue and all the circumstances surrounding the conclusion of the contract;
—
where the national court considers that a contractual term relating to the calculation of ordinary interest, such as that at issue in the main proceedings, is not in plain intelligible language, within the meaning of Article 4(2) of that directive, it is required to examine whether that term is unfair within the meaning of Article 3(1) of the directive. In the context of that examination, it is the duty of the referring court, inter alia, to compare the method of calculation of the rate of ordinary interest laid down in that term and the actual sum resulting from that rate with the methods of calculation generally used, the statutory interest rate and the interest rates applied on the market at the date of conclusion of the agreement at issue in the main proceedings for a loan of a comparable sum and term to those of the loan agreement under consideration; and
—
as regards the assessment by a national court of the potential unfairness of the term relating to accelerated repayment resulting from a failure on the part of the debtor to comply with his obligations during a limited specific period, it is for the referring court to examine whether the right of the seller or supplier to call in the totality of the loan is conditional upon the non-compliance by the consumer with an obligation which is of essential importance in the context of the contractual relationship in question, whether that right is provided for in cases in which such non-compliance is sufficiently serious in the light of the term and amount of the loan, whether that right derogates from the applicable common law rules, where specific contractual provisions are lacking, and whether national law provides for adequate and effective means enabling the consumer subject to such a term to remedy the effects of the loan being called in.
4.
Directive 93/13 must be interpreted as precluding an interpretation in the case-law of a provision of national law governing accelerated repayment clauses in loan agreements, such as Article 693(2) of Law 1/2000, as amended by Decree-Law 7/2013, which prohibits the national court which has found such a contractual term to be unfair from declaring that term null and void and removing it where the seller or supplier did not in fact apply it, but complied with the requirements laid down in that provision of national law.
[Signatures]
( *1 ) Language of the case: Spanish. |
OPINION OF ADVOCATE GENERAL
SZPUNAR
delivered on 14 January 2016 ( )
Joined Cases C‑381/14 and C‑385/14
Jorge Sales Sinués
v
Caixabank SA
and
Youssouf Drame Ba
v
Catalunya Caixa SA (Catalunya Banc SA)
(Request for a preliminary ruling from the Juzgado de lo Mercantil no 9 de Barcelona (Commercial Court No 9, Barcelona (Spain))
‛Directive 93/13/EEC — Consumer contracts — Mortgage loan agreement — Unfair terms — Actions for the annulment of a term of an agreement — Consumer protection association — Collective actions for an injunction — Stay of individual proceedings — Principles of equivalence and effectiveness’
I – Introduction
1.
The present cases concern the doubts which the Juzgado de lo Mercantil no 9 de Barcelona (Commercial Court No 9, Barcelona) entertains regarding the consistency of Spanish legislation relating to precedence in civil proceedings with Article 7 of Directive 93/13/EEC ( ) and, consequently, the consistency with that article of the staying of individual actions pending a final decision concluding collective proceedings brought by a consumers and users association.
2.
The requests for a preliminary ruling were submitted in the context of disputes between two consumers and two banks involving individual actions for the annulment of ‘floor’ clauses in mortgage loan agreements.
3.
These cases present the Court, inter alia, with an opportunity to clarify its case-law on the nature of individual actions and collective actions and the relationship between them.
II – Legal framework
A – EU law
4.
Article 3(1) of Directive 93/13 provides:
‘A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.’
5.
Article 4(1) of that directive states:
‘… the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.’
6.
Article 6(1) of the directive is drafted as follows:
‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon [the remaining] terms if it is capable of continuing in existence without the unfair terms.’
7.
Article 7(1) and (2) of Directive 93/13 provides:
‘1. Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.
2. The means referred to in paragraph 1 are to include provisions whereby persons or organisations, having a legitimate interest under national law in protecting consumers, may take action according to the national law concerned before the courts or before competent administrative bodies for a decision as to whether contractual terms drawn up for general use are unfair, so that they can apply appropriate effective means to prevent the continued use of such terms.
…’
B – Spanish law
8.
Article 13 of the Code of Civil Procedure (Ley de enjuiciamiento) of 7 January 2000 (BOE No 7 of 8 January 2000, p. 575, ‘the Code of Civil Procedure’) provides:
‘1. While legal proceedings are pending, any person who is able to show a direct, legitimate interest in the outcome of the action may be admitted as a claimant or defendant in the action.
In particular, any consumer or user may intervene in proceedings commenced by legally recognised bodies whose object is to protect the interests of consumers and users.
2. An application to intervene shall not result in a stay of the proceedings. After hearing the parties to the proceedings, the court shall make an order deciding the application within a general period of 10 days.
3. The grant of leave to intervene shall not have any retroactive effect in the proceedings. However, the intervener shall be regarded as a party to the proceedings for all intents and purposes and shall be entitled to support the claims made by co-litigants or those which the intervener himself makes if he has a procedural right to do so, even if his co-litigants abandon their action, acquiesce to their opponent’s claim, discontinue or withdraw from the proceedings for any other reason.
The intervener shall also be entitled to put forward such arguments as may be necessary to his case if he has not yet put forward those arguments because they belong to a stage in the proceedings prior to his being granted leave to intervene. The court registrar shall in any event communicate such arguments to the other parties within a period of five days.
Similarly, the intervener may pursue the prescribed legal remedies in respect of decisions which he regards as prejudicial to his own interests, even if his co-litigants consent to such decisions.’
9.
Article 15 of the Code of Civil Procedure is drafted as follows:
‘1. In proceedings brought by associations or other bodies established in order to protect the rights and interests of consumers and users, and in proceedings brought by groups of concerned persons, any person that has suffered harm as a result of consuming the product or using the service which gave rise to the proceedings shall be invited to join the proceedings in order to enforce his individual rights and interests. The invitation shall be issued by the court registrar, who shall publish a notice concerning the admission of claims in communication media published in the territory in which the said rights or interests were affected.
…
3. In the case of proceedings in which the harmful event affects a number of persons who are unidentified or difficult to identify, the invitation shall have the effect of staying the proceedings for a period not exceeding two months to be determined by the court registrar in each case in accordance with the circumstances or complexity of the harmful event and the difficulties involved in identifying and locating the injured parties. The proceedings shall resume with the participation of all consumers who have accepted the invitation, and consumers and users shall not be allowed subsequently to enter an individual appearance, without prejudice to their entitlement to assert their rights or interests in accordance with the provisions of Articles 221 and 519 of this law.
4. The provisions of the preceding paragraphs shall not apply to injunctive proceedings brought for the purpose of defending collective interests or the interests of consumers and users in general.’
10.
Article 43 of the Code of Civil Procedure provides:
‘Where, in order to give a ruling on the subject-matter of a dispute, it is necessary to decide an issue which itself constitutes the main subject-matter of other proceedings pending before the same or a different civil court, and where it is not possible for the two actions to be joined, the court may, on the application of both parties or on the application of one of them and after hearing the other party, order the proceedings to be stayed as they currently stand, until such time as the proceedings concerning the preliminary issue are concluded.’
11.
As regards the effects of judgments given in proceedings brought by consumers or users associations, Article 221 of the Code of Civil Procedure states:
‘1. Without prejudice to the provisions of the preceding articles, judgments given on claims brought by consumers or users associations having the legal capacity referred to in Article 11 of this law shall be subject to the following rules:
1a.
If the claim is for pecuniary damages, or an order laying down an obligation to do or to refrain from doing something or to give a specific or general thing, the judgment upholding the claim shall identify individually which consumers and users are to be regarded as entitled to benefit from the judgment, in accordance with the laws for their protection.
Where it is not possible to identify such consumers and users individually, the judgment shall set out the facts, characteristics and conditions required in order to be able to demand payment and, where appropriate, apply for execution or participate therein in the event that enforcement is sought by the claimant association.
2a.
Where, as a preliminary finding or as the court’s principal or sole ruling, a given activity or particular conduct is declared unlawful or inconsistent with the law, the court shall indicate in its judgment whether, in accordance with the laws on the protection of consumers and users, that declaration has procedural consequences that are not limited to the parties to the relevant proceedings.
3a.
Where particular consumers or users have participated in the proceedings, the judgment shall include an express ruling on their claims.
2. In any judgment granting an application for an injunction to protect collective interests or the interests of consumers and users in general, the court may, if it considers it appropriate, order that the judgment be published in full or in part, at the defendant’s expense and, where the effects of the infringement may persist over time, may make a rectifying declaration.’
12.
Under Article 222 of the Code of Civil Procedure:
‘1. The authority of res judicata attaching to final judgments, either upholding or dismissing a claim, shall exclude, in accordance with the law, any further proceedings having the same subject-matter as that in which the first judgment was given.
2. The authority of res judicata shall attach to claims made in the main application and to counter-claims and to the matters referred to in Article 408(1) and (2) of this law.
Facts subsequent to the expiry of the time-limit for the lodging of pleadings in the proceedings in which such claims were made shall be regarded as new and different with respect to the basis on which such claims were made.
3. The authority of res judicata shall be binding on the parties to the proceedings in which it arises, their heirs and those deriving title from them, and on the persons who, not being parties to the proceedings, hold the rights which give them standing to bring proceedings in accordance with the provisions of Article 11 of this law.
…
4. A decision that has acquired the force of res judicata in a final judgment concluding proceedings shall be binding on a court before which subsequent proceedings are brought where the decision having the force of res judicata appears, in the subsequent proceedings, to be a logical antecedent to the subject-matter of the subsequent proceedings and where the parties to the two sets of proceedings are the same or where the authority of res judicata applies to them pursuant to provisions of the law.’
13.
Under Article 519 of the Code of Civil Procedure:
‘Where, in a judgment as referred to in the first rule under Article 221, it has not been possible to identify individually which consumers and users are to be regarded as entitled to benefit from that judgment, the court having jurisdiction for enforcement shall, on the application of one or more interested parties and after hearing the party against which judgment was given, make an order determining whether, in accordance with the facts, characteristics and conditions specified in the judgment, the applicants are entitled to benefit from the judgment. With a copy of that order, the persons whose entitlement is recognised may apply for enforcement. The Public Prosecutor may apply for the enforcement of the judgment for the benefit of the consumers and users affected.’
III – The facts of the dispute in the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court
14.
On 20 October 2005, Mr Sales Sinués concluded an agreement with Caixabank SA (‘Caixabank’) for the novation of a mortgage loan. On 7 February 2005, Mr Drame Ba concluded a mortgage loan agreement with Catalunya Caixa SA (Catalunya Bank SA) (‘Catalunya Caixa’). Both agreements were concluded at nominal interest rates, the first for a capital sum of EUR 78132 and the second for a capital sum of EUR 209000. They both contained a ‘floor’ clause, stipulating a lower limit on the variation of the nominal interest applicable on successive annual renewals, the first fixed at 2.85% and the second at 3.75%, and an upper limit, or ceiling, on the interest rate, fixed at 12%.
15.
The agreements also contained a clause under which the fixed nominal interest rate applied from the date of the agreement until 1 October 2006 and 31 August 2005, respectively. From the day following those dates until full repayment of the loans, variable nominal interest was applicable, based on an index, namely EURIBOR, plus 0.6% and 0.5% respectively.
16.
On 10 October and 25 October 2013 respectively, Mr Sales Sinués and Mr Drame Ba each brought an individual action for the annulment of the floor clauses in their mortgage loan agreements. In their actions, the applicants in the main proceedings argue that the floor clauses had been imposed on them unilaterally by the banks as general conditions of the agreements and without any negotiation. Consequently, they request the referring court, first, to declare the clauses null and void as a result of a lack of transparency and the resulting imbalance which was to their detriment and, secondly, to order the reimbursement of sums unduly received by the banks under those clauses.
17.
Prior to the commencement of the applicants’ actions, on 11 November 2010, the consumers and users association ADICAE (Asociación de Usuarios de Bancos Cajas y Seguros) ( ) brought before the Juzgado de lo Mercantil No 11 de Madrid (Commercial Court No 11, Madrid) a collective action against 72 banks including Caixabank and Catalunya Caixa, ( ) seeking an injunction prohibiting the continued use of floor clauses on the ground of their unfairness.
18.
Relying on Article 11(4), Article 43 and Article 222 of the Code of Civil Procedure, the defendants in the main proceedings raised a preliminary objection and requested that the individual actions against them be stayed pending a final decision concluding the collective proceedings.
19.
The applicants in the main proceedings opposed that objection, arguing that they were entitled to dissociate themselves from the collective action brought by the consumers and users association and to bring an individual action.
20.
In the context of the cases which have thus been brought before it, the referring court states, first of all, that Article 43 of the Code of Civil Procedure provides for the stay of the individual actions until such time as the collective action has resulted in a final decision. It adds that, where it is difficult or impossible to determine the number of persons affected, Article 15(3) of the Code of Civil Procedure permits those affected to enter an individual appearance only within the period of two months following a general invitation to participate in the proceedings made via social media. Lastly, it states that individual participation in proceedings for the protection of collective interests brought pursuant to Article 11(4) of the Code of Civil Procedure requires the consumer concerned to appear before the court seised of the case and to waive his right to bring proceedings in the courts of his own jurisdictional area (the commercial court for the place where he is resident).
21.
In light of the foregoing, the referring court expresses doubt as to the compatibility of Article 43 of the Code of Civil Procedure with Article 7 of Directive 93/13 in circumstances such as those of the main proceedings. It points out, in particular, that the proceedings in the collective action, the outcome of which will be decisive if the individual actions in the main proceedings are stayed, had, by the date of its request for a preliminary ruling, been ongoing for four years, that no date has yet been fixed for the hearing and that several of the banks have yet to lodge their defences.
22.
It was in those circumstances that the Juzgado de lo Mercantil No 9 de Barcelona (Commercial Court No 9, Barcelona) decided, by two decisions dated 27 June 2014, received at the Court registry on 11 August 2014 (Case C‑381/14) and 13 August 2014 (Case C‑385/14), to stay the proceedings and refer the following questions to the Court for a preliminary ruling:
‘(1)
Can it be considered [that the Spanish legal system provides for] an effective means or mechanism within the meaning of Article 7(1) of Directive 93/13?
(2)
To what extent does the suspensory effect of a stay of proceedings preclude a consumer from complaining that unfair terms included in a contract concluded with him are void, and, therefore, infringe Article 7(1) of the directive?
(3)
Does the fact that a consumer is unable to dissociate himself from collective proceedings constitute an infringement of Article 7(3) of Directive 93/13?
(4)
Or, on the other hand, is the suspensory effect of a stay of proceedings provided for in Article 43 [of the Code of Civil Procedure] compatible with Article 7 of Directive 93/13 in that the rights of consumers are fully safeguarded by collective actions, the Spanish legal system providing for other equally effective procedural mechanisms for the protection of consumers’ rights, and by the principle of legal certainty?’
23.
By Order of the President of the Court of 9 September 2014, Cases C‑381/14 and C‑385/14 were joined for the purposes of the written procedure, the oral procedure and the judgment. Written observations were lodged by Mr Sales Sinués, Catalunya Caixa, the Spanish Government and the European Commission. Mr Sales Sinués, Caixabank, Catalunya Caixa, the Spanish Government and the Commission presented oral argument at the hearing on 30 September 2015.
IV – Analysis of the questions referred for a preliminary ruling
24.
The questions referred for a preliminary ruling in the present cases, as formulated by the referring court, concern the interpretation of Directive 93/13 with reference to two mortgage loan agreements each of which contains a ‘floor’ clause. This is a type of clause which stipulates a minimum rate of variable interest below which consumers are unable to benefit from reductions in official rates.
25.
The context in which these cases arose is not only legally complex, it is also one in which a number of interpretative criteria diverge from one national court to another. I therefore think it necessary to begin by noting, on the basis of the information given in the documents before the court, the essential elements of the procedural rules at issue before proceeding to examine the questions referred for a preliminary ruling.
A – Preliminary observations
26.
The national court, Mr Sales Sinués, the Spanish Government and the Commission have all referred to the scope of the legislation at issue, and in particular Article 43 of the Code of Civil Procedure, which lies at the heart of the problem which the national court and the Court of Justice must address.
1. The objection concerning precedence in civil proceedings
27.
The national court states that Spanish procedural law precludes the bringing, either simultaneously or successively, of two sets of legal proceedings between the same parties and having the same cause of action because of the risk of their leading to conflicting judgments. Three different mechanisms for avoiding that risk are therefore provided for in Spanish law, namely the force of substantive res judicata, ( )lis alibi pendens, ( ) and precedence in civil proceedings.
28.
It is this last procedural mechanism, provided for in Article 43 of the Code of Civil Procedure, which poses the central problem to which the national court refers. Article 43 addresses the situation in which, in order to give a ruling on the subject-matter of a dispute that is pending brought before a civil court, ‘it is necessary to decide an issue which itself constitutes the main subject-matter of other proceedings pending before the same or a different civil court’. According to that same article, if the joinder of the two actions is possible, the court must join them. If, however, joinder is not possible, Article 43 enables the court seised to stay the proceedings.
29.
In order for the proceedings to be stayed, three cumulative conditions must be fulfilled: the preliminary issue must have a direct and decisive influence upon the resolution of the main proceedings, an application must be made by one party or by both parties, ( ) and proceedings must be pending which involve the preliminary issue. Nevertheless, Article 43 of the Code of Civil Procedure states that ‘the court may … order the proceedings to be stayed’. Consequently, as is apparent from the order for reference, staying the proceedings is optional, in that Article 43 allows the courts a discretion in deciding whether a stay of the proceedings is appropriate. ( )
2. Divergent interpretation and application by the national courts of Article 43 of the Code of Civil Procedure
30.
As is clear from the documents before the Court, it is the divergent interpretation and application by the national courts of Article 43 of the Code of Civil Procedure in the context of the collective injunctive proceedings brought by ADICAE which render the analysis of the questions referred for a preliminary ruling even more complex, the matter not having been decided by the highest national courts.
31.
On the one hand, certain courts appear to take the view that there is an issue of civil procedural precedence, in accordance with Article 43 of the Code of Civil Procedure, and have stayed individual proceedings pending the delivery of a final judgment in the collective proceedings, on the basis of the connection between the subject-matter of the individual actions and that of the collective actions. ( )
32.
On the other hand, certain other courts appear to believe there to be a situation of lis alibi pendens as regards the individual actions vis-à-vis the collective actions, on the view that the cause of action and the parties are the same, ( ) and are removing from the register individual actions on the basis of Article 222(3) of the Code of Civil Procedure. It is apparent from the documents before the court that such courts are in the minority.
33.
Lastly, some courts take the view that there is neither an issue of civil procedural precedence nor a situation of lis alibi pendens and consider, in particular, that the causes of action and the parties are not in fact the same, that the outcome of the collective action will not be decisive for the individual actions and that, whilst a declaration in the collective action that the floor clauses are null and void might have a positive influence on the individual actions, the dismissal of the collective action would not necessarily entail the dismissal of the individual actions. They thus conclude that consumers retain locus standi legally to defend their own interests and that it is unnecessary to stay the individual proceedings. ( )
34.
It is this last interpretation that the Spanish Government and the Commission appear to endorse, in particular arguing in their written observations that the application of Article 43 of the Code of Civil Procedure does not necessarily entail the staying of individual actions.
35.
The Spanish Government added, in its submissions at the hearing, that a distinction must be drawn between the collective action for an injunction prohibiting the continued use of standard contract terms that are unfair and individual actions for the annulment of mortgage loan agreements on the ground that they contain a term that is unfair. The two types of action are different in nature and so their subject-matter is only partly the same. While, in the collective action for an injunction, the parties may submit observations without it being possible for the court to assess all the circumstances of each individual case (the court’s review being abstract and general), in particular, the circumstances pertaining to each consumer who has concluded an agreement, in the individual actions, the court must take into account all the circumstances pertaining at the time when the loan agreement was concluded, how those circumstances have developed, all the circumstances attending the conclusion of the agreement and all the other terms of the agreement or of another agreement on which it is dependent. ( )
36.
Consequently, the Spanish Government maintains that a logical, systematic interpretation of the Spanish procedural rules excludes civil procedural precedence and that Article 43 of the Code of Civil Procedure deals with precedence that is not merely hypothetical or potential but is real, and that for this reason no stay of the proceedings should be ordered.
3. The effects of judgments upholding collective actions for consumers who were not parties to the proceedings
37.
The Spanish Government and Catalunya Caixa maintain that Article 221 of the Code of Civil Procedure does not provide that the effects of a judgment upholding a collective action must be extended to all consumers whose contracts contain a general condition of the same nature as that which was called into question. Indeed, in the event that a collective action is dismissed, Article 221 allows individual actions to be pursued, so as to enable consumers to put forward the particular circumstances of their individual case. According to the Spanish Government, that is consistent with Article 11(1) of the Code of Civil Procedure, in accordance with which consumer associations have locus standi to bring legal actions ‘[w]ithout prejudice to the individual right of injured parties to bring proceedings’. ( ) On the other hand, the Spanish Government adds that Article 221 of the Code of Civil Procedure merely establishes that the effects of a judgment upholding a collective action may be extended to persons who were not parties to the proceedings, and that that decision is a matter for the national court. ( )
38.
However, Mr Sales Sinués argued at the hearing that the bringing of an individual action implies, in principle, dissociation from collective proceedings, that is to say that the consumer waives the extension of effect which Article 221(1) of the Code of Civil Procedure attaches to any judgment upholding a collective action. Consequently, there is, he alleges, no risk that two conflicting judgments will be delivered on the same claim. Nevertheless, he maintains that an interpretation of Article 43 of the Code of Civil Procedure according to which there is civil procedural precedence and the individual action would therefore be stayed pending a final judgment in the collective action would mean that the consumer could not dissociate himself from the collective action.
4. Intervening in actions to protect the rights and the collective and diffuse interests of consumers
39.
The national court, Mr Sales Sinués, the Spanish Government and the Commission refer to the judgment of the Tribunal Supremo of 9 May 2013, ( ) handed down in a collective action for an injunction different from the one with which the referring court is concerned, but also concerning a floor clause. The Tribunal Supremo (Supreme Court) had declared this type of clause null and void, not because of its content but because of a lack of transparency, that is to say, a failure to provide consumers with clear, transparent information regarding such clauses. ( )
40.
In so far as concerns the nature of the action in which that judgment was delivered, the Commission pointed out in its written observations that it was simply a collective action for an injunction and thus merely concerned the legality of floor clauses. It was therefore without consequences in so far as concerns the award of damages.
41.
By contrast, Mr Sales Sinués stated at the hearing that the collective action brought by ADICAE includes both a claim for a declaration, the purpose of which is to prevent the continued inclusion of floor clauses in loan agreements, and a collective claim for compensation of the losses sustained as a result of such clauses. He pointed out in this connection that Article 15 of the Code of Civil Procedure does not apply to actions for an injunction but only to collective actions in damages. Consequently, the individual intervention of consumers, which occurred in the two-month period following the general invitation to participate in the collective proceedings made via social media, as provided for in Article 15(3) of the Code of Civil Procedure, related not to the collective action for an injunction brought by ADICAE, but only to the collective action in damages. ( ) According to Mr Sales Sinués, the delay in the procedure in the present case is therefore due to the collective action in damages, because of the very large number of consumers who have entered an individual appearance before the court. ( ) He argues, accordingly, that a collective action in damages takes longer than an individual action.
42.
I believe it is clear from the foregoing that that is the context in which the court must examine the questions referred for a preliminary ruling, subject to verification by the referring court.
B – The questions referred for a preliminary ruling
43.
It should be noted first of all that, in the context of the procedure for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the case before it. In that light, the Court may have to reformulate the questions referred to it. ( ) To that end, the Court may draw upon all the information provided by the national court, in particular from the grounds of the decision to make the reference, the legislation and the principles of EU law that require interpretation, in view of the subject-matter of the dispute in the main proceedings. ( )
44.
In the present case, I am of the view that, by the questions which it has referred for a preliminary ruling, the Juzgado de lo Mercantil No 9 de Barcelona is actually asking the Court to interpret the principles of equivalence and effectiveness in the context of the implementation of Article 7 of Directive 93/13, so as to enable it to assess whether the procedural rules at issue comply with EU law.
45.
In those circumstances, it is necessary to understand the questions referred for a preliminary ruling as asking, essentially, whether, in light of the principles of equivalence and effectiveness, Article 7 of Directive 93/13 is to be interpreted as precluding national procedural rules, such as those at issue in the case in the main proceedings, which permit the staying, on grounds of civil procedural precedence, of an individual action commenced in parallel with a collective action for an injunction until a final judgment concluding the collective action is delivered, without the individual consumer’s being able to dissociate himself from the collective action.
1. The criteria for assessing the unfair nature of contractual terms in the context of Directive 93/13 and the case-law
a) Actions involving individual consumers and collective actions for an injunction
46.
It seems to me important to observe, as a preliminary point, that the system of protection established by Directive 93/13 is based on the notion that the consumer is in a weak position vis-à-vis the seller or supplier as regards both his bargaining power and his level of knowledge, which leads to the consumer’s agreeing to terms drawn up in advance by the seller or supplier without his being able to influence the content of those terms. ( )
47.
In order to guarantee the protection intended by Directive 93/13, criteria for assessing the unfair nature of contractual terms have been laid down in EU legislation. Amongst other things, these make it necessary for the specific circumstances of each individual case to be assessed. ( ) In accordance with Article 3 of Directive 93/13, it is necessary to establish whether the contractual term in question has been negotiated individually or whether it was drafted in advance, without the consumer’s being able to influence its substance, particularly in the context of a pre-formulated standard contract. In addition, Article 4(1) of the directive provides that the unfairness of a contractual term must be assessed taking into account, at the time of conclusion of the contract, ‘all the circumstances attending the conclusion of the contract’ and ‘all the other terms of the contract or of another contract on which it is dependent’.
48.
As regards, first of all, actions involving an individual consumer, such as those at issue in the main proceedings, the Court has held that, in view of the weaker position of the consumer, ‘Article 6(1) of the directive requires Member States to specify that unfair terms “shall, as provided for under their national law, not be binding on the consumer”. As is apparent from the case-law, that is a mandatory provision which aims to replace the formal balance which the contract establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them’. ( )
49.
It seems pertinent to point out that Articles 3 and 6 of Directive 93/13 confer individual rights on consumers which national courts have a duty to protect, including of their own motion.
50.
As regards, secondly, collective actions for an injunction, such as that brought by ADICAE, I would point out that it is clear from the case-law that Directive 93/13 does not seek to harmonise the penalties applicable in the event of a term being found to be unfair in the context of a collective action. Nevertheless, Article 7(1) of the directive requires the Member States to ensure that adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers. ( )
51.
The Court has already stated on several occasions that the system of protection established by Directive 93/13 is based on the notion that the imbalance which exists between the consumer and the seller or supplier may be corrected only by positive action unconnected with the actual parties to the contract. ( ) That is why Article 7(2) of Directive 93/13 specifies that the aforementioned means are to include the possibility for authorised consumer associations to take action before the competent courts (or competent administrative bodies) in order to obtain a decision as to whether contractual terms drawn up for general use are unfair and, where appropriate, to have them prohibited. ( )
52.
That being said, it should also be observed that the relationship between individual actions and collective actions has not been expressly regulated by the EU legislature. Nevertheless, as the Commission has rightly pointed out, the nature and limits of the relationship between those two types of action may be inferred not only from Directive 93/13 but also from the case-law of the Court.
b) The nature of individual actions and collective actions for an injunction and the relationship between them
i) The different nature of individual actions and collective actions in the context of Directive 93/13
53.
The Commission maintains in its written observations that Article 7(1) of Directive 93/13 refers in general fashion to individual actions brought by consumers who have been adversely affected by unfair terms, such actions being the normal legal remedy for protecting their interests, while the collective actions provided for in Article 7(2) are a complementary means of guaranteeing such protection.
54.
I concur with that analysis.
55.
The complementary nature of collective actions for an injunction may, in my view, be deduced from the fact that they are general actions which entail no specific examination of the type which Directive 93/13 requires in the case of actions involving individual consumers and instead merely require an abstract, general assessment of whether or not contractual terms are unfair. ( )
56.
It follows that Directive 93/13 requires the Member States to include within their legal systems, first and foremost, individual legal actions in which it is possible to argue the unfair nature of contractual terms and, secondly and subsidiarily ( ) collective actions for injunctions, which nevertheless may not replace individual actions or preclude them.
ii) The complementary relationship between individual actions and collective actions in the case-law
57.
In so far as concerns individual actions, it is clear from the case-law that the role assigned by Directive 93/13 to national courts, which is to ensure the effectiveness of the protection intended to be given by the provisions of the directive, ‘is not limited to a mere power to rule on the possible unfairness of a contractual term, but also consists of the obligation to examine that issue of its own motion’. ( ) According to the Court, this obligation upon national courts to intervene, even of their own motion, in individual actions constitutes, in a general fashion, the positive action or the adequate means needed to redress the position of inferiority in which the consumer finds himself vis-à-vis the seller or supplier. ( ) As regards collective actions for an injunction, on the other hand, the Court has held that consumer protection associations are not in the same position of inferiority vis-à-vis the seller or supplier. ( ) More specifically, it has held that a collective action for an injunction pitting such an association against a seller or supplier ‘is not characterised by the same imbalance that is present in an individual action brought by a consumer against a seller or supplier’. ( ) That difference between individual actions and collective actions for an injunction which flows from Directive 93/13 and has been recognised in the case-law, reinforces, in my view, the complementary nature of the latter with respect to the former.
58.
Moreover, the court has stated that ‘the deterrent nature and dissuasive purpose of the measures to be adopted, [that is to say, collective actions for an injunction,] together with their independence of any particular dispute, mean that such actions may be brought even though the terms which it is sought to have prohibited have not been used in specific contracts’. ( ) Effectively attaining that objective requires, according to the Court, that terms within the general business conditions of consumer contracts which are declared to be unfair in an action for an injunction brought against the seller(s) or supplier(s) concerned, such as the term to which the national court refers, ‘are not binding on either the consumers who are parties to the actions for an injunction or on those who have concluded with that seller or supplier a contract to which the same [general business conditions] apply’. ( ) Indeed, ‘[t]he application of a penalty of invalidity of an unfair term with regard to all consumers who have concluded a consumer contract to which the same [general business conditions] apply ensures that those consumers will not be bound by that term, but does not exclude the application of other types of adequate and effective penalties provided for by national legislation’. ( )
59.
It is therefore clear from that case-law that, under Directive 93/13, the relationship between collective actions for an injunction and the specific terms by which consumers are bound must be one that is favourable to the consumer, not one which poses an obstacle to individual actions or replaces individual actions by collective actions for an injunction.
2. Assessment of the procedural rules at issue in the light of Article 7 of the directive and the principles of equivalence and effectiveness
60.
It should be noted that it appears from the way in which the questions for a preliminary ruling have been formulated that the national court proceeds on the assumption that the staying of the individual actions in question, which have been brought by the applicants in parallel pending a final decision in the collective proceedings, is a necessary consequence of Article 43 of the Code of Civil Procedure. ( ) However, it is clear from the observations submitted by Mr Sales Sinués, the Spanish Government and the Commission that staying those actions is optional, inasmuch as the provision in question allows the Spanish courts a discretion in deciding whether or not a stay is appropriate.
61.
I would also observe that, as is clear from points 30 to 33 of this Opinion, in the present case, the divergent interpretation of the procedural rules in question by national courts compounds the complexity of these rules.
62.
In the present instance, as regards the national legislation at issue in the main proceedings, I would point out that it is not for the Court to rule on the interpretation of provisions of national law, that being a matter exclusively for the referring court or, as the case may be, the national courts having jurisdiction, which must determine whether the provisions of the applicable national legislation meet the requirements of EU law. However, when giving a preliminary ruling, the Court may, where appropriate, offer clarification intended to provide the national court with guidance in its assessment. ( )
63.
It is in that context that I shall now examine, in the light of the principles of equivalence and effectiveness, whether the national procedural rules at issue pose an obstacle to the exercise of the rights conferred by Directive 93/13.
64.
I would recall in this connection that the Court has already held on a number of occasions that, there being no harmonisation of procedural rules, that question is a matter for the national legal order of the Member States, in accordance with the principle of the procedural autonomy of the latter. None the less, the Court has stressed that the detailed procedural rules governing actions for safeguarding the rights which individuals derive under EU law must fulfil the dual requirement that they should be no less favourable than those governing similar domestic actions (the principle of equivalence) and should not make it in practice impossible or excessively difficult to exercise the rights conferred on consumers by EU law (the principle of effectiveness). ( )
a) Observance of the principle of equivalence
65.
The principle of equivalence requires that the national rule in question be applied without distinction, whether the infringement alleged is of EU law or national law, where the purpose and cause of action are similar. In order to establish whether the principle of equivalence has been complied with, it is for the national court, which alone has direct knowledge of the procedural rules governing actions under national law, to ensure, in national law, that the procedural rules intended to ensure that the rights derived by individuals from EU law are safeguarded respect that principle and to consider both the purpose and the essential characteristics of allegedly similar domestic actions. To that end, the national court must assess the similarity of the actions concerned in terms of their purpose, cause of action and essential characteristics. In order to determine whether a national procedural provision is less favourable, the national court must take account of the role of that provision in the procedure, viewed as a whole, of the conduct of that procedure and of its special features. ( )
66.
In the present case, the possibility of civil procedural precedence and of the application of the rule of lis alibi pendens to individual disputes and collective actions arises from interpretative criteria relating to the legislation at issue which diverge from one national court to another. Nevertheless, there is, in my opinion, nothing to indicate that that legislation would be interpreted differently in the context of disputes concerning rights arising under national law.
b) Observance of the principle of effectiveness
67.
In so far as concerns the principle of effectiveness, as I shall explain in the following points, there are several factors which, by contrast, lead me to consider that an interpretation of the procedural rules at issue which admits of civil procedural precedence and, therefore, permits the staying of individual actions pending the delivery of a final judgment in a collective action, renders the exercise of the rights conferred by Directive 93/13 impossible or excessively difficult.
68.
First of all, if, as is suggested in points 46 to 59 of this Opinion, it is to be presumed that Directive 93/13 confers individual in personam rights on which it must be possible to rely in the context of individual legal actions and that collective actions for an injunction are complementary to, and different and distinct from individual actions, then there is no justification for the mandatory or automatic staying of individual actions until such time as a final judgment is delivered in collective proceedings.
69.
As regards the individual nature of the rights of consumers, it should be observed that, in so far as concerns, in particular, the national court’s duty to examine of its own motion whether a contractual term is unfair, that court is not, however, required under the directive to exclude the possibility that the term in question may be applicable, if the consumer, after having been informed of it by that court, does not intend to assert its unfair or non-binding status. ( ) Indeed, the Court has held that, where a national court considers, after examining a contractual term of its own motion, that the term is unfair, ‘it must not apply it, except if the consumer opposes that non-application’. ( ) This individual dimension, in accordance with which ‘[t]he right to effective legal protection also includes the option not to assert one’s rights’ ( ), takes form in the opportunity which the consumer must be afforded to set out his views and in the duty of the national court ‘to take into account, where appropriate, the intention expressed by the consumer when, conscious of the non-binding nature of an unfair term, that consumer states nevertheless that he is opposed to that term being disregarded, thus giving his free and informed consent to the term in question’. ( )
70.
Consequently, an interpretation of the legislation in question, and in particular Article 43 of the Code of Civil Procedure, in accordance with which there is an obligation to stay an individual action where parallel collective proceedings are afoot ( ) or which accords automatic priority over individual actions, without the consumer’s being able to decide either to refrain from exercising his rights or to exercise them effectively in individual proceedings or indeed to dissociate himself from the collective action, is not consistent with the principle of effectiveness.
71.
As the Commission pointed out in its written observations, guaranteeing the effectiveness of the individual rights conferred by Directive 93/13 implies that every consumer must be able to dissociate himself from collective action and bring an individual action, or simply continue with the collective proceedings and accept the non-binding nature of the contractual term at issue. In other words, the consumer ’should be free to leave the [collective action] at any time before the final judgement is given or the case is otherwise validly settled … without being deprived of the possibility to pursue [his] claims in another form, if this does not undermine the sound administration of justice’. ( ) That conclusion applies to the case where the consumer has not intervened in the collective action.
72.
Secondly, if, as is suggested in point 55 of this Opinion, it is to be accepted that the abstract, general assessment of whether or not a contractual term is unfair that is to be carried out in a collective action for an injunction pursues a different aim from that pursued in an individual action, which entails a specific examination of the contractual term in the light of the particular circumstances of the case, then it must also be accepted that, in principle, the judgments handed down in collective actions and in individual actions may differ, even if they are seldom contradictory. ( ) Accordingly, a consumer who decides to act in his individual capacity should not be directly affected by a judgment delivered in collective proceedings, even though the court hearing his individual action will obviously take that judgment into account. ( )
73.
Thirdly and lastly, the option which is open to the consumer of participating in a collective action is not comparable to the bringing of an individual action. First of all, as is clear from the order for reference, individual participation in proceedings for the protection of collective interests brought pursuant Article 11(4) of the Code of Civil Procedure requires the consumer concerned to appear before the court seised of the case and to waive his right to bring proceedings in the courts of his own jurisdictional area (the commercial court for the place where he is resident). Next, the two-month period following the publication in the media contemplated by Article 15(1) and (3) of the Code of Civil Procedure may present certain practical difficulties for consumers who have been adversely affected and wish to participate in collective proceedings. ( ) Finally, the consumer will find himself constrained by the approach which the consumer protection association has taken to the case and will be unable to alter its substance or include other claims. He will also be affected by any delay which, as in the present case, poses an obstacle to his protection as a consumer.
74.
Consequently, in light of all the foregoing considerations, I am of the opinion that, having regard to the principle of effectiveness, Article 7 of Directive 93/13 is to be interpreted as not precluding national procedural rules, such as those at issue in the case in the main proceedings, which permit the staying, on grounds of civil procedural precedence, of individual actions brought in parallel to a collective action for an injunction pending the delivery of a final judgment concluding the collective proceedings, provided that such a stay is neither mandatory nor automatic and provided that the consumer concerned is able to dissociate himself from the collective action.
V – Conclusion
In light of all the foregoing considerations, I propose that the Court should answer the Juzgado de lo Mercantil No 9 de Barcelona (Commercial Court No 9, Barcelona) as follows:
Having regard to the principle of effectiveness, Article 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts is to be interpreted as not precluding national procedural rules, such as those at issue in the case in the main proceedings, which permit the staying, on grounds of civil procedural precedence, of individual actions brought in parallel to a collective action for an injunction pending the delivery of a final judgment concluding the collective proceedings,
—
provided that such a stay is neither mandatory nor automatic, and
—
provided that the consumer concerned is able to dissociate himself from the collective action.
( ) Original language: French.
( ) Council Directive of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).
( ) A consumer association specialising in the field of banking and insurance services.
( ) At the request of that court, an invitation was issued to the public via social media and the association ADICAE.
( ) According to the national court, the authority of substantive res judicata, provided for in Article 222 of the Code of Civil Procedure, exists where a final judgment, either upholding or dismissing the action, has already been given in legal proceedings, with the result that no new proceedings between the same parties and having the same cause of action may be commenced.
( ) The national court explains that lis alibi pendens exists where the cause of action of subsequent proceedings is the same as that which gave rise to earlier proceedings that are still pending. Accordingly, in view of the risk of conflicting judgments being given on the same subject-matter, the later proceedings must be removed from the register.
( ) See, to that effect, Judgment No 527/2013 of the Tribunal Supremo (Civil Chamber) of 3 September 2013.
( ) The national court states that it ‘is required at this stage of the proceedings to decide whether … it must stay the proceedings … or whether the proceedings must continue their normal course up to judgment’ (my emphasis). On Article 43 of the Code of Civil Procedure, see, inter alia, De la Oliva Santos, A., Objeto del proceso y cosa juzgada en el proceso civil, Thomson-Civitas, 2006, pp. 85 to 88, Montero Aroca, J., et al., Derecho Jurisdiccional II. Proceso civil, 21st ed., Tirant lo Blanch, 2013, pp. 126 and 127, and Gimeno Sendra, V., Derecho Procesal Civil 1. El proceso de declaración. Parte General, 5th ed., Colex, 2014, p. 215.
( ) The national court refers in this connection to Order No 84/2013 of the Audiencia Provincial de Barcelona (Provincial Court, Barcelona) of 11 June 2013, which, taking into account the possibility that the judgment that is to be handed down in the collective proceedings will declare the floor clauses to be null and void, expressly provides, in accordance with Article 221(1) of the Code of Civil Procedure, that it applies ultra partes.
( ) The Commission states that this minority view seems to have been taken by the Audiencia Provincial de Barcelona in Order No 112/2014 of 9 October 2014.
( ) See, in particular, Order No 76/2013 of the Audiencia Provincial de Huelva (Provincial Court, Huelva) of 24 February 2014 and Judgments Nos 278/2013 and 494/2013 of the Audiencia Provincial de Ourense (Provincial Court, Orense) of 22 May and 22 September 2014.
( ) Judgment No 241/13 of the Tribunal Supremo of 9 May 2013, paragraphs 235 to 238.
( ) Article 11(1) provides that ‘[w]ithout prejudice to the individual right of injured parties to bring proceedings, legally established consumers and users associations shall have locus standi to defend in a court of law the rights and interests of their members and of the association, as well as the general interests of consumers and users’.
( ) My emphasis.
( ) Judgment No 241/2013 of the Tribunal Supremo (Supreme Court) of 9 May 2013. In that judgment, the Tribunal Supremo restricted the retroactive effect of its declaration of invalidity so that it would only produce effects ex nunc, that is to say, not from the date of conclusion of the loan agreement (ex tunc), but only from 9 May 2013 onwards, that being the date of the judgment in question. Such a restriction was confirmed in another of that court’s judgments, No 139/2015 of 25 March 2015. Moreover, this type of restriction of effects is the subject of a recent request for a preliminary ruling from a Spanish court in another case pending before the Court, Gutierrez Naranjo (C‑154/15).
( ) It is apparent from the written observations lodged by Mr Sales Sinués that, since floor clauses are an element of the cost of the loan agreement, financial establishments are under an obligation to inform consumers about them, so that they are fully apprised of their existence and understand their effect on the actual cost of the credit when signing the loan agreement.
( ) The applicant cited Article 15(4) of the Code of Civil Procedure, which provides that ‘[t]he provisions of the preceding paragraphs shall not apply to injunctive proceedings brought for the purpose of defending collective interests or the interests of consumers and users in general’.
( ) Catalunya Caixa submitted at the hearing that the length of time taken by the collective proceedings is attributable, inter alia, to the large number of consumers (9000) who have become parties to the proceedings.
( ) See, inter alia, the judgments in Krüger (C‑334/95, EU:C:1997:378, paragraphs 22 and 23), Byankov (C‑249/11, EU:C:2012:608, paragraph 57) and Biovet (C‑306/14, EU:C:2015:689, paragraph 17).
( ) See, to that effect, inter alia, the judgments in Redmond (83/78, EU:C:1978:214, paragraph 26), Byankov (C‑249/11, EU:C:2012:608, paragraph 58) and Konstantinides (C‑475/11, EU:C:2013:542, paragraph 42).
( ) See the judgments in Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 25), Mostaza Claro (C‑168/05, EU:C:2006:675, paragraph 25), Asturcom Telecomunicaciones (C‑40/08, EU:C:2009:615, paragraph 29), Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 22), Invitel (C‑472/10, EU:C:2012:242, paragraph 33), Aziz (C‑415/11, EU:C:2013:164, paragraph 44) and Barclays Bank (C‑280/13, EU:C:2014:279, paragraph 32).
( ) According to the fifteenth recital of the preamble to Directive 93/13, ‘… it is necessary to fix in a general way the criteria for assessing the unfair character of contract terms’.
( ) See the judgment in Invitel (C‑472/10, EU:C:2012:242, paragraph 34).
( ) Ibidem (point 35).
( ) See the judgments in Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 27), Mostaza Claro (C‑168/05, EU:C:2006:675, paragraph 26), Asturcom Telecomunicaciones (C‑40/08, EU:C:2009:615, paragraph 31) and Banco Español de Crédito (C‑618/10, EU:C:2012:349, paragraph 41).
( ) See, to that effect, the judgments in Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 27), Commission v Italy (C‑372/99, EU:C:2002:42, paragraph 15) and Invitel (C‑472/10, EU:C:2012:242, paragraph 36). See also the twenty-third recital of the preamble to Directive 93/13.
( ) The Commission states that the ‘persons’ referred to in Article 7(2) of the directive are not the consumers themselves, but persons entrusted with their protection, such as a ‘consumer ombudsman’.
( ) According to the Commission, consumer protection is one of the areas ‘where the supplementary private enforcement of rights granted under Union law in the form of collective redress is of value’. See recital 7 of the preamble to Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law (OJ 2013 L 201, p. 60). My emphasis.
( ) Judgment in Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 32).
( ) See the judgments in Océano Grupo Editorial and Salvat Editores (C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 27), Cofidis (C‑473/00, EU:C:2002:705, paragraph 32) and Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 32).
( ) See the judgment in Asociación de Consumidores Independientes de Castilla y León (C‑413/12, EU:C:2013:800, paragraph 49).
( ) See the judgment in Asociación de Consumidores Independientes de Castilla y León (C‑413/12, EU:C:2013:800, paragraph 50).
( ) See the judgments in Commission v Italy (C‑372/99, EU:C:2002:42, paragraph 15), Invitel (C‑472/10, EU:C:2012:242, paragraph 37) and Pohotovost’ (C‑470/12, EU:C:2014:101, paragraph 44).
( ) See the judgment in Invitel (C‑472/10, EU:C:2012:242, paragraph 38).
( ) See the judgment in Invitel (C‑472/10, EU:C:2012:242, paragraph 40).
( ) It nevertheless appears from the order for reference that the national court is not obliged to stay the actions in question. See, in this connection, footnote 8 to this Opinion.
( ) See, to that effect, the judgment in Mascolo and Others (C‑22/13, C‑61/13, C‑63/13 and C‑418/13, EU:C:2014:2401, paragraph 81 and 83).
( ) See, inter alia, the judgments in Rewe-Zentralfinanz and Rewe-Zentral (33/76, EU:C:1976:188, paragraph 5), Peterbroeck (C‑312/93, EU:C:1995:437, paragraph 12) and Impact (C‑268/06, EU:C:2008:223, paragraph 44 to 46). See also the judgments in Banif Plus Bank (C‑472/11, EU:C:2013:88, paragraph 26), Aziz (C‑415/11, EU:C:2013:164, paragraph 50) and Barclays Bank (C‑280/13, EU:C:2014:279, paragraph 37).
( ) See, to that effect, the judgment in Rosado Santana (C‑177/10, EU:C:2011:557, paragraph 90).
( ) Judgment in Pannon GSM (C‑243/08, EU:C:2009:350, paragraph 33).
( ) Ibidem (paragraph 35).
( ) Opinion of Advocate General Kokott in Duarte Hueros (C‑32/12, EU:C:2013:128), point 53).
( ) Judgment in Banif Plus Bank (C‑472/11, EU:C:2013:88, paragraph 35).
( ) I would, however, note that national courts must retain the right to stay individual proceedings on other legitimate grounds where such a stay constitutes an appropriate and proportionate means of ensuring the sound administration of justice.
( ) Paragraph 22 of the Commission Recommendation of 11 June 2013.
( ) For example, a contractual term may not be unfair in the abstract, but may be unfair under certain circumstances, or it may be potentially unfair and yet, having been negotiated individually in a given situation, it will be binding on the consumer in question.
( ) I note that this is the interpretation adopted by certain national courts which are refusing to stay proceedings, in particular, on the ground that the difference in nature between individual actions (specific review) and collective actions (abstract, general review) precludes the extension of the effects of the latter to the former. See, inter alia, Judgments Nos 128/2014 of the Audiencia Provincial de Granada (Provincial Court, Granada) of 23 May 2014, 308/2014 of the Audiencia Provincial de Oviedo (Provincial Court, Oviedo) of 17 December 2014, 141/2015 of the Audiencia Provincial de Oviedo of 20 May 2015 and 332/2014 of the Audiencia Provincial de Girona (Provincial Court, Girona) of 3 December 2014.
( ) In this connection, see point 41 of this Opinion. |
OPINION OF ADVOCATE GENERAL
WAHL
delivered on 17 March 2016 ( )
Case C‑493/14
Dilly’s Wellnesshotel GmbH
(Request for a preliminary ruling from the Bundesfinanzgericht (Federal Finance Court, Austria))
‛Reference for a preliminary ruling — State aid — Regulation (EC) No 800/2008 — Categories of aid which may be regarded as compatible with the common market — Aid for environmental protection — Aid measures in the form of reductions in environmental taxes — Mandatory nature of the conditions for exemption)’
1.
It is well established that the obligation of prior notification of each measure intended to grant or alter new aid, which is incumbent on the Member States under the Treaties, is one of the fundamental features of the system of control in the field of State aid. ( ) It necessarily follows that any qualification of that obligation, which arises from the wish to facilitate cooperation between national authorities and the Commission in clearly defined situations, by adopting administrative simplification measures in connection with the grant of block exemption, must be interpreted strictly.
2.
This requirement lies at the heart of the present request for a preliminary ruling, which is the first from the Bundesfinanzgericht (Federal Finance Court, Austria) ( ) and raises several questions on the interpretation of Regulation (EC) No 800/2008. ( )
3.
In particular, the present case gives the Court the opportunity to clarify the formal and substantive conditions that must be satisfied if a Member State is to qualify for an exemption from the obligation to notify aid measures under that regulation. More generally, it provides the opportunity to point out that all the specific obligations on the Member States in that context, whether formal or substantive, are mandatory in nature and that infringement of them results in loss of entitlement to the exemption sought.
I – Legal framework
A – EU law
4.
Article 109 TFEU (formerly Article 94 of the EC Treaty) authorises the Council of the European Union, inter alia, to take implementing measures in order to determine the categories of aid exempted from the information procedure referred to in Article 108(3) TFEU (formerly Article 93(3) of the EC Treaty).
5.
Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid ( ) was adopted pursuant to Article 94 of the EC Treaty. Article 3(1) of that regulation, entitled ‘Transparency and monitoring’, states that, ‘when adopting regulations pursuant to Article 1, the Commission shall impose detailed rules upon Member States to ensure transparency and monitoring of the aid exempted from notification in accordance with those regulations’.
6.
Regulation No 800/2008, ( ) which is applicable in the present case, was adopted under Regulation No 994/98.
7.
Under Article 1(1)(d) of Chapter I of Regulation No 800/2008, entitled ‘Scope’, that regulation applies, inter alia, to ‘aid for environmental protection’.
8.
Article 3(1) of that chapter, entitled ‘Conditions for exemption’, provided:
‘Aid schemes fulfilling all the conditions of Chapter I of this Regulation, as well as the relevant provisions of Chapter II of this Regulation, shall be compatible with the common market within the meaning of Article 87(3) of the Treaty and shall be exempt from the notification requirement of Article 88(3) of the Treaty provided that any individual aid awarded under such scheme fulfils all the conditions of this Regulation, and the scheme contains an express reference to this Regulation, by citing its title and publication reference in the Official Journal of the European Union.’
9.
Under Article 9 of that chapter, entitled ‘Transparency’:
‘1. Within 20 working days following the entry into force of an aid scheme or the awarding of an ad hoc aid, which has been exempted pursuant to this Regulation, the Member State concerned shall forward to the Commission a summary of the information regarding such aid measure. That summary shall be provided in electronic form, via the established Commission IT application and in the form laid down in Annex III.
The Commission shall acknowledge receipt of the summary without delay.
The summaries shall be published by the Commission in the Official Journal of the European Union and on the Commission’s website.
2. Upon the entry into force of an aid scheme or the awarding of an ad hoc aid, which has been exempted pursuant to this Regulation, the Member State concerned shall publish on the Internet the full text of such aid measure. In the case of an aid scheme, this text shall set out the conditions laid down in national law which ensure that the relevant provisions of this Regulation are complied with. The Member State concerned shall ensure that the full text of the aid measure is accessible on the Internet as long as the aid measure concerned is in force. The summary information provided by the Member State concerned pursuant to paragraph 1 shall specify an Internet address leading directly to the full text of the aid measure.
…’
10.
Article 10 of the same chapter, entitled ‘Monitoring’, was worded as follows:
‘1. The Commission shall regularly monitor aid measures of which it has been informed pursuant to Article 9.
…
3. On written request, the Member State concerned shall provide the Commission within a period of 20 working days or such longer period as may be fixed in the request, with all the information which the Commission considers necessary to monitor the application of this Regulation.
Where the Member State concerned does not provide the information requested within the period prescribed by the Commission or within a commonly agreed period, or where the Member State provides incomplete information, the Commission shall send a reminder setting a new deadline for the submission of the information. If, despite such reminder, the Member State concerned does not provide the information requested, the Commission may, after having provided the Member State concerned with the possibility to make its views known, adopt a decision stating that all or part of the future aid measures to which this Regulation applies are to be notified to the Commission in accordance with Article 88(3) of the Treaty.’
11.
Article 17 of Chapter II of Regulation No 800/2008, entitled ‘Definitions’, was in Section 4 thereof, entitled ‘Aid for environmental protection’, and provided as follows:
‘For the purposes of this Section, the following definitions shall apply:
1.
“environmental protection” means any action designed to remedy or prevent damage to physical surroundings or natural resources by the beneficiary’s own activities, to reduce risk of such damage or to lead to a more efficient use of natural resources, including energy-saving measures and the use of renewable sources of energy;
…
10.
“environmental tax” means a tax whose specific tax base has a clear negative effect on the environment or which seeks to tax certain activities, goods or services so that the environmental costs may be included in their price and/or so that producers and consumers are oriented towards activities which better respect the environment;
…’
12.
Under Article 25 of Section 4, entitled ‘Aid in the form of reductions in environmental taxes’:
‘1. Environmental aid schemes in the form of reductions in environmental taxes fulfilling the conditions of [Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity (OJ 2003 L 283, p. 51] shall be compatible with the common market within the meaning of Article 87(3) of the Treaty and shall be exempt from the notification requirement of Article 88(3) of the Treaty, provided the conditions laid down in paragraphs 2 and 3 of this Article are fulfilled.
2. The beneficiaries of the tax reduction shall pay at least the Community minimum tax level set by [Directive 2003/96].
3. Tax reductions shall be granted for maximum periods of ten years. After such 10-year period, Member States shall re-evaluate the appropriateness of the aid measures concerned.’
B – Austrian law
13.
Under the Law accompanying the budget (Budgetbegleitgesetz) of 30 December 2010, ( ) service providers were to be excluded once again from the energy tax rebate.
14.
Paragraph 2(1) of the Law on the rebate of energy taxes (Energieabgabenvergütungsgesetz, ‘the EAVG’), as amended by Paragraph 72 of the BBG 2011, reads as follows:
‘Only undertakings whose activity is shown to consist primarily in the manufacture of goods shall be entitled to a rebate, and only in so far as those undertakings do not provide the energy resources set out in Paragraph 1(3) or heating (steam or hot water) produced from the energy resources set out in Paragraph 1(3).’
15.
The temporal scope of Paragraph 2 is laid down in Paragraph 4(7) of the Law on the rebate of energy taxes (Energieabgabenvergütungsgesetz, ‘the EAVG’), which provides:
‘Paragraphs 2 and 3 [of the EAVG] shall apply to rebate applications which relate to a period after 31 December 2010, subject to the approval of the European Commission.’
16.
With regard to Paragraph 4(7) of the EAVG, the travaux préparatoires for the draft law state as follows:
‘The application of the amended provisions is subject to the approval of the European Commission. That amendment shall enter into force in respect of energy use after 31 December 2010. Applications from service providers for periods after 31 December 2010 shall therefore no longer be accepted. If the amendment to the EAVG is approved by the Commission as authorised State aid, the statutory restriction to production undertakings shall apply from 1 January 2011, with the result that, after that date, service providers will no longer be entitled to the energy tax rebate for energy used. If the amendment is not approved by the Commission, the current legal situation shall remain unchanged and both production undertakings and service providers shall be entitled to an energy tax rebate.’
II – The case before the referring court, the questions referred and the procedure before the Court
17.
On 29 December 2011, Dilly’s Wellnesshotel GmbH (‘Dilly’s Wellnesshotel’) submitted an application for an energy tax rebate for 2011.
18.
By decision of 21 February 2012, that application was rejected as unfounded, with reference being made to the new legislation contained in the BBG 2011, in accordance with which, from 1 January 2011, the energy tax rebate was to be granted only to production undertakings. An appeal to the Unabhängiger Finanzsenat (Independent Finance Tribunal, which was succeeded by the Bundesfinanzgericht (Federal Finance Court), was dismissed.
19.
By decision of 19 March 2013, the Verwaltungsgerichtshof (Administrative Court) held that, following a judgment delivered by that court on 22 August 2012, the energy tax rebate should still have been granted to service providers for January 2011. The Verwaltungsgerichtshof (Administrative Court) took the view that, for that month, the Commission had not yet given its approval for the new legislation as regards the notice issued under Regulation No 800/2008, which related only to the period commencing 1 February 2011.
20.
Dilly’s Wellnesshotel lodged a further administrative appeal before the Unabhängiger Finanzsenat (Independent Finance Tribunal), by which that company requested, in essence, inter alia, that its application for the energy tax rebate for the period from January to December 2011 be granted in full.
21.
Dilly’s Wellnesshotel started from the premiss that, if the application of Paragraph 2(1) of the EAVG in conjunction with Paragraph 4(7) of the EAVG infringes EU law, the new legislation introduced by the BBG 2011 is not applicable and service providers could continue to apply for the energy tax rebate for the whole of 2011 and beyond.
22.
It is clear from the order for reference that Paragraph 2(1) of the original version of the EAVG provided for an energy tax rebate for undertakings engaged essentially in the ‘manufacture of goods’. The provision of services was excluded from the tax rebate. The referring court states that, according to the travaux préparatoires, the purpose of the EAVG was to prevent Austrian production industries which consume a large amount of energy from being placed at a competitive disadvantage in relation to undertakings from other countries in which, as a general rule, there was no taxation on energy.
23.
The national legislation on energy tax rebates has subsequently been amended on several occasions.
24.
In the present case, the referring court has doubts as to whether the new legislation on energy tax rebates introduced by the BBG 2011 is compatible with Regulation No 800/2008. That court raises the question of whether the Republic of Austria is able to use the special procedure provided for in Article 25 of Regulation No 800/2008 for the national legislation at issue, although it appears that several requirements in Chapter I of that regulation have not been fulfilled.
25.
In those circumstances, the Bundesfinanzgericht (Federal Finance Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Is EU law infringed if an aid scheme makes use of the special procedure under [Article 25 of] Regulation [No 800/2008] ... in order to be exempt from the obligation to notify under Article 108(3) TFEU, but does not comply with various obligations of Chapter I of [that regulation] and, moreover, does not make any reference to [that regulation]?
(2)
Is EU law infringed if an aid scheme is based on the special procedure [under Article 25 of Regulation No 800/2008] which is applicable to environmental aid ... but the requirements laid down in Chapter II — namely the promotion of environmental protection measures and energy-saving measures under Article 17(1) [of that regulation] — are not satisfied?
(3)
Does EU law preclude national rules which contain no temporal restriction and also no reference to the period stated in the exemption notice, with the result that the limitation of the energy tax refund to 10 years, required in Article 25(3) [of Regulation No 800/2008], is to be inferred only from the exemption notice?’
26.
Written observations were submitted by Dilly’s Wellnesshotel, the Austrian and Estonian Governments and the Commission.
27.
A hearing was held on 21 January 2016, which was attended by Dilly’s Wellnesshotel, the Austrian Government and the Commission.
III – Analysis
A – Preliminary remarks regarding the situation in the main proceedings and the obligation to notify plans to grant new aid
1. Situation in the main proceedings
28.
The present reference for a preliminary ruling raises several questions of interpretation concerning the formal requirements (first question) and substantive conditions (second and third questions) that a national aid measure must fulfil in order to be eligible for an exemption from the obligation to notify under Regulation No 800/2008.
29.
As is clear from the information provided by the referring court, the dispute in the main proceedings arises from the refusal by the Austrian tax authorities to grant an application for an energy tax rebate for 2011 submitted by the appellant in the main proceedings, Dilly’s Wellnesshotel, a service provider. The reason for that refusal was the fact that, since the amendment introduced by the BBG 2011, the EAVG excludes service providers from entitlement to the energy tax rebate.
30.
In the appeal before the referring court, the appellant in the main proceedings relies on the earlier version of that national legislation, a version which also covered service providers. It argues that that new legislation, since it does not comply with the binding provisions laid down in Regulation No 800/2008, has not been exempted from the obligation to notify laid down in Article 108(3) TFEU and therefore could not be implemented.
31.
The referring court has made the present request for a preliminary ruling under its obligation to draw all the appropriate conclusions from any infringement of EU law on State aid relied on by individuals in accordance with their procedural rights. ( ) Under the third sentence of Article 108(3) TFEU, ‘the Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision’. Article 3 of Regulation (EC) No 659/1999, ( ) entitled ‘Standstill clause’, states in that regard that ‘aid notifiable ... shall not be put into effect before the Commission has taken, or is deemed to have taken, a decision authorising such aid’.
32.
In the present case, the referring court stated that the original version of the EAVG was notified to the Commission as State aid in 2002 and that the Commission found it to be compatible with the internal market. By contrast, the version of the EAVG that is relevant to the dispute in the main proceedings was not notified to the Commission, within the prescribed periods, as State aid, since the Austrian Ministry of Finance considered that that amendment was exempt from notification, under Article 25 of Regulation No 800/2008.
33.
It is also clear from the file that, on 7 February 2011, a communication was sent to the Commission concerning the new version of the EAVG and announcing a new duration for the scheme from 1 February 2011 to 31 December 2013. A summary of the measure, referring to that duration, was published in the Official Journal of the European Union of 30 September 2011. The Internet link in that publication which was supposed to give access to the full text of the measure was incorrect.
34.
Moreover, it appears to be common ground that the national legislation at issue in the dispute in the main proceedings was not notified to the Commission, in accordance with Article 2 of Regulation No 659/1999, and that the only exemption from the notification requirement which could be applied is that provided for in Article 25 of Regulation No 800/2008.
2. Importance of the obligation to notify plans for new aid and the need for a strict interpretation of the obligations incumbent on the Member States under a block exemption regulation
35.
There is undeniably an element of novelty to the questions referred by the national court, since no interpretation has yet been given of Regulation No 800/2008 concerning the aspects specifically referred to in the present case. ( )
36.
Before addressing in turn the questions referred, I consider it appropriate to recall a number of rules and guiding principles which will inform my entire examination.
37.
In the first place, under the first sentence of Article 108(3) TFEU, as clarified by Article 2(1) of Regulation No 659/1999, the general rule is that any plans for new aid must be notified. It must be stated that the obligation of prior notification is the keystone of the entire monitoring system introduced by the Treaty, since it enables the Commission effectively and systematically to carry out a precautionary assessment of all plans to grant new aid or to alter existing aid. As Advocate General Jacobs stated, ‘the obligation to notify proposed aids is of such manifest importance for the functioning of the common market that, in the absence of any Council regulations on the matter, it is plain that the obligation must be rigorously observed both as to content and as to form, and that it is essential, in particular, that the notification should make it clear beyond doubt that its purpose is to enable the Commission to submit its comments under Article 93(3) and if necessary to initiate the procedure provided for in Article 93(2) before the proposed aid is implemented’. ( )
38.
The Court held at a very early stage that the obligation to inform the Commission of plans to grant or alter aid does not apply solely to the initial plan, but also covers subsequent alterations to that plan; such information may be supplied to the Commission in the course of the consultations which take place following the initial notification. ( )
39.
Under the first sentence of Article 4(1) of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999, ( ) the concept of ‘new aid’ covers, inter alia ‘any change, other than modifications of a purely formal or administrative nature which cannot affect the evaluation of the compatibility of the aid measure with the common market’. Moreover, in accordance with Article 4(2)(c) of Regulation No 794/2004, the tightening of the criteria for the application of an authorised aid scheme, such as that at issue in the main proceedings which seeks to restrict the circle of recipient undertakings covered by the scheme notified previously, is one of the alterations whose notification is, in principle, obligatory.
40.
The obligation to notify any alteration to an aid scheme notified previously applies irrespective of whether the new scheme provides, as such, selective advantages that are incompatible with the common market. Whether aid may be classified as new aid or as the alteration of existing aid must be determined by reference only to the provisions that provide for the grant of the aid. ( )
41.
The strict requirements which are imposed on the Member States in that regard also apply, in my view, when determining the conditions under which those Member States may, pursuant to an exemption regulation, be exempted from their obligation to notify.
42.
Also, I take the view that, when adopting a block exemption regulation under Article 108(4) TFEU, it should be possible to exempt from the obligation to notify only the measures which satisfy in every respect the conditions laid down in that regulation. If all of the conditions for exemption are not satisfied, the obligation to notify remains.
43.
In the second place, and following on from what I have just stated, since the basic principle is that State aid is incompatible with the common market, any proposed derogations in this field must be interpreted restrictively. Such a principle means that the Member State concerned has the burden of proving that both the formal and substantive conditions on which the compatibility of aid depends are fulfilled. It is for that Member State, in particular, to provide all the relevant information to determine that the conditions for the derogation sought are fulfilled. ( )
44.
In the third place, if an exemption from the obligation to notify is, as in the present case, conceivable under a general exemption regulation adopted under Regulation No 994/98, the requirements of transparency and efficiency underlying the adoption of that regulation (see, inter alia, Article 3 and recitals 4, 6, 7 and 10 thereof) and the requirements of legal certainty with regard to third parties require the Member States to comply with the detailed rules set out in the exemption regulation.
45.
Since the obligation to notify is central to the system of monitoring plans for State aid, all of the detailed rules laid down in an exemption regulation, possibly to avoid that obligation, must be duly observed. Unlike the situation which may arise with regard to information provided by the Member States to determine whether planned aid is compatible with the common market, there is no need to establish a hierarchy between the specific conditions provided for by an exemption regulation to avoid the obligation to notify plans for new aid laid down in Article 108(3) TFEU.
46.
In such a context, there is no need to draw a distinction between the various conditions for exemption — the conditions which are ‘substantive’ in nature and those which are not — laid down in Regulation No 800/2008 and, therefore, between the legal consequences of failing to fulfil a particular condition as opposed to another. The only distinction that may apply as regards that regulation is that between the ‘general conditions for exemption’, laid down in Chapter I of that regulation (Articles 1 to 12), entitled ‘Common provisions’, and the special conditions laid down in Chapter II thereof (Articles 13 to 42), entitled ‘specific provisions for the different categories of aid’.
47.
Although it cannot be denied that, in other areas of EU law, it has been possible to draw a distinction between procedural defects which are substantive in nature and those which are not, that distinction cannot, in my view, apply where all of the conditions imposed on the Member States are eminently mandatory in nature, as is the case in procedures to notify plans for new aid and, where necessary, exemption from that procedure.
48.
Therefore, in the judgment in Heintz van Landewijck, ( ) the Court, called upon to give a ruling on the scope of the obligation to notify which was binding on the Member States under Article 27(5) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment ( ) (‘the Sixth Directive’), ruled that failure to observe the period for notification of measures intended to simplify the procedure for charging taxes does not constitute a procedural defect capable of rendering inapplicable a derogating measure which was notified late.
49.
However, even if an analogy with the issue of fulfilling the conditions for exemption were allowed — which to me seems highly doubtful in the light of the, previously noted, eminently mandatory nature of the conditions for exemption laid down by the regulation at issue — I note that the Court, whilst recalling the rule that a derogation from the Sixth Directive adopted without compliance with the duty of notification imposed on the Member States by Article 27(2) thereof cannot be relied upon as against a taxable person, has taken care to point out that the reason for that conclusion was the fact that, ‘in the present case, it [was] not a question of a new derogating measure which must be authorised by the Council, but a special measure in existence on 1 January 1977 and which the Member State [had] wished to maintain, in accordance with Article 27(5) of the Sixth Directive, in spite of the implementation of that directive’. ( )
50.
Clearly, such a situation contrasts with that in which, as in the present case, new aid is involved, even though it results from an amendment to a national legislative measure that was notified previously.
51.
In any event, in the field of State aid, it should be considered that, where provisions are clearly worded, such as those relating to the obligation to notify and concomitantly to the possibilities for exemption from such an obligation, the conditions laid down by such provisions are not mere procedural requirements. ( )
52.
This must be true in particular as regards mandatory conditions laid down in a general block exemption regulation such as those referred to in Chapter I of Regulation No 800/2008. It is not possible, in my view, to be freed from the formal obligation to notify a proposed aid measure where one or more of those conditions have not been satisfied. Measures that do not fulfil all the required conditions remain subject to the notification requirement of Article 88(3) of the EC Treaty, as stated in recital 7 of that regulation.
B – The first question: formal requirements under Regulation No 800/2008
53.
By its first question, concerning formal requirements, the referring court wishes to ascertain the effect, first, of the absence of any reference to Regulation No 800/2008 in the aid measure at issue, secondly, of the late forwarding to the Commission of a summary of information regarding that measure and, thirdly, of an error in the Internet link that was supposed to give access to the full text of that measure.
1. Express reference requirement in Regulation No 800/2008
54.
It seems to me that the indispensable nature of such a reference, which constitutes one of the strict conditions to which the exemption from the obligation laid down in Article 25(1) of Regulation No 800/2008 is subject, may be clearly deduced from the relevant provisions of Regulation No 800/2008.
55.
In that regard, Article 3(1) of that regulation, entitled ‘Conditions for exemption’, provides that aid schemes fulfilling ‘all the conditions’ of Chapter I and the relevant provisions of Chapter II of that regulation are to be compatible with the common market and exempt from the notification requirement provided that any individual aid awarded under such scheme fulfils ‘all the conditions’ of the regulation and the scheme contains ‘an express reference to [Regulation No 800/2008], by citing its title and publication reference in the Official Journal of the European Union’.
56.
Moreover, Regulation No 800/2008 was adopted on the basis of Regulation No 994/98, which provided in Article 3(1) thereof, entitled ‘Transparency and monitoring’, that ‘when adopting regulations pursuant to Article 1, the Commission shall impose detailed rules upon Member States to ensure transparency and monitoring of the aid exempted from notification in accordance with those regulations’.
57.
That provision must be read in the light of recital 5 of Regulation No 800/2008, in accordance with which ‘this Regulation should exempt any aid that fulfils all the relevant conditions of this Regulation, and any aid scheme .... In order to ensure transparency, as well as more efficient monitoring of aid, any individual aid measure granted under this Regulation should contain an express reference to the applicable provision of Chapter II and to the national law on which the individual aid is based’ (emphasis added).
58.
That requirement must also be understood in the light of the transparency requirement set out above, which is laid down inter alia in Article 3(1) of Regulation No 994/98. As the Commission submits, a reference to that regulation in a given aid measure enables the recipients, and their competitors, to understand the reasons why that measure may be implemented even though it was not notified to the Commission or authorised by it. In other words, that reference enables not only the Commission to review, but also third parties to be informed of, the proposed aid measures, so that they may exercise their procedural rights.
59.
I do not think that such an interpretation, which is fully in line with the wording of Regulation No 800/2008, is excessively formalistic.
60.
First of all, the inclusion in an aid measure of an express reference to Regulation No 800/2008 does not pose any particular difficulty for the Member States. That ease contrasts with the possible difficulty, both for the Commission and third parties, in identifying a scheme of that kind in the absence of such a reference.
61.
Moreover, it seems to me that forwarding a summary of the information regarding the aid measure and its publication in the Official Journal of the European Union, as laid down in Article 9(1) of Regulation No 800/2008, can only partly remedy the absence of an express reference to that regulation. It seems to me that those provisions pursue objectives which are different in nature and that satisfying the conditions set out in one of those provisions cannot remedy non-compliance with the other.
62.
If, as I suggest, the Court finds that an express reference to Regulation No 800/2008 in the aid measure is essential, it will not be necessary to examine the other aspects of the first question referred for a preliminary ruling or the second and third questions referred to the Court.
63.
Should this not prove to be the case, I shall examine the other aspects below.
2. Requirement to forward a summary of the information regarding the aid measure under Article 9(1) of Regulation No 800/2008
64.
Forwarding to the Commission a summary of the aid measure, in accordance with Article 9(1) of Regulation No 800/2008 and within 20 working days following the entry into force of the aid scheme is, in my view, very important in order to enable the Commission to carry out, at short notice, effective monitoring of compliance by the Member State concerned with the conditions for exemption.
65.
This is undeniably a condition for the effectiveness of the exemption from the obligation to notify laid down in Article 108(3) TFEU.
66.
Since this is a condition set out in Chapter I of Regulation No 800/2008, infringement of it means that the exemption sought is ineffective. Where that irregularity is remedied late, which seems to have been the situation in the case in the main proceedings, the exemption sought may, in my view, apply only for the future, namely for the period after the irregularity is remedied — that is the period from February to December 2011 ( ) — and not for the preceding period.
3. Requirement to state the Internet address giving direct access to the full text of the aid measure
67.
Under the first sentence of Article 9(2) of Regulation No 800/2008, the Member State is required to publish on the Internet the full text of the aid measure in question. Under the third sentence of Article 9(2) of Regulation No 800/2008, the Member State concerned must, in addition, ensure that the full text of that measure is accessible as long as the measure is in force. In the present case, the referring court has stated that the Republic of Austria did not comply with those obligations in every respect.
68.
As regards the fourth sentence of Article 9(2) of Regulation No 800/2008, which requires that the summary information provided by the Member State contain an Internet address ‘leading directly to the full text of the aid measure’, the referring court has stated that the Internet address sent to the Commission and contained in the summary published in the Official Journal of the European Union cannot be opened.
69.
As I noted above, Article 3(1) of Regulation No 800/2008 requires the Member States to comply with all the conditions laid down in Chapter I thereof. This is a fortiori the case as provisions satisfying the legislature’s desire to ensure transparency and legal certainty in the process for examining aid measures are at issue.
70.
In my view, the requirement to comply with the obligations under Article 9 of Regulation No 800/2008 is as strict as that regarding the express reference to that regulation. To decide otherwise would, in my view, amount to establishing a hierarchy between the various conditions, in particular of a formal nature, imposed on the Member States under the exemption regulation.
71.
However, it seems to me that the transparency requirements are met since, despite the fact that the Internet link provided in the summary referred to in Article 9 of Regulation No 800/2008 does not work, which may be the result of a technical fault, it has clearly been established that, having regard to the information provided in the summary forwarded to the Commission in accordance with that provision, the full text of the national legislation at issue was readily accessible both to the Commission services and to any interested third parties.
72.
Nevertheless, it should be pointed out, following on from what I have stated above, that a failure to comply with one of the conditions laid down in Regulation No 800/2008 can in no way be remedied by possible compliance with another of those conditions.
C – The second question: formal requirement, set out in Article 25(1) of Regulation No 800/2008, concerning the existence of an ‘environmental ’ aid scheme
73.
The second question referred for a preliminary ruling asks the Court to specify the substantive conditions that must be satisfied in order to qualify for the notification exemption provided for in Article 25 of that regulation. The referring court is asking whether the granting of an exemption under Article 25 of Regulation No 800/2008 presupposes, in addition to compliance with the conditions set out in that provision, that it is demonstrated that the national scheme to reduce environmental taxes actually contributes to the protection of the environment.
74.
There are two opposing points of view in the present case.
75.
According to the Austrian and Estonian Governments and the Commission, it is sufficient that an aid measure fulfils the conditions expressly laid down in that article, namely the conditions set out in Directive 2003/96, the condition that the beneficiaries of the tax reduction pay at least the Community minimum tax level set by that directive and the condition that such reductions are granted for maximum periods of ten years, in order for an exemption to be granted for it.
76.
By contrast, Dilly’s Wellnesshotel submits that aid in the form of reductions in environmental taxes must also constitute aid for ‘environmental protection’ within the meaning of Article 17(1) of Regulation No 800/2008, which sets out a definition to that effect.
77.
If, in particular, certain conclusions are drawn from the case-law established prior to the adoption of Regulation No 800/2008, ( ) the referring court’s doubts as to whether the tax reduction measures at issue are actually intended to improve environmental protection are easily understandable. It is, at first sight, difficult to understand the reasons why those measures lead to a reduction in environmental damage, by preventing such damage or by a rational use of natural resources.
78.
However, a literal, systemic and teleological interpretation of Article 25 of Regulation No 800/2008 causes me to state a clear preference for the viewpoint expressed by the majority of the intervening parties.
79.
From a literal standpoint, it appears that Article 25 of Regulation No 800/2008 lays down only three conditions for an aid measure to be exempt, namely compliance with the requirements of Directive 2003/96, the requirement for a minimum tax level and the grant of tax reductions for a maximum period of ten years.
80.
That provision merely refers to ‘environmental’ aid schemes and does not make any reference to the definition of aid contained in Article 17(1) of that regulation. Article 25 of that regulation is expressly linked to fulfilment of the conditions set out in Directive 2003/96. Recital 31 of Regulation No 800/2008 states, in that regard, that ‘reductions in environmental taxes fulfilling the conditions of Council Directive 2003/96/EC ... and covered by this Regulation should be presumed to have an incentive effect in view of [the] fact that these reduced rates contribute at least indirectly to an improvement of environmental protection by allowing the adoption or the continuation of the overall tax scheme concerned, thereby incentivising the undertakings subject to the environmental tax to reduce their level of pollution’.
81.
From a teleological and systemic standpoint, it seems that Article 25 of Regulation No 800/2008, which has the title ‘Aid in the form of reductions in environmental taxes’, covers the environmental taxes that are harmonised by Directive 2003/96 ( ) and can therefore be distinguished from Articles 17 to 20 of that regulation, which lay down additional conditions related to environmental protection.
82.
As can be seen from its preamble (see, inter alia, recitals 6, 7 and 12 thereof), that directive takes into consideration environmental protection objectives. Since that directive, which itself takes account of environmental protection objectives, constitutes the basis on which the energy taxes are harmonised, such taxes fall within the concept of ‘environmental taxes’.
83.
In other words, aid schemes that are found to comply with Article 25 — that is to say which meet 1) the requirements of Directive 2003/96, 2) the minimum tax level and 3) the ten-year limit — take indirect account of environmental protection objectives and must be classified as environmental taxes.
84.
With regard, more specifically, to the reduction of environmental taxes, as in the present case, recital 31 of Regulation No 800/2008 states that it has ‘an incentive effect in view of fact that these reduced rates contribute at least indirectly to an improvement of environmental protection by allowing the adoption or the continuation of the overall tax scheme concerned, thereby incentivising the undertakings subject to the environmental tax to reduce their level of pollution’.
85.
Moreover, that is why the reference in Article 25 of Regulation No 800/2008 to compliance with the minimum Community levels laid down in Directive 2003/96 is justified.
86.
It is therefore clear from the scheme of Regulation No 800/2008 that a mechanism to reduce energy tax which complies with the minimum levels of taxation set by Directive 2003/96 is capable of falling within the scope of the measures referred to in Article 25 of Regulation No 800/2008.
D – The third question: requirement that the measure at issue cannot be granted for a period of more than ten years (Article 25(3) of Regulation No 800/2008) and consequences of an absence of any reference to that period in that measure
87.
In the context of any answer to the third question, it must be examined whether Article 25(3) of Regulation No 800/2008 requires the aid measure itself to contain an express reference to its duration.
88.
I think that this question should be answered in the negative.
89.
In accordance with that provision, tax reductions ‘shall be granted for maximum periods of ten years’. Recital 47 of that regulation states that, after that maximum period of 10 years, Member States should re-evaluate the appropriateness of the tax reductions concerned, without prejudice to the possibility for Member States of re-adopting those measures or similar measures on the basis of Regulation No 800/2008, after having realised such re-evaluation.
90.
In the present case, the referring court stated that the contested amendment, namely Paragraph 4(7) of the EAVG, does not limit in time the entitlement to a rebate of environmental taxes and also contains no reference to the period mentioned in the exemption notice.
91.
It is true that the time limit for the grant of aid which applies to the measures and is expressly laid down in Regulation No 800/2008, read in the light of recital 47 thereof and the Community guidelines on State aid for environmental protection ( ) for the period 2008 to 2014, is very important and is mandatory in nature.
92.
It is well-established that, as a derogation from the principle of prohibition of State aid, a declaration of compatibility, such as that resulting implicitly from a block exemption, must necessarily be limited in time. ( ) Moreover, that requirement makes the temporal application of the aid measures transparent, both for potential beneficiaries of the aid scheme and for their competitors, in accordance with one of the Commission’s objectives in drafting the detailed rules applicable to the Member States under the block exemption regulations.
93.
However, that requirement does not stipulate that the Member State concerned must state that time limit in the actual wording of the national scheme for reductions in or exemptions from environmental taxes, such as that at issue in the main proceedings, since the mere reference to Regulation No 800/2008 — which, as I stated above, is mandatory — establishes a temporal limit for the grant of the aid at issue. In that regard, it must be noted that Article 4(1) of Regulation No 994/98 provides that aid exempted from notification under a block exemption regulation, such as Regulation No 800/2008, is to be exempted ‘for the period of validity of that regulation and for the adjustment period provided for in paragraphs 2 and 3’.
94.
Moreover, that conclusion seems to me to be fully in line with the approach taken by the Court in the judgment in Nuova Agricast and Cofra v Commission. ( ) Called upon to give a ruling on compliance with the principles of legitimate expectations and legal certainty in the light of an aid scheme authorised previously by a Commission decision, the Court held that, on account of a publication by the Commission in the Official Journal of the European Union which stated the date on which the aid scheme in question ceased to apply, ‘a prudent and alert economic operator’ could have inferred the expiry date for the authorisation of the aid scheme ‘even though the national provisions governing the detailed rules of that scheme and [some related] measures did not indicate a specific expiry date [to that effect]’.
95.
I therefore take the view that the absence of any indication of the maximum period of ten years laid down in Article 25(3) of Regulation No 800/2008 in the actual wording of the national scheme at issue cannot, in itself, exclude that scheme from the benefit of the block exemption laid down in that regulation.
96.
Not only does the wording of Article 25(3) of Regulation No 800/2008 contain no such requirement, it seems to me to be wholly impractical in respect of measures of a fiscal nature which are amended periodically and which, to my knowledge, are not implemented for so long a period. This is evidenced by the scheme in the main proceedings, which was subject to several amendments and which, according to the information contained in the summary forwarded to the Commission on 7 February 2011, was proposed for a period from 1 February 2011 to 31 December 2011.
IV – Conclusion
97.
In the light of the foregoing considerations, I propose that the Court should answer the questions referred by the Bundesfinanzgericht (Federal Finance Court) as follows:
An aid scheme which, in breach of Article 3(1) of Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation), contains no reference to that regulation by citing its title and publication reference in the Official Journal of the European Union does not fulfil the eligibility conditions for an exemption from the obligation to notify laid down in Article 108(3) TFEU (formerly Article 88(3) of the EC Treaty).
An aid scheme in the form of a reduction in an energy tax for the purposes of Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity, under which the beneficiary pays at least the Community minimum tax levels set by that directive and the period of validity of which is limited to ten years, falls within the scope of Article 25 of Regulation No 800/2008.
An aid scheme which does not comply with the time limit of ten years for granting aid laid down by Article 25(3) of Regulation (EC) No 800/2008 does not fulfil the eligibility conditions for the exemption provided for by that regulation. Such a requirement does not necessarily mean that that time limit must appear in the actual wording of the scheme in question.
( ) Original language: French.
( ) See, inter alia, judgment in France Télécom v Commission (C‑81/10 P, EU:C:2011:811, paragraph 58).
( ) It must be noted that that court is the successor to the Unabhängiger Finanzsenat (Independent Finance Tribunal, ‘the UFS’) and that the Court has, on a number of occasions, already held that it has jurisdiction to answer questions referred by the UFS.
( ) Commission Regulation of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (OJ 2008 L 214, p. 3).
( ) OJ 1998 L 142, p. 1. Regulation No 994/98 was amended by Council Regulation (EU) No 733/2013 of 22 July 2013 (OJ 2013 L 204, p. 11) and subsequently repealed by Council Regulation (EU) 2015/1588 of 13 July 2015 on the application of Articles [107 TFEU] and [108 TFEU] to certain categories of horizontal State aid (OJ 2015 L 248, p. 1).
( ) Regulation No 800/2008 was amended by Commission Regulation (EU) No 1224/2013 of 29 November 2013 (OJ 2013 L 320, p. 22). The period of application of Regulation No 800/2008 was therefore extended until 30 June 2014. That regulation was subsequently repealed by Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of [Articles 107 TFEU] and [108 TFEU] (OJ 2014 L 187, p. 1).
( ) BGBl. I, 111/2010, ‘the BBG 2011’.
( ) See, inter alia, judgments in Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et transformateurs de saumon (C‑354/90, EU:C:1991:440, paragraphs 16 and 17) and SFEI and Others (C‑39/94, EU:C:1996:285).
( ) Council Regulation of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1), as amended by Council Regulation (EC) No 1791/2006 of 20 November 2006 (OJ 2006 L 363, p. 1, ‘Regulation No 659/1999’).
( ) Although that regulation has been referred to in a number of cases brought before the Court (judgment in Wam Industriale v Commission, C‑560/12 P, EU:C:2013:726, and Opinion of Advocate General Sharpston in Commission v Spain, C‑184/11, EU:C:2014:33), the guidance provided by the latter is of little use in the present case.
( ) See his Opinion in France v Commission (C‑301/87, EU:C:1989:357, point 19).
( ) See judgment in Heineken Brouwerijen (91/83 and 127/83, EU:C:1984:307, paragraph 18).
( ) OJ 2004 L 140, p. 1.
( ) See, inter alia, judgment in Namur-Les assurances du crédit (C‑44/93, EU:C:1994:311, paragraph 28).
( ) See, inter alia, judgment in Italy v Commission (C 372/97, EU:C:2004:234, paragraph 81 and the case-law cited).
( ) C‑494/04, EU:C:2006:407, paragraph 51.
( ) OJ 1977 L 145, p. 1.
( ) Judgment in Heintz van Landewijck (C‑494/04, EU:C:2006:407, paragraph 49).
( ) See, by analogy, order in Banco Privado Português and Massa Insolvente do Banco Privado Português v Commission (C‑93/15 P, EU:C:2015:703, paragraph 67 and the case-law cited).
( ) Although, as has been stated by the referring court, the summary information was communicated on 7 February 2011, it is reasonable to consider that the whole of February 2011 is covered by the exemption, since, under Article 9(1) of Regulation No 800/2008, the Member State concerned has a period of 20 working days following the entry into force of the aid scheme to forward to the Commission a summary of the information regarding the aid measure. I note that a rebate of the energy tax for only one month is conceivable under Austrian law, as is clear from the decision of the Verwaltungsgerichtshof (Administrative Court) of 19 March 2013 (see point 19 of this Opinion).
( ) See judgment in Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke (C 143/99, EU:C:2001:598), according to which it became apparent that the advantageous terms granted to undertakings manufacturing goods were more intended to preserve the competitiveness of that sector than motivated by ecological considerations.
( ) See, in that regard, judgment in Austria v Commission (T‑251/11, EU:T:2014:1060, paragraph 202).
( ) OJ 2008 C 82, p. 1.
( ) See, by analogy, judgment in Nuova Agricast and Cofra v Commission (C 67/09 P, EU:C:2010:607, paragraph 80).
( ) C 67/09 P, EU:C:2010:607, paragraphs 71 to 77 and the case-law cited. |
JUDGMENT OF THE COURT (Fifth Chamber)
16 February 2017 ( *1 )
‛Reference for a preliminary ruling — Combating late payment in commercial transactions — Directive 2011/7/EU — Commercial transactions between private undertakings and public authorities — National legislation making the immediate recovery of the principal amount of a debt conditional upon the waiver of interest for late payment and of compensation for recovery costs’
In Case C‑555/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Juzgado de lo Contencioso-Administrativo No 6 de Murcia (Court for Contentious Administrative Proceedings No 6, Murcia, Spain), made by decision of 20 November 2014, received at the Court on 3 December 2014, in the proceedings
IOS Finance EFC SA
v
Servicio Murciano de Salud
THE COURT (Fifth Chamber),
composed of J.L. da Cruz Vilaça, President of the Chamber, A. Tizzano (Rapporteur), Vice-President of the Court, M. Berger, A. Borg Barthet and E. Levits, Judges,
Advocate General: E. Sharpston,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 2 March 2016,
after considering the observations submitted on behalf of:
—
IOS Finance EFC SA, by J. Tornos Mas, abogado,
—
the Spanish Government, by A. Rubio González, acting as Agent,
—
the German Government, by T. Henze and J. Möller, acting as Agents,
—
the European Commission, by G. Wilms, D. Loma-Osorio Lerena, E. Sanfrutos Cano, A.C. Becker and M. Šimerdová, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 12 May 2016,
gives the following
Judgment
The present request for a preliminary ruling concerns the interpretation of Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions (OJ 2011 L 48, p. 1).
The request has been made in proceedings between IOS Finance EFC SA (‘IOS Finance’) and the Servicio Murciano de Salud (Health Service of the Autonomous Community of the Region of Murcia, Spain), in relation to the latter’s refusal to pay to IOS Finance, in addition to the principal sums, interest in respect of late payment and compensation for recovery costs claimed by IOS in respect of invoices which had not been paid on time.
Legal context
EU law
Recitals 1, 12, 16 and 28 of Directive 2011/7 read as follows:
‘(1)
A number of substantive changes are to be made to Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions [OJ 2000 L 200, p. 35]. It is desirable, for reasons of clarity and rationalisation, that the provisions in question should be recast.
…
(12)
Late payment constitutes a breach of contract which has been made financially attractive to debtors in most Member States by low or no interest rates charged on late payments and/or slow procedures for redress. A decisive shift to a culture of prompt payment, including one in which the exclusion of the right to charge interest should always be considered to be a grossly unfair contractual term or practice, is necessary to reverse this trend and to discourage late payment. Such a shift should also include the introduction of specific provisions on payment periods and on the compensation of creditors for the costs incurred, and, inter alia, that the exclusion of the right to compensation for recovery costs should be presumed to be grossly unfair.
…
(16)
This Directive should not oblige a creditor to claim interest for late payment. …
…
(28)
This Directive should prohibit abuse of freedom of contract to the disadvantage of the creditor. As a result, where a term in a contract or a practice relating to the date or period for payment, the rate of interest for late payment or the compensation for recovery costs is not justified on the grounds of the terms granted to the debtor, or it mainly serves the purpose of procuring the debtor additional liquidity at the expense of the creditor, it may be regarded as constituting such an abuse. For that purpose, … any contractual term or practice which grossly deviates from good commercial practice and is contrary to good faith and fair dealing should be regarded as unfair to the creditor. In particular, the outright exclusion of the right to charge interest should always be considered as grossly unfair, whereas the exclusion of the right to compensation for recovery costs should be presumed to be grossly unfair. This Directive should not affect national provisions relating to the way contracts are concluded or regulating the validity of contractual terms which are unfair to the debtor.’
Paragraph 1 of Article 1 of that directive, entitled ‘Subject matter and scope’, provides:
‘The aim of this Directive is to combat late payment in commercial transactions ...’
Paragraph 1 of Article 4 of that directive, entitled ‘Transactions between undertakings and public authorities’, provides:
‘Member States shall ensure that, in commercial transactions where the debtor is a public authority, the creditor is entitled upon expiry of the period defined in paragraphs 3, 4 or 6 to statutory interest for late payment, without the necessity of a reminder, where the following conditions are satisfied:
(a)
the creditor has fulfilled its contractual and legal obligations; and
(b)
the creditor has not received the amount due on time, unless the debtor is not responsible for the delay.’
Article 6 of the directive, entitled ‘Compensation for recovery costs’ reads as follows:
‘1. Member States shall ensure that, where interest for late payment becomes payable in commercial transactions in accordance with Articles 3 or 4, the creditor is entitled to obtain from the debtor, as a minimum, a fixed sum of EUR 40.
2. Member States shall ensure that the fixed sum referred to in paragraph 1 is payable without the necessity of a reminder and as compensation for the creditor’s own recovery costs.
3. The creditor shall, in addition to the fixed sum referred to in paragraph 1, be entitled to obtain reasonable compensation from the debtor for any recovery costs exceeding that fixed sum and incurred due to the debtor’s late payment. This could include expenses incurred, inter alia, in instructing a lawyer or employing a debt collection agency.’
Article 7 of Directive 2011/7, entitled ‘Unfair contractual terms and practices’, is worded as follows:
‘1. Member States shall provide that a contractual term or a practice relating to the date or period for payment, the rate of interest for late payment or the compensation for recovery costs is either unenforceable or gives rise to a claim for damages if it is grossly unfair to the creditor.
In determining whether a contractual term or a practice is grossly unfair to the creditor, within the meaning of the first subparagraph, all circumstances of the case shall be considered, including:
(a)
any gross deviation from good commercial practice, contrary to good faith and fair dealing;
(b)
the nature of the product or the service; and
(c)
whether the debtor has any objective reason to deviate from the statutory rate of interest for late payment, from the payment period as referred to in Article 3(5), point (a) of Article 4(3), Article 4(4) and Article 4(6) or from the fixed sum as referred to in Article 6(1).
2. For the purpose of paragraph 1, a contractual term or a practice which excludes interest for late payment shall be considered as grossly unfair.
3. For the purpose of paragraph 1, a contractual term or a practice which excludes compensation for recovery costs as referred to in Article 6 shall be presumed to be grossly unfair.
…’
Spanish law
It is apparent from the documents submitted to the Court that the Spanish legislature put in place, from 2012, an ‘extraordinary financing mechanism for payment of suppliers’, for a limited period, in order to deal with the delays which had been built up, because of the economic crisis, by the Autonomous Communities and local bodies in paying their suppliers (the ‘extraordinary financing mechanism’). In essence, under the rules governing the functioning of that mechanism, suppliers who join that mechanism agree, in exchange for immediate payment of the principal debt, to waive related sums owed on account of the failure by the public administrations concerned to respect the payment periods, including, inter alia, interest for late payment and compensation for recovery costs.
In that regard, in particular, Article 6 of the Real Decreto-ley 8/2013 de medidas urgentes contra la morosidad de las administraciones públicas y de apoyo a entidades locales con problemas financieros (Royal Decree-Law 8/2013 of 28 June 2013 on urgent measures to combat late payment by the public administrative authorities and to support local bodies with financial problems) (BOE No 155 of 29 June 2013, p. 48782), entitled ‘Effects of payment of outstanding debts’, provides:
‘Payment to the supplier leads to extinguishment of the debt owed to the supplier by the Autonomous Community or local body, as the case may be, in respect of the principal sum, interest, legal costs and any other ancillary expenses.’
Prior to Royal Decree-Law 8/2013, Real Decreto-ley 4/2013 de medidas de apoyo al emprendedor y de estímulo del crecimiento y de la creación de empleo (Royal Decree-Law 4/2013 of 22 February 2013 on measures to support entrepreneurship and stimulate growth and create employment) (BOE No 47 of 23 February 2013, p. 15219) transposed Directive 2011/7 into Spanish law.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Between 2008 and 2013, several companies supplied goods and services to medical establishments forming part of the Health Service of the Autonomous Community of the Region of Murcia, which, however, failed to pay for those goods and services.
Those companies then assigned some of the debts at issue to IOS Finance, which, in September 2013, asked that health service to pay both the principal sum of those debts and interest in respect of late payment and compensation for the recovery costs accrued.
As that Health Service failed to pay those amounts, IOS Finance joined the extraordinary financing mechanism, which enabled it to obtain payment only of the principal amounts of the debts owed to it.
In May 2014, IOS Finance brought proceedings before the referring court seeking an order requiring the Health Service to pay the amounts claimed in respect of interest for late payment and compensation for recovery costs.
In support of its action, IOS Finance claims, first, that it is impossible to waive the debts owed by the administration. Second, it argues that Royal Decree-Law 8/2013 is incompatible with EU law and, third, that Directive 2011/7 has direct effect, in so far as it provides that contractual clauses or practices excluding interest for late payment and compensation for recovery costs are grossly unfair.
The Health Service of the Autonomous Community of the Region of Murcia has argued that the action should be dismissed on the ground, first, that joining the extraordinary financing mechanism is voluntary and, second, that the waiver of that interest and compensation occurs, not before the debt accrues, but after the debt has accrued and has remained unpaid.
The referring court acknowledges that joining the extraordinary financing mechanism is not compulsory and that creditors wishing to obtain payment not merely of the principal amount but also of the interest for late payment and compensation for recovery costs can still seek a judicial remedy. That court is, however, unsure whether EU law, and more specifically Article 7(2) and (3) of Directive 2011/7, prohibits making the recovery of the principal debt conditional on the waiver of the right to interest for late payment and compensation for recovery costs.
In those circumstances, the Juzgado de lo Contencioso-Administrativo No 6 de Murcia (Court for Contentious Administrative Proceedings No 6, Murcia, Spain) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘Regard being had to Articles 4(1), 6 and 7(2) and (3) of [Directive 2011/7]:
(1)
Must Article 7(2) of Directive 2011/7 be interpreted as meaning that a Member State may not make recovery of the principal debt conditional on the waiver of the right to interest for late payment?
(2)
Must Article 7(3) of Directive 2011/7 be interpreted as meaning that a Member State may not make recovery of the principal debt conditional on the waiver of the right to compensation for recovery costs?
(3)
Should the answer to those two questions be in the affirmative, where the debtor is a contracting authority, can it rely on the freedom of contract of the parties in order to avoid its obligation to pay interest for late payment and compensation for recovery costs?’
Consideration of the questions referred
Preliminary observations
It must be observed from the outset that, according to the Commission, the situation at issue in the main proceedings is covered, not by Directive 2011/7, but by Directive 2000/35, with the result that, contrary to what is stated in the order for reference, the questions must be answered in the light of that latter directive.
However, the Commission’s assessment in that respect stems from its own interpretation of the provisions of national law contained in, inter alia, Royal Decree-Law 4/2013 transposing Directive 2011/7 in the Spanish legal order.
According to established case-law, it is not for the Court, in the context of a request for a preliminary ruling, to rule on the interpretation of national provisions or to decide whether the referring court’s interpretation of such provisions is correct. The national courts alone are competent to decide on the interpretation of domestic law (judgment of 27 October 2016, Audace and Others, C‑114/15, EU:C:2016:813, paragraph 65 and the case-law cited).
Consequently, in so far as the referring court infers from its interpretation of Spanish law that Directive 2011/7 applies to the facts at issue in the main proceedings, the questions referred, as raised by the referring court, must be answered.
The first and second questions
By its first and second questions, which should be examined together, the referring court asks, in essence, whether Directive 2011/7, and in particular Article 7(2) and (3) thereof, must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which allows a creditor to waive his right to interest for late payment and to compensation for recovery costs in return for immediate payment of the principal amount of the debt owed.
In order to answer those questions, it must be noted that, in accordance with Article 1(1) of Directive 2011/7, the aim of that directive is to combat late payment in commercial transactions, that delay constituting, according to recital 12 of that directive, a breach of contract which has been made financially attractive to debtors because, inter alia, low or no interest is charged on late payments.
In order to achieve that aim, Directive 2011/7 does not, however, harmonise fully all of the rules relating to late payments in commercial transactions (see, by analogy with Directive 2000/35, judgment of 15 December 2016, Nemec, C‑256/15, EU:C:2016:954, paragraph 46 and case-law cited).
Like Directive 2000/35, Directive 2011/7 lays down only certain rules in this area, which include those relating to interest for late payment.
In that regard, the Member States must, in accordance with Article 4(1) and Article 6 of Directive 2011/7, ensure that, in commercial transactions where the debtor is a public authority, a creditor who has met his obligations, and who has not received the amount owed on time, has the right to obtain interest for late payment as well as compensation for the recovery costs which he has incurred, unless the debtor is not responsible for the delay.
To that end, Article 7(1) of that directive does, it is true, require the Member States to provide that a contractual term or a practice relating, in particular, to the rate of interest for late payment or the compensation for recovery costs is either unenforceable or is to give rise to a claim for damages if it is grossly unfair to the creditor. Furthermore, Article 7 provides that any contractual term or practice which excludes the payment of that interest for late payment or the compensation for recovery costs must be considered, according to Article 7(2), or presumed, according to Article 7(3), to be grossly unfair.
However, it is apparent from those provisions that they do no more than guarantee that the circumstances envisaged in, inter alia, Article 4(1) and Article 6 of Directive 2011/7 grant the creditor the right to demand interest for late payment and compensation for recovery costs. As is apparent from recital 28 of that directive, the impossibility of excluding such a right by contractual means is intended to prevent abuse of the freedom of contract to the disadvantage of the creditor, who, at the time when the contract is entered into, is not in a position to renounce such a right.
In other words, the purpose of Article 7(2) and (3) of Directive 2011/7 is to prevent the creditor’s waiver of the right to interest for late payment or to compensation for recovery costs from occurring at the time when the contract is entered into, that is to say, at the time of the exercise of the creditor’s freedom of contract and therefore of the possible risk of an abuse of that freedom by the debtor to the disadvantage of the creditor.
By contrast, when, as in the case in the main proceedings, the conditions laid down in Directive 2011/7 are met and the interest for late payment and the compensation for recovery costs are payable, the creditor, having regard to his freedom of contract, must remain free to waive the sums owed in respect of that interest and compensation, inter alia, in exchange for immediate payment of the principal sum.
This is, moreover, confirmed by recital 16 of Directive 2011/7, which states that the directive should not oblige a creditor to claim interest for late payment.
Consequently, as the Advocate General notes in essence in point 62 of her Opinion, there is nothing in Directive 2011/7 to suggest that it prohibits the creditor from freely waiving the right to demand interest for late payment and compensation for recovery costs.
That said, such a waiver is conditional on its having actually been freely agreed to, with the result that it must not in turn amount to an abuse of the creditor’s freedom of contract which is attributable to the debtor.
In a case such as that in the main proceedings, in order to assess whether the waiver has been freely agreed to, it is necessary to ensure that the creditor was in fact able to rely on any effective legal remedy to seek, had he wished to, payment of the debt in full, including interest for late payment and compensation for recovery costs, this being a matter for the referring court to verify.
In the light of all of the foregoing considerations, the answer to the first and second questions is that Directive 2011/7, and Article 7(2) and (3) thereof in particular, must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, which allows a creditor to waive his right to interest for late payment and compensation for recovery costs in exchange for immediate payment of the principal amount of debts owed, on condition that such a waiver is freely agreed to, this being a matter for the referring court to verify.
The third question
Having regard to the foregoing, there is no need to answer the third question, since this was posed only in the event that the answer to the first and second questions would be in the affirmative.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions, and Article 7(2) and (3) thereof in particular, must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, which allows a creditor to waive his right to interest for late payment and compensation for recovery costs in exchange for immediate payment of the principal amount of debts owed, on condition that such a waiver is freely agreed to, this being a matter for the referring court to verify.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE GENERAL COURT (Ninth Chamber)
28 January 2016 ( *1 )
‛Common foreign and security policy — Restrictive measures taken in view of the situation in Ukraine — Freezing of funds — List of persons, entities and bodies covered by the freezing of funds and economic resources — Inclusion of the applicant’s name — Proof that inclusion on the list is justified’
In Case T‑331/14,
Mykola Yanovych Azarov, residing in Kiev (Ukraine), represented by G. Lansky and A. Egger, lawyers,
applicant,
v
Council of the European Union, represented by J.-P. Hix and F. Naert, acting as Agents,
respondent,
supported by
Republic of Poland, represented by B. Majczyna, acting as Agent,
and by
European Commission, represented by S. Bartelt, D. Gauci and T. Scharf, acting as Agents,
interveners,
APPLICATION for the annulment, first, of Council Decision 2014/119/CFSP of 5 March 2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (OJ 2014 L 66, p. 26), and of Council Regulation (EU) No 208/2014 of 5 March 2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (OJ 2014 L 66, p. 1) and, secondly, of Council Decision (CFSP) 2015/143 of 29 January 2015 amending Decision 2014/119 (OJ 2015 L 24, p. 16) and of Council Regulation (EU) 2015/138 of 29 January 2015 amending Regulation No 208/2014 (OJ 2015 L 24, p. 1), in so far as they concern the applicant,
THE GENERAL COURT (Ninth Chamber),
composed of G. Berardis (Rapporteur), President, O. Czúcz and A. Popescu, Judges,
Registrar: K. Andová, Administrator,
having regard to the written procedure and further to the hearing on 30 September 2015,
gives the following
Judgment
Background to the dispute
The applicant, Mr Mykola Yanovych Azarov, was Prime Minister of Ukraine from 11 March 2010 to 28 January 2014.
On 5 March 2014, the Council of the European Union adopted, on the basis of Article 29 TEU, Decision 2014/119/CFSP concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (OJ 2014 L 66, p. 26).
Article 1(1) and (2) of Decision 2014/119 provide as follows:
‘1. All funds and economic resources belonging to, owned, held or controlled by persons having been identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them, as listed in the Annex, shall be frozen.
2. No funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural or legal persons, entities or bodies listed in the Annex.’
The procedures for implementing the restrictive measures at issue are defined in the subsequent paragraphs of that article.
On the same date, the Council adopted, on the basis of Article 215(2) TFEU, Council Regulation (EU) No 208/2014 of 5 March 2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine (OJ 2014 L 66, p. 1).
In accordance with Decision 2014/119, Regulation No 208/2014 requires the adoption of the restrictive measures at issue and defines the procedures for implementing those restrictive measures in terms which are essentially identical to those used in the aforementioned decision.
The names of the persons covered by Decision 2014/119 and Regulation No 208/2014 were included on the list in the annex to that decision and in Annex I to that regulation (‘the list’) along with, in particular, the reason for their inclusion on the list.
The name of the applicant was on the list along with the identifying information ‘former adviser to the President of Ukraine’ and the following reason was given:
On 6 March 2014, the Council published in the Official Journal of the European Union a notice for the attention of the persons subject to the restrictive measures provided for in Decision 2014/119 and Regulation No 208/2014 concerning restrictive measures in view of the situation in Ukraine (OJ 2014 C 66, p. 1). According to that Notice, ‘the persons concerned may submit a request to the Council, together with supporting documentation, that the decision to include them on the … list should be reconsidered …’. The Notice also draws the attention of the persons concerned ‘to the possibility of challenging the Council’s decision before the General Court … in accordance with the conditions laid down in Article 275, second paragraph, and Article 263, fourth and sixth paragraphs [TFEU]’.
Decision 2014/119 was amended by Council Decision (CFSP) 2015/143 of 29 January 2015 (OJ 2015 L 24, p. 16), which entered into force on 31 January 2015. As to the criteria for the designation of persons covered by the restrictive measures at issue, according to Article 1 of that decision, Article 1(1) of Decision 2014/119 is replaced by the following:
‘1. All funds and economic resources belonging to, owned, held or controlled by persons having been identified as responsible for the misappropriation of Ukrainian State funds and persons responsible for human rights violations in Ukraine, and natural or legal persons, entities or bodies associated with them, as listed in the Annex, shall be frozen.
For the purpose of this Decision, persons identified as responsible for the misappropriation of Ukrainian State funds include persons subject to investigation by the Ukrainian authorities:
(a)
for the misappropriation of Ukrainian public funds or assets, or being an accomplice thereto; or
(b)
for the abuse of office as a public office-holder in order to procure an unjustified advantage for him- or herself or for a third party, and thereby causing a loss to Ukrainian public funds or assets, or being an accomplice thereto.’
Council Regulation (EU) 2015/138 of 29 January 2015 amending Regulation No 208/2014 (OJ 2015 L 24, p. 1) amended the latter in accordance with Decision 2015/143.
Decision 2014/119 and Regulation No 208/2014 were further amended by Council Decision (CFSP) 2015/364 of 5 March 2015 amending Decision 2014/119 (OJ 2015 L 62, p. 25) and by Council Implementing Regulation (EU) 2015/357 of 5 March 2015 implementing Regulation No 208/2014 (OJ 2015 L 62, p. 1). Decision 2015/364 amended Article 5 of Decision 2014/119, by extending the restrictive measures against the applicant until 6 March 2016. Implementing Regulation 2015/357 therefore replaced Annex I to Regulation No 208/2014.
By Decision 2015/364 and Implementing Regulation 2015/357, the name of the applicant was retained on the list along with the identifying information ‘Prime Minister of Ukraine until January 2014’ and the following new statement of reasons:
Decision 2015/364 and Implementing Regulation 2015/357 are the subject of a new action brought by the applicant before the General Court on 29 April 2015 (Case T‑215/15, Azarov v Council).
Procedure and forms of order sought
By application lodged at the Court Registry on 12 May 2014, the applicant brought the present action. He also lodged a request for an expedited procedure pursuant to Article 76a of the Rules of Procedure of the General Court of 2 May 1991.
By decision of 5 June 2014, the General Court rejected the request for an expedited procedure.
By documents lodged at the Court Registry respectively on 28 March and 2 September 2014, the European Commission and the Republic of Poland applied to intervene in the present proceedings in support of the form of order sought by the Council. By orders of 7 November 2014, the President of the Ninth Chamber of the Court granted those applications. The Republic of Poland submitted its statement in intervention and the applicant submitted his observations on that statement within the prescribed periods. The Commission waived its right to submit a statement in intervention.
On 19 December 2014, the Council submitted a reasoned application in accordance with the second subparagraph of Article 18(4) of the Instructions to the Registrar of the General Court for the contents of an annex to the rejoinder not to be cited in the documents relating to this case to which the public has access.
By document lodged at the Court Registry on 25 March 2015, the applicant amended the form of order sought in order also to seek annulment of Decision 2015/143 and Regulation 2015/138, in so far as they relate to him.
By decision of the President of the Ninth Chamber of the Court of 7 August 2015, after the parties had been heard, the present case and Case T‑332/14, Azarov v Council, were joined for the purposes of the oral procedure, in accordance with Article 68 of the Rules of Procedure.
The parties presented oral argument and answered the questions put to them by the Court at the hearing on 30 September 2015.
The applicant claims that the Court should:
—
annul Decision 2014/119, Regulation No 208/2014, Decision 2015/143 and Regulation 2015/138 in so far as those measures relate to him;
—
order the Council to pay the costs of the proceedings.
The Council, supported by the Commission, contends that the Court should:
—
dismiss the application;
—
reject the modification of the form of order sought in so far as it relates to Decision 2015/143 and Regulation 2015/138, on the grounds that the Court lacks jurisdiction or because it is inadmissible;
—
order the applicant to pay the costs.
The Republic of Poland, in essence, submits that the action should be dismissed.
Law
Claim for annulment of Decision 2014/119 and Regulation No 208/2014 in so far as they relate to the applicant
The applicant’s continuing interest in bringing proceedings
As was pointed out in paragraphs 12 and 13 above, Decision 2015/364 and Implementing Regulation 2015/357 amended the reason for including the applicant’s name on the list and extended the application of the restrictive measures against him until 6 March 2016.
In its observations on the statement modifying the form of order sought, the Council raised doubts as to the applicant’s continuing interest in bringing proceedings in relation to the claim for annulment of Decision 2014/119 and Regulation No 208/2014 in so far as those measures concern him and left it to the Court to make an assessment.
According to settled case-law, the subject matter of the dispute, like an applicant’s interest in bringing proceedings, must continue until the final decision, failing which there will be no need to adjudicate, which presupposes that the action must be liable, if successful, to procure an advantage for the party bringing it (see judgment of 6 June 2013 in Ayadi v Commission, C‑183/12 P, ECR, EU:C:2013:369, paragraph 59 and the case-law cited).
Moreover, it is clear from the case-law that, whilst recognition of the illegality of the contested act cannot, as such, compensate for material harm or for interference with a person’s private life, it is nevertheless capable of rehabilitating the person concerned or constituting a form of reparation for the non-material harm which he has suffered by reason of that illegality, and of thereby establishing that he retains his interest in bringing proceedings (see, to that effect, judgment of 28 May 2013 in Abdulrahim v Council and Commission, C‑239/12 P, ECR, EU:C:2013:331, paragraphs 70 to 72).
In the present case, it must be noted, as the applicant asserted in the statement modifying the form of order sought and at the hearing, that being publicly identified as the subject of criminal proceedings in Ukraine in connection with the misappropriation of public funds could harm, in particular, his reputation as a politician and as a businessman.
It must be pointed out, as the applicant stated at the hearing, that recognition of the illegality of Decision 2014/119 and of Regulation No 208/2014 may form the basis of a subsequent action for compensation for damage suffered as a result of those acts during the period of their application, that is to say, for the period from 5 March 2014 to 6 March 2015 (see, to that effect and by analogy, judgment in Abdulrahim v Council and Commission, EU:C:2013:331, cited in paragraph 28 above, paragraph 82).
In that regard, contrary to what the Council maintains, the fact that Decision 2014/119 and Regulation No 208/2014 are no longer in force, having been amended, in so far as they concern the applicant, by Decision 2015/364 and Implementing Regulation 2015/357, cannot be equated with annulment by the Court of acts adopted initially, in so far as that amendment does not amount to recognition of the illegality of those acts (see, to that effect and by analogy, judgment of 11 June 2014 in Syria International Islamic Bank v Council, T‑293/12, EU:T:2014:439, paragraphs 36 to 41 and the case-law cited).
It must therefore be concluded that the applicant’s interest in bringing proceedings continues to exist despite the amendment of Decision 2014/119 and Regulation No 208/2014, in so far as they concern the applicant, by Decision 2015/364 and Implementing Regulation 2015/357, which are also the subject of a separate action (see paragraph 14 above).
Merits of the claim for annulment of Decision 2014/119 and Regulation No 208/119 in so far as they relate to the applicant
In support of the action, the applicant relies on five pleas in law. The first alleges an infringement of the duty to give reasons. The second alleges an infringement of fundamental rights. The third alleges misuse of power. The fourth alleges an infringement of the principle of sound administration and the fifth alleges a manifest error of assessment.
The Court considers that it is appropriate to examine the fifth plea first.
In support of the fifth plea, the applicant claims, in essence, that the restrictive measures concerning him were adopted without a sufficiently solid factual basis.
According to the applicant, Decision 2014/119 and Regulation No 208/2014 contain only very brief statements of reasons for including his name on the list, confining themselves to stating that he is subject to investigation in Ukraine for involvement in crimes in connection with the misappropriation of State funds and their illegal transfer outside Ukraine. More particularly, he claims that, by manifestly relying solely on the fact that he had held a political position in Ukraine in order to justify that listing, when he was not subject to a criminal investigation in Ukraine for involvement in those offences, the Council committed a manifest error of assessment. Furthermore, the only reason given to justify that listing is vague and general, in that the complaints are not sufficiently specified, either as regards the time, place or nature of his involvement in the alleged offences.
In the reply, the applicant contests the Council’s argument that the restrictive measures at issue aim to prevent the unlawful use of State funds, because, first, they do not have a preventive effect, and secondly, such an objective cannot, in any event, justify including the applicant’s name on the list. He also claims that the letter from the Office of the Public Prosecutor of Ukraine sent to the High Representative of the European Union for Foreign Affairs and Security Policy of 3 March 2014 (‘the letter of 3 March 2014’) does not constitute a sufficiently solid factual basis.
In response to an argument put forward by the Republic of Poland in its statement in intervention, the applicant claims that there were no ongoing proceedings concerning misappropriation of State funds when the letter of 3 March 2014 was sent. That is borne out by the letters from the Office of the Public Prosecutor of Ukraine of 8 July and 10 October 2014. The first letter mentions different offences and the second concerns proceedings initiated only after the restrictive measures at issue were adopted.
The Council contends that it is clear from the recitals of Decision 2014/119 and Regulation No 208/2014, and from the general context in which those measures were adopted that they aimed, inter alia, to consolidate and support the rule of law, and to assist the Ukrainian authorities in combating corruption and misappropriation of funds belonging to the State. Those objectives also include the objective of preventing the unlawful use of State funds, in particular by persons who hold or held political positions in Ukraine.
The reasons for including the applicant’s name on the list therefore have a solid factual basis and are compatible with the case-law. Those reasons are based on the letter of 3 March 2014 informing the Council that investigations were conducted concerning the applicant’s involvement, inter alia, in offences in connection with the misappropriation of State funds and their illegal transfer outside Ukraine, which corresponds to the statement of reasons concerning the applicant in Decision 2014/119 and in Regulation No 208/2014.
Indeed, stricter requirements could undermine the effectiveness of restrictive measures taken following a misappropriation of State funds. The Council considers that a distinction must be made between, on the one hand, ongoing investigations in Ukraine, in which the applicant may refute the allegations made against him in accordance with the provisions governing criminal proceedings in Ukraine and, on the other, the restrictive measures taken at EU level which are limited in time and are reversible. In that context, urgent measures are necessary for the freezing of funds because of the misappropriation of State funds, otherwise there is a risk that those funds would be transferred outside the territory of the EU and that, as a result, the aim of those measures would not be achieved.
The Republic of Poland, in essence, puts forward arguments which are broadly the same as those advanced by the Council. In particular, it considers that, in the present case, the Council had concrete evidence of the existence of criminal proceedings against the applicant and that the accuracy of the allegations made, in view of the evidence provided, was not in doubt.
It should be noted that, although the Council has a broad discretion as regards the general criteria to be taken into consideration for the purpose of adopting restrictive measures, the effectiveness of the judicial review guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union requires that, as part of the review of the lawfulness of the grounds which are the basis of the decision to include or to maintain a person’s name on the list of persons subject to restrictive measures, the Courts of the European Union are to ensure that that decision, which affects that person individually, is taken on a sufficiently solid factual basis. That entails a verification of the factual allegations in the summary of reasons underpinning that decision, with the consequence that judicial review cannot be restricted to an assessment of the cogency in the abstract of the reasons relied on, but must concern whether those reasons, or, at the very least, one of those reasons, deemed sufficient in itself to support that decision, are substantiated by sufficiently specific and concrete evidence (see judgment of 21 April 2015 in Anbouba v Council, C‑605/13 P, ECR, EU:C:2015:248, paragraphs 41 and 45 and the case-law cited).
In the present case, the criterion laid down in Article 1(1) of Decision 2014/119 provides that restrictive measures are to be adopted against persons having been identified as responsible for the misappropriation of public funds. Furthermore, it is clear from the second recital of that decision that the Council adopted those measures ‘with a view to consolidating and supporting the rule of law ... in Ukraine’.
The name of the applicant was included on the list on the ground that he was a ‘person subject to investigation in Ukraine for involvement in crimes in connection with the embezzlement of Ukrainian State funds and their illegal transfer outside Ukraine’. It thus appears that the Council considered that the applicant was the subject of a preliminary investigation or an inquiry which had not (or not yet) culminated in the bringing of a formal charge, in relation to his alleged involvement in the misappropriation of public funds.
In support of the reason for including the applicant’s name on the list, the Council relies on the letter of 3 March 2014 and on other evidence post-dating Decision 2014/119 and Regulation No 208/2014.
The first part of the letter of 3 March 2014 states that the ‘law-enforcement agencies of Ukraine’ have launched a certain number of criminal proceedings to investigate criminal acts committed by former senior officials, whose names are listed immediately afterwards, with regard to whom the investigation into the above mentioned offences has made it possible to establish embezzlement of State funds in sizeable amounts and the further illegal transfer of those funds out of Ukrainian territory.
The second part of the letter of 3 March 2014 adds that ‘the investigation verifies the involvement of other senior officials representing former authorities in the same sort of crimes’ and that it is ‘planned to inform them shortly of the opening of that investigation’. The names of those other senior officials, including the applicant, are also listed immediately afterwards.
With regard to the case-file, the letter of 3 March 2014 is the only piece of evidence submitted by the Council during the course of these proceedings which pre-dates Decision 2014/119 and Regulation No 208/2014. Accordingly, the lawfulness of those acts must be assessed in the light of that piece of evidence alone.
It must therefore be established whether the letter of 3 March 2014 constitutes sufficient proof to support the conclusion that the applicant was identified ‘as responsible for the misappropriation of Ukrainian State funds’ within the meaning of Article 1(1) of Decision 2014/119.
Although, as the Council states, the letter of 3 March 2014 was sent by a high judicial body in a non-member country, namely, the Office of the Public Prosecutor of Ukraine, it contains only a general and generic statement linking the applicant’s name, among those of other former senior officials, to an inquiry which, essentially, established acts of misappropriation of public funds. The letter does not provide any details as to the establishment of the acts which the investigation conducted by the Ukrainian authorities was in the process of verifying and, still less, as to the applicant’s individual liability, even if only presumed, in respect of those acts.
It is true that, as the Council submits, in the context of the application of restrictive measures, the EU judicature has held that identifying a person as responsible for an offence does not necessarily imply that that person has been convicted of that offence (see, to that effect, judgments of 5 March 2015 in Ezz and Others v Council, C‑220/14 P, ECR, EU:C:2015:147, paragraph 72, and of 27 February 2014 in Ezz and Others v Council, T‑256/11, ECR, EU:T:2014:93, paragraphs 57 to 61).
However, in the context of the cases which gave rise to the case-law cited in paragraph 52 above, the applicants had at least been the subject of an order of the prosecutor general of the non-member country concerned seeking to seize their assets, which had been endorsed by a criminal court (judgment in Ezz and Others v Council, EU:T:2014:93, cited in paragraph 52 above, paragraph 132). Consequently, the imposition of restrictive measures on the applicants in those cases was based on specific facts of which the Council was apprised.
In this case, it must be found, first, that the Council did not have any information regarding the acts or conduct specifically imputed to the applicant by the Ukrainian authorities and, secondly, that, even if it is examined in its context, the letter of 3 March 2014 on which it relies cannot constitute a sufficiently solid factual basis within the meaning of the case-law cited in paragraph 43 above for including the applicant’s name on the list on the ground that he was identified ‘as responsible’ for the misappropriation of State funds.
Irrespective of the stage of the proceedings to which the applicant was deemed to be subject, the Council could not adopt restrictive measures against him without knowing the acts of misappropriation of public funds which the Ukrainian authorities specifically alleged against him. It is only by being aware of such acts that the Council would have been in a position to establish that they were capable, first, of being categorised as misappropriation of public funds and, secondly, of undermining the rule of law in Ukraine, the consolidation and support of which, as was recalled in paragraph 44 above, constitute the objective pursued by the adoption of the restrictive measures in question.
Moreover, it is for the competent European Union authority to establish, in the event of challenge, that the reasons relied on against the person concerned are well-founded, and not the task of that person to adduce evidence of the negative, that those reasons are not well-founded (judgments of 18 July 2013 in Commission and Others v Kadi, C‑584/10 P, C‑593/10 P and C‑595/10 P, ECR, EU:C:2013:518, paragraphs 120 and 121, and of 28 November 2013 in Council v Fulmen and Mahmoudian, C‑280/12 P, ECR, EU:C:2013:775, paragraphs 65 and 66).
In view of all the foregoing, the inclusion of the applicant’s name on the list does not comply with the criteria set by Decision 2014/119 for the designation of persons covered by the restrictive measures at issue.
The action must therefore be upheld in that it seeks annulment of Decision 2014/119 in so far as it concerns the applicant, without it being necessary to rule on the other pleas which he relied on, or on his application to adopt measures of organisation of procedure.
For the same reasons, Regulation No 208/2014 must be annulled in so far as it concerns the applicant.
Claim for annulment of Decision 2015/143 and Regulation 2015/138 in so far as they relate to the applicant
In the statement modifying the form of order sought, the applicant also seeks annulment of Decision 2015/143 and Regulation 2015/138, essentially in so far as they amend Article 1(1) of Decision 2014/119 and Article 3 of Regulation No 208/2014, respectively.
In its observations on the statement modifying the form of order sought, the Council contends, first, that the Court does not have jurisdiction under Article 275 TFEU to rule on an action brought against Decision 2015/143, which was adopted, inter alia, on the basis of Article 29 TEU, and secondly, that the extension of the form of order sought to that decision and to Regulation 2015/138 is inadmissible due to the applicant’s lack of locus standi. Furthermore, the Council, supported by the Commission, contends that the applicant’s claim does not contain any statement of the pleas relied on for the purposes of Article 21 of the Statute of the Court of Justice and Article 44(1) of the Rules of Procedure of 2 May 1991.
As regards, at the outset, the issue of the jurisdiction of the EU judicature, it must be recalled that the second paragraph of Article 275 TFEU expressly provides that, by way of derogation from the first paragraph of that article, the EU judicature has jurisdiction ‘to rule on proceedings, brought in accordance with the conditions laid down in the fourth paragraph of Article 263 of this Treaty, reviewing the legality of decisions providing for restrictive measures against natural or legal persons adopted on the basis of Chapter 2 of Title V of the [EU] Treaty’. Thus, contrary to what the Council maintains, that provision is directed at all Council decisions relating to restrictive measures against natural or legal persons, falling within Chapter 2 of Title V of the EU Treaty, without making any distinction on the basis of decisions of general application or individual decisions. In particular, it does not preclude the possibility of challenging, in a statement modifying the form of order sought, the legality of a general provision, in support of an action for annulment brought against an individual restrictive measure (see, to that effect, judgment of 4 September 2015 in NIOC and Others v Council, T‑577/12, under appeal, EU:T:2015:596, paragraphs 93 and 94).
Therefore, contrary to what the Council submits, the Court has jurisdiction to examine the legality of Decision 2015/143 in so far as it amends Article 1(1) of Decision 2014/119.
Next, as regards the plea of inadmissibility concerning the applicant’s lack of locus standi, it must be observed that Decision 2014/119 and Regulation No 208/2014 were amended by Decision 2015/143 and by Regulation 2015/138 only in so far as the criteria for the freezing of funds targeting persons responsible for the misappropriation of Ukrainian State funds were clarified.
Decision 2015/143 and Regulation 2015/138 do not name the applicant, nor were they adopted further to a complete review of the lists of persons subject to the restrictive measures. Those measures cover only the general listing criteria applicable to objectively determined situations and having legal effects in relation to categories of persons and entities envisaged in a general and abstract manner, and not the inclusion of the applicant’s name on the list. Consequently, they are not of either direct or individual concern to the applicant, and he is not entitled, as the Council submitted, to amend his claims to seek their annulment (see, to that effect, judgment of 6 September 2013 in Bank Refah Kargaran v Council, T‑24/11, ECR, EU:T:2013:403, paragraph 50).
Moreover, the amendments made to the general listing criterion by Decision 2015/143 and by Regulation 2015/138 are not relevant for the assessment of the legality of the listing of the applicant’s name, which was conducted by the Council on the basis of the single criterion set out in Article 1(1) of Decision 2014/119 (see paragraph 44 above).
In the light of the foregoing, the action must be dismissed as inadmissible in so far as it is directed against Decision 2015/143 and Regulation 2015/138, without it being necessary to rule on the other plea of inadmissibility raised by the Council and the Commission.
The temporal effects of the annulment in part of Decision 2014/119
The Council submits that, if the Court annuls Decision 2014/119 in so far as it concerns the applicant, it will be necessary for the effects of that decision as regards the applicant to be maintained pursuant to the second paragraph of Article 264 TFEU until the partial annulment of Regulation No 208/2014 takes effect, in order to ensure legal certainty and preserve the coherence and consistency of the legal order.
The applicant disputes that line of argument.
It must be recalled that Decision 2014/119 was amended by Decision 2015/364 which replaced the list from 7 March 2015 and extended the application of the restrictive measures, in so far as they concern the applicant, until 6 March 2016. Following those amendments the applicant’s name was retained on the list with new reasons for his listing (see paragraphs 12 and 13 above).
Therefore, as at today’s date, the applicant is subject to a new restrictive measure. It follows that the annulment of Decision 2014/119, in so far as it relates to the applicant, does not lead to the removal of his name from the list.
Consequently, it is not necessary to maintain the effects of Decision 2014/119, in so far as it relates to the applicant.
Costs
Under Article 134(2) of the Rules of Procedure, where there is more than one unsuccessful party the Court will decide how the costs are to be shared.
In the present case, since the Council has been unsuccessful in relation to the claim for annulment made in the application, it must be ordered to pay the costs relating to that claim, in accordance with the form of order sought by the applicant. Since the applicant has been unsuccessful in relation to the claim for annulment made in the statement modifying the form of order sought, he must be ordered to pay the costs relating to that claim, in accordance with the form of order sought by the Council.
In addition, under Article 138(1) of the Rules of Procedure, Member States and institutions which have intervened are to bear their own costs. The Republic of Poland and the Commission will thus bear their own costs.
On those grounds,
THE GENERAL COURT (Ninth Chamber)
hereby:
1.
Annuls Council Decision 2014/119/CFSP of 5 March 2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine and Council Regulation (EU) No 208/2014 of 5 March 2014 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Ukraine in so far as they concern Mykola Yanovych Azarov;
2.
Dismisses the action as to the remainder;
3.
Orders the Council of the European Union to bear its own costs and to pay those incurred by Mr Azarov in relation to the claim for annulment made in the application;
4.
Orders Mr Azarov to bear his own costs and to pay those incurred by the Council in relation to the claim for annulment made in the statement modifying the form of order sought;
5.
Orders the Republic of Poland and the European Commission to bear their own costs.
Berardis
Czúcz
Popescu
Delivered in open court in Luxembourg on 28 January 2016.
[Signatures]
( *1 ) Language of the case: German. |
OPINION OF ADVOCATE GENERAL
BOT
delivered on 4 June 2015 ( )
Case C‑223/14
Tecom Mican SL,
José Arias Domínguez
(Request for a preliminary ruling from the Juzgado de Primera Instancia No 7 de Las Palmas de Gran Canaria (Spain))
‛Reference for a preliminary ruling — Regulation (EC) No 1393/2007 — Service of documents — Extrajudicial document — Definition’
1.
In its judgment in Roda Golf & Beach Resort, ( ) the Court stated that an ‘extrajudicial document’, within the meaning of Article 16 of Council Regulation (EC) No 1348/2000 of 29 May 2000 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters, ( ) is a concept of EU law. ( ) The Court further held that a document drawn up by a notary constitutes ‘as such’ an extrajudicial document. ( )
2.
The present request for a preliminary ruling raises the question whether a private document may also fall within the concept of an ‘extrajudicial document’ within the meaning of Article 16 of Regulation (EC) No 1393/2007, ( ) which replaced Regulation No 1348/2000, and therefore calls on the Court to give a definition of that concept.
3.
The request was made in the context of an application for review made before the Juzgado de Primera Instancia No 7 de Las Palmas de Gran Canaria (Court of First Instance No 7, Las Palmas de Gran Canaria) (Spain) by Tecom Mican SL ( ) against the refusal of the secretario judicial (registrar) of that court to serve a letter of demand on MAN Diesel & Turbo SE ( ) on the ground that a strictly private document cannot be regarded as an extrajudicial document.
4.
In this Opinion, I shall submit, first, that a document drawn up or certified by a public authority or official or any person so competent under the law of the Member State of origin, as well as any document the transmission of which to its addressee is necessary for the purposes of exercising, proving or safeguarding a right, constitutes an ‘extrajudicial document’ within the meaning of Article 16 of Regulation No 1393/2007.
5.
Next, I shall argue that there is no need to determine, in each individual case and on the basis of an assessment of the particular circumstances of that case, whether the transmission of a document satisfying one of those two criteria has cross-border implications and is necessary for the proper functioning of the internal market.
6.
Finally, I shall show that an extrajudicial document which has already been served on its addressee may be served again under the procedures laid down in Regulation No 1393/2007, even if the first service was itself effected in accordance with that regulation.
I – Legal framework
A – International law
7.
Article 17 of the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters ( ) provides:
‘Extrajudicial documents emanating from authorities and judicial officers of a Contracting State may be transmitted for the purpose of service in another Contracting State by the methods and under the provisions of the present Convention.’
B – EU law
8.
By act of 26 May 1997, the Council of the European Union drew up, on the basis of Article K.3 of the Treaty on European Union, a Convention on the service in the Member States of the European Union of judicial and extrajudicial documents in civil or commercial matters. ( ) Article 16 of the 1997 Convention states:
‘Extrajudicial documents may be transmitted for service in another Member State in accordance with the provisions of this Convention.’
9.
Although the 1997 Convention never entered into force because it was not ratified by the Member States prior to the entry into force of the Treaty of Amsterdam, Regulation No 1348/2000 was extensively based on it.
10.
Article 16 of Regulation No 1348/2000 reproduced the wording of the 1997 Convention as follows:
‘Extrajudicial documents may be transmitted for service in another Member State in accordance with the provisions of this Regulation.’
11.
Article 17(b) of that regulation provided for the drawing up of a glossary of documents which may be served under that regulation.
12.
That regulation was replaced by Regulation No 1393/2007.
13.
Recitals 2 and 6 in the preamble to Regulation No 1393/2007 state:
‘(2)
The proper functioning of the internal market entails the need to improve and expedite the transmission of judicial and extrajudicial documents in civil or commercial matters for service between the Member States.
…
(6)
Efficiency and speed in judicial procedures in civil matters require that judicial and extrajudicial documents be transmitted directly and by rapid means between local bodies designated by the Member States …’
14.
With regard to the local bodies designated by the Member States, Article 2 of that regulation provides:
‘1. Each Member State shall designate the public officers, authorities or other persons … competent for the transmission of judicial or extrajudicial documents to be served in another Member State. [ ( )]
2. Each Member State shall designate the public officers, authorities or other persons … competent for the receipt of judicial or extrajudicial documents from another Member State. [ ( )]
…’
15.
Pursuant to Article 23(1) of the regulation, the Kingdom of Spain designated the ‘secretario judicial’ as the transmitting agency.
16.
The ‘[o]ther means of transmission and service of judicial documents’ are laid down in Articles 12 to 15 of Regulation No 1393/2007.
17.
Article 16 of that regulation provides:
‘Extrajudicial documents may be transmitted for service in another Member State in accordance with the provisions of this Regulation.’
18.
That regulation does not provide for the drawing up of a glossary of documents which may be served.
19.
In accordance with Article 20(1) of Regulation No 1393/2007, that regulation prevails over other provisions contained, inter alia, in the Hague Convention.
II – The dispute in the main proceedings and the questions referred for a preliminary ruling
20.
In November 2009, Tecom, which has its registered office in Spain, and MAN Diesel, whose registered office is located in Germany, concluded a commercial agency contract which was terminated by MAN Diesel in 2012.
21.
Following that termination, Tecom drafted a letter of demand seeking, inter alia, the payment of a goodwill indemnity and accrued and unpaid commissions. That letter mentioned the possibility of legal action if the demand were not satisfied and further stated that a similar letter of demand, drawn up by notarial act, had already been sent to MAN Diesel in the person of its executive director.
22.
On 19 November 2013, Tecom asked the secretario judicial of the Juzgado de Primera Instancia No 7 de Las Palmas de Gran Canaria to effect service of that letter of demand at the registered office of MAN Diesel through the Amtsgericht Augsburg (Local Court, Augsburg), pursuant to Regulation No 1393/2007.
23.
The secretario judicial refused to transmit the letter on the ground that no judicial proceedings requiring recourse to the mutual legal assistance sought had been instituted.
24.
Tecom brought an application for the reconsideration of that refusal on the ground that, in accordance with the judgment in Roda Golf & Beach Resort, ( ) Article 16 of Regulation No 1393/2007 does not require that legal proceedings be ongoing in order for service of extrajudicial documents to be effected.
25.
By order of 20 December 2013, the secretario judicial dismissed the application for reconsideration and confirmed the contested decision, stating that, despite the absence of a glossary, drawn up by the Kingdom of Spain, specifying the type of documents covered by Article 16 of Regulation No 1393/2007, the view could not be taken that service of any private document could be effected pursuant to the provisions of that regulation. The secretario judicial took the view, in particular, that ‘only extrajudicial documents which meet the characteristics indicated, the latter conferring official status on those documents, fall within the material scope of th[at] regulation; which is to say that those documents, by their nature or by virtue of their formal character, produce certain legal effects’. In his view, any other interpretation would have the effect of distorting the concept of ‘extrajudicial documents’ within the meaning of Article 16 of Regulation No 1393/2007, thus running the risk of turning national courts into ‘courier services’; in this regard, he adopted the terminology used by Advocate General Ruiz-Jarabo Colomer in his Opinion in Roda Golf & Beach Resort (C‑14/08, EU:C:2009:134).
26.
On 2 January 2014, Tecom submitted an application for review of that order, claiming that a strictly private document can be regarded as an ‘extrajudicial document’ which may be served in accordance with the provisions of Regulation No 1393/2007.
27.
The referring court has pointed out that, in accordance with the judgment in Roda Golf & Beach Resort, ( )‘extrajudicial documents’ are an autonomous concept of EU law. However, it finds itself unable to interpret an autonomous concept of EU law in the absence of any information enabling it to determine the characteristics which a document must exhibit in order to be regarded as an extrajudicial document.
28.
In addition, the referring court asks whether the implementation of Regulation No 1393/2007 is subject to any limits so far as concerns, first, the situation where a letter of demand is served both by a notary and by a judicial authority, and, secondly, the requirement of a condition of application of the regulation that is based on the cross-border implications of the cooperation and the proper functioning of the internal market, where the extrajudicial document is intended to give practical effect to the subjective rights afforded by national legislation or EU law.
29.
In the light of those considerations, the Juzgado de Primera Instancia No 7 de Las Palmas de Gran Canaria referred the following questions for a preliminary ruling:
‘(1)
Can a purely private document be considered an “extrajudicial document” within the meaning of Article 16 of Regulation No 1393/2007 …, regardless of whether it was issued by a non-judicial public authority or official?
(2)
If so, can any private document whatsoever be considered an extrajudicial document or must it meet certain specific requirements?
(3)
Supposing that the private document meets those requirements, may an EU citizen request service under the procedure laid down in Article 16 of Regulation No 1393/2007 …, when he has already effected such service through another non-judicial public authority, such as a notary?
(4)
Lastly, is it necessary, for the purposes of Article 16 of Regulation No 1393/2007, to have regard to the fact that the cooperation has cross-border implications and is necessary for the proper functioning of the internal market? When must it be understood that judicial cooperation has “cross-border implications and is necessary for the proper functioning of the internal market”?’
III – My analysis
A – The first and second questions
30.
By its first and second questions, which should be examined jointly, the referring court asks, in essence, whether a strictly private document which has not been issued or authenticated by a public authority or official may be regarded as an ‘extrajudicial document’ within the meaning of Article 16 of Regulation No 1393/2007.
31.
It should be pointed out, at the outset, that the qualifier ‘extrajudicial’ is not defined in EU law, even though it appears in a number of provisions of primary law. ( ) In addition, that adjective may have different meanings depending on the noun which it qualifies. So it is that the concept of an ‘extrajudicial decision’ calls to mind decisions given following the use of alternative methods of dispute settlement, whereas the concept of an ‘extrajudicial document’ may suggest a broader interpretation extending beyond the framework of dispute settlement procedures alone. In the light of the multiple meanings of the term ‘extrajudicial’, I shall therefore focus my examination on an analysis of the concept of an ‘extrajudicial document’ within the meaning of Regulation No 1393/2007.
32.
In order to determine the substance of that concept, it is necessary to begin with a summary of the history behind it.
33.
The system for the service of documents through a central authority dates back to the Hague Convention, Article 17 of which provides for the transmission of ‘extrajudicial documents emanating from authorities and judicial officers of a Contracting State’ by the methods and under the provisions of that convention. As a reading of the documents preparatory to it confirms, the drafters of the Convention sought to exclude strictly private documents from its scope, and to have the documents to be served screened or reviewed by an official body. ( )
34.
However, that restrictive intention is not entirely borne out by the Practical Handbook on the Operation of the Hague Service Convention. ( ) It is true that that Handbook states that ‘[e]xtrajudicial documents differ from judicial documents in that they are not directly related to a trial, and from strictly private documents in that they require the involvement of an “authority or judicial officer”’. ( ) The Handbook further states that ‘[t]here are many kinds of extrajudicial documents. Extrajudicial documents include, for the purposes of Article 17, demands for payment, notices to quit in connection with leaseholds or contracts of employment, protests with respect to bills of exchange and promissory notes, provided that they are issued by an authority or huissier’. ( ) However, the Handbook is somewhat ambiguous since it goes on to state, in more general terms, that ‘[o]bjections to marriage, consents for adoption, and acceptances of paternity are also in this class in so far as they imply compliance with certain formalities’. ( ) In addition, after having mentioned that, in certain systems, private persons serve certain extrajudicial documents themselves with identical effect, the Handbook points out that, ‘even though the Convention intended to exclude from Article 17 documents emanating from private persons …, the Special Commission encouraged the Central Authorities to serve extrajudicial documents not emanating from an authority or judicial officer if those documents were of a type which normally would call for the intervention of an authority in their country’. ( ) The Handbook states, moreover, that ‘[c]haracterisation as a judicial or extrajudicial document depends on the law of the requesting State (State of origin)’ ( ) since ‘it is that law which determines the power of the authorities and judicial officers to issue a given document’, ( ) although it does specify that the concept of ‘judicial and extrajudicial documents’ is to be construed broadly. ( )
35.
Although inspired by the Hague Convention, the 1997 Convention differs from that convention in that it does not limit its scope exclusively to the transmission of extrajudicial documents issued by public authorities or officials. The Explanatory Report on the 1997 Convention ( ) states in this regard that, although the term ‘extrajudicial documents’ is not amenable to precise definition, ‘[i]t may be taken to cover documents drawn up by a public officer, for example a notarial deed or a writ, documents drawn up by Member States’ official authorities or documents of a type or importance which require them to be transmitted and brought to the addressee’s attention by official procedure’. ( )
36.
Article 16 of Regulation No 1348/2000 reproduced the wording of Article 16 of the 1997 Convention. However, that regulation had introduced a new feature inasmuch as it provided for the drawing up of a glossary of documents which may be served under the regulation. That glossary, which formed Annex II to Commission Decision 2001/781/EC of 25 September 2001 adopting a manual of receiving agencies and a glossary of documents that may be served under Regulation No 1348/2000, ( ) as amended by Commission Decision 2008/541/EC of 8 April 2008, ( ) included the information communicated by the Member States pursuant to Article 17(b) of Regulation No 1348/2000. A reading of Annex II showed that the Member States had provided that information in different forms and that the content of the information provided differed. Some Member States had simply stated, in general terms, that extrajudicial documents were included in the documents that may be served. ( ) Other Member States, on the other hand, had clearly limited the concept of ‘extrajudicial documents’ to documents emanating from a public authority or a public officer only. ( ) Others still had adopted a broad definition capable of encompassing private documents. ( ) Finally, some Member States had drawn up a detailed list of the documents they considered capable of being served, without distinguishing between judicial documents and extrajudicial documents. ( )
37.
As for Article 16 of Regulation No 1393/2007, it reproduces Article 16 of Regulation No 1348/2000 verbatim. However, unlike that latter regulation, Regulation No 1393/2007 does not provide for the drawing up of a glossary.
38.
That historical summary shows there to be two different conceptions of extrajudicial documents within the Member States. One makes the involvement of a public authority or official the decisive criterion for identifying such a document. The other, on the contrary, disregards the criterion relating to the author of the document and focuses on the latter’s connection with the exercise or safeguarding of a right. That divergence on the part of the national legal systems very definitely explains why, with the exception of the Hague Convention, the restrictive vision of which was, however, later qualified, international and Community instruments relating to the transmission of documents in civil or commercial matters are careful not to give a definition of extrajudicial document.
39.
In order to answer the question whether a strictly private document may constitute an extrajudicial document, it is necessary to go beyond the merely negative definition of such a document, that is to say its definition by opposition to a judicial document, and to identify the components of a positive definition of such a document for the purposes of Article 16 of Regulation No 1393/2007.
40.
The differences in approach which I set out above when charting the history of the concept can be found in the written observations lodged before the Court.
41.
On the one hand, the Spanish Government takes the view that a private document cannot be an extrajudicial document, since that classification must be reserved, at least in Spain, for documents issued by officials, notaries and mortgage registrars. In support of that argument, it submits in particular that the objective of Regulation No 1393/2007 is to guarantee the transmission not of any document between private individuals resident in different Member States, but only of documents which must be issued in the course of judicial proceedings or which are intended to protect rights with a view to the possibility of such proceedings. It infers from this that the document in question must always be public, in the sense that it must constitute proof of the identity of its author, the date of its issue and its content.
42.
On the other hand, Tecom, the German and Hungarian Governments and the European Commission opt for a broader definition which is independent of the author of the document and, as such, includes certain private documents. Thus, the German Government includes private documents in the category of extrajudicial documents ‘in so far as their formal communication is such as to make it possible to guarantee, give effect to or counter a claim in civil or commercial matters’, whereas the Hungarian Government proposes that an ‘extrajudicial document’ be classified as any private document which ‘must be sent to its addressee by means of a service procedure in accordance with the applicable rules of substantive or procedural law of the Member States or of the European Union in a particular civil or commercial matter’. Tecom and the Commission, for their part, adopt the criterion, based on the type and importance of the document, which is set out in the Explanatory Report on the 1997 Convention.
43.
With reference to the criteria identified by Advocate General Ruiz-Jarabo Colomer in his Opinion in Roda Golf & Beach Resort, ( ) the Portuguese Government adopts a — not entirely unambiguous — intermediate position to the effect that a private document may be regarded as an extrajudicial document provided, inter alia, ‘that it entails the involvement of an authority or the adoption of a public document’.
44.
Before I set out my own view, it is appropriate, at the outset, to recall that the Court has already adopted a position on whether the concept of an ‘extrajudicial document’ is to be given an autonomous interpretation. Whereas several governments had argued before it that the substance of the concept of an ‘extrajudicial document’ ought to be determined according to the law of each Member State, the Court, in its judgment in Roda Golf & Beach Resort, ( ) held that that concept was to be regarded as a concept of EU law, ( ) taking into account, on the one hand, the ‘will of the Member States to anchor [the measures in the field of judicial cooperation in civil matters having cross-border implications] firmly in the Community legal order and thus to lay down the principle that they are to be interpreted autonomously’, ( ) and, on the other hand, the choice of the form of a regulation, which, in the view of the Court, ‘shows the importance which the Community legislature attaches to the direct applicability of the regulation’s provisions and their uniform application’. ( )
45.
I would point out that the Court also held, in the same judgment, that a document drawn up by a notary constitutes ‘as such’ an extrajudicial document. Moreover, it provided further clarification by dismissing the argument that a broad definition of the concept of an ‘extrajudicial document’ would place an excessive burden on the resources of the national courts, and pointing out that the obligations with regard to service which derive from Regulation No 1348/2000 are not necessarily the responsibility of the national courts. ( )
46.
Those solutions, arrived at on the basis of Regulation No 1348/2000, are, in my view, perfectly transposable to situations governed by Regulation No 1393/2007, particularly since the latter removed the provision relating to the glossary of documents that may be served, which might have suggested that the Member States retained some discretion in the determination of which documents constitute extrajudicial documents.
47.
The Court has not, however, indicated which criteria are to be used to assess whether or not a document is an ‘extrajudicial document’ within the meaning of EU law. In his Opinion in Roda Golf & Beach Resort, ( ) Advocate General Ruiz-Jarabo Colomer had proposed the use of three criteria, which he had regarded as being cumulative, based, first, on the author of the document, which must be a public authority; secondly, on the legal effects produced by the document, which must be ‘specific and different’; and, thirdly, on the existence of evidence of a connection, however slight, between the document and a judicial authority, characterised by the fact that the document ‘[must be capable of being] used to support a claim in possible … proceedings’. ( )
48.
Before looking more specifically at the criteria which I am proposing should be employed, it is, in my view, necessary to return to the implications of a broader or narrower definition of the concept of an ‘extrajudicial document’, since it seems to me that the different understandings of that concept stem in part from a failure fully to grasp those implications.
49.
It should be pointed out, first of all, that, even though ‘judicial cooperation … cannot be limited to legal proceedings alone’, ( ) the fact remains that the objective of transmitting extrajudicial documents is, as the fact that only one article of Regulation No 1393/2007 is devoted to such documents confirms, subsidiary to the overriding objective of improving and expediting the transmission of judicial documents. The explanation for this is probably to be found in the fact that, in national legal systems, the communication of judicial documents to their addressee is generally subject to formalities which are liable to slow down or complicate the procedure, especially where delivery is to be effected in another country and calls into question the sovereignty of the State in which that delivery is to take place. The harmonisation of national laws is therefore an effective means of improving and expediting the cross-border transmission of such documents. The service of extrajudicial documents, on the other hand, is not necessarily subject to the same rules, under the national legal systems, as are applicable to judicial documents. If their transmission is discretionary, subjecting that transmission to the mechanisms laid down in Regulation No 1393/2007 scarcely constitutes a means of facilitating or expediting matters, in my view. Another objective, however, relating this time to security of transmission, which seeks to protect the interests both of the applicant and of the addressee, may justify the proposition that such documents can be transmitted in accordance with Regulation No 1393/2007.
50.
Next, it must be pointed out that the purpose of an autonomous definition of extrajudicial documents is not, to my mind, to establish the lowest common denominator from among all the legal traditions of the Member States, the consequence of which would be to retain only those criteria which are exactly equivalent in each of the national legal systems. On the contrary, I am of the opinion that this definition-seeking exercise must have a unifying aim, in that it seeks rather to ensure that any document deemed to be extrajudicial in one Member State may be transmitted without hindrance to the others.
51.
In that regard, I have considered whether the solution to the problem of defining extrajudicial documents should not have been found by applying a principle that might be termed the country of origin principle, whereby the authorities of the receiving Member State would be required to ensure the transmission of all documents deemed to be extrajudicial by the Member State of origin. This would meet the objective pursued by Regulation No 1393/2007, since any document regarded as ‘extrajudicial’ in one Member State would be able to move freely and easily throughout the European Union. However, the assertion in the judgment in Roda Golf & Beach Resort ( ) that an ‘extrajudicial act’ is an autonomous concept appears to have put an end to that approach, which probably has the disadvantage of affording an excessively broad discretion to the Member States.
52.
It is necessary, ultimately, to find a definition which is sufficiently broad to encompass the diversity of the existing interpretations of that concept and sufficiently precise to avoid legal uncertainty.
53.
I shall, at the outset, employ the organic criterion based on the involvement of a non-judicial authority with the power to draw up or to certify legal documents. The relevance of that criterion lies in the exercise, by the drafting or certifying authority, of a control over the content of the documents to be transmitted which is separate from the control exercised by the transmitting and receiving agencies in the context of Regulation No 1393/2007. After all, the latter control is confined to verifying that the document to be transmitted does indeed fall within the scope of that regulation and that the formal conditions for transmission laid down by that regulation have been duly observed.
54.
I do not think that the scope of that organic criterion should be reduced by the introduction of other cumulative requirements relating, in particular, to the specific and differentiated legal effects that the document would produce following the involvement of the authority, or to the fact that the document would support a claim in any legal proceedings. In my view, the Court, in finding, in its judgment in Roda Golf & Beach Resort, ( ) that a document drawn up by a notary constitutes ‘as such’ an extrajudicial document, implicitly rejected that proposition.
55.
Is it necessary, however, to adopt another, not cumulative but alternative, criterion which would make it possible to include within the concept of ‘extrajudicial documents’ within the meaning of Article 16 of Regulation No 1393/2007 documents which emanate from private individuals and the content of which, as such, has not been previously certified by an authority?
56.
In that regard, while it seems to me to be impossible to determine which documents are covered by the concept of ‘extrajudicial document’ by reference to a criterion as contingent and ill-defined as that relating to the ‘importance’ of the document, which is so subjective as to give rise to legal uncertainty incompatible with the objective of improving and expediting the transmission of documents, I am none the less inclined to the view that the objective relating to the proper functioning of the internal market justifies the search for an objective criterion on the basis of which the concept of ‘extrajudicial documents’ may be extended to include certain legal documents not drawn up or certified by an authority.
57.
However, it is not easy to identify a distinguishing principle which accommodates the diversity of the legal documents involved while at the same time satisfying the requirements of the principle of legal certainty.
58.
One might contemplate adopting as a criterion whether or not the document is subject to formalities in relation to its service. Where service of the document is subject to particular formalities under the national law of the Member State of origin, service in another country could be effected by the methods laid down in Regulation No 1393/2007. On the other hand, where there is no restriction on the freedom to choose between the means of service, transmission to another country could not be effected by those methods. However, this distinguishing criterion does not seem to me to be satisfactory because it requires an assessment of each individual document, based on the law of the Member State of origin, in order to determine whether or not service is subject to particular formalities.
59.
Perhaps, then, the criterion sought might lie in whether or not service is necessary in order for the legal document in question to be effective, which would effectively amount to a distinction between declaratory documents, that is to say those the service of which on the person liable to be affected by them is a condition of their effectiveness, and non-declaratory documents. ( )
60.
The adoption of that criterion, however, would simply shift rather than resolve the conceptual difficulty, in so far as the distinction between declaratory and non-declaratory documents is itself a fine one. It therefore seems to me to be necessary to provide the clearer guide offered by the use of a criterion which takes account of the natural and direct function of transmitting the document in question to its addressee. This would involve including within the concept of ‘extrajudicial documents’ within the meaning of Article 16 of Regulation No 1393/2007 any document the transmission of which to its addressee is necessary for the purposes of exercising, proving or safeguarding a right.
61.
Such an extension of the concept would be capable of offering increased legal certainty both for the applicant and for the addressee of such documents, inasmuch as it would, in particular, provide the option of using the procedure for transmission between transmitting agencies and agencies competent to receive documents.
62.
I do not think that the extension proposed would give rise to an increase in requests for transmission between the transmitting agencies and receiving agencies, resulting in an excessive workload for those agencies, which would thus be turned into postal services. After all, sight must not be lost of the fact that the use of the system for transmitting documents provided for in Regulation No 1393/2007 exposes the applicant to the payment of costs and, in addition, requires him to comply with certain formalities relating in particular to translation.
63.
That extension would have the advantage of enabling persons such as Tecom, who, in order to exercise their rights, must bring a document to the attention of its addressee, to surround themselves with supplementary guarantees in the case of a process complicated by the fact that the document must be transmitted to another country.
64.
It is for those reasons that I propose that the Court answer the first two questions to the effect that a document drawn up or certified by a public authority, by an official or by any person so competent under the law of the Member State of origin, as well as any document the transmission of which to its addressee is necessary for the purposes of exercising, proving or safeguarding a right, constitutes an ‘extrajudicial document’ within the meaning of Article 16 of Regulation No 1393/2007.
B – The fourth question
65.
On account of its connection to the first and second questions, I shall examine the fourth question before the third.
66.
As is clear from the order for reference, the doubts of the Juzgado de Primera Instancia No 7 de Las Palmas de Gran Canaria with respect to the interpretation to be given to the conditions relating to the cross-border implications of the judicial cooperation and the proper functioning of the internal market stem from the fact that paragraph 56 of the judgment in Roda Golf & Beach Resort ( ) states that the judicial cooperation referred to in Article 65 EC may manifest itself both in the context of and in the absence of legal proceedings ‘if that cooperation has cross-border implications and is necessary for the proper functioning of the internal market’. ( )
67.
The referring court is therefore asking, in essence, whether, in order to determine whether a document constitutes an ‘extrajudicial document’ within the meaning of Article 16 of Regulation No 1393/2007, it must be verified that the transmission of that document has cross-border implications and is necessary for the proper functioning of the internal market.
68.
In that regard, it is sufficient to recall that the condition relating to the cross-border implications of the judicial cooperation and the proper functioning of the internal market constitutes the legal basis on which Regulation No 1393/2007 is founded.
69.
In accordance with the teleological and schematic methods of interpretation, that regulation must be interpreted in the light of the objectives which it pursues on the foundation of that legal basis.
70.
However, the condition relating to the cross-border implications of the judicial cooperation seems to me to be irrelevant for the purposes of determining the scope of Regulation No 1393/2007 so far as the documents in question are concerned, since the situations governed by that regulation, which is concerned with the transmission of a judicial or extrajudicial document from one Member State to another, are necessarily of a cross-border nature on account of the involvement of two Member States.
71.
The objective relating to the proper functioning of the internal market, on the other hand, must be taken into account for the purposes of determining the meaning of the concept of an ‘extrajudicial document’. ( ) Nevertheless, I share the view of the German Government to the effect that, where it is established that the document at issue comes under the category of ‘extrajudicial documents’ within the meaning of Article 16 of Regulation No 1393/2007, there is no point in justifying on a case-by-case basis the need, for the purposes of the proper functioning of the internal market, to ensure that that document is served in accordance with the procedures laid down in that regulation.
72.
I therefore take the view that the answer to the fourth question should be that there is no need to verify, in each individual case and on the basis of an assessment of the particular circumstances of that case, whether the transmission of the document at issue has cross-border implications and is necessary for the proper functioning of the internal market.
C – The third question
73.
By its third question, the referring court asks, in essence, whether an extrajudicial document which has already been served on its addressee may be served again in accordance with the procedure laid down in Regulation No 1393/2007.
74.
The answer to that question does not appear to me to be in any doubt where the first service was not effected in accordance with the procedures provided for in Regulation No 1393/2007.
75.
After all, in that situation, it is absolutely essential to allow service to be effected again or in a compliant manner. It is inherent in the principle that, where the person to be served with the judicial or extrajudicial document resides abroad, the service of that document must be carried out by the means put in place by Regulation No 1393/2007, ( ) that the applicant should be afforded the opportunity to effect service of the document in question in a manner compliant with that regulation.
76.
The answer is less clear-cut where the first service of the document was effected in accordance with Regulation No 1393/2007. As the Commission suggests, this could be the case in the main proceedings if service of the letter of demand, in its notarised form, could be regarded as direct service by postal services, as provided for in Article 14 of Regulation No 1393/2007.
77.
In its judgment in Alder (C‑325/11, EU:C:2012:824), the Court held that Regulation No 1393/2007 does not establish a hierarchy between the various means of transmission for which it provides. ( ) In my view, it is for the applicant and the applicant alone to choose, from among the various means available to him, the method which he deems to be the most appropriate and to decide, if he considers it necessary, to effect a re-transmission after having transmitted the document in question a first time.
78.
In this regard, it seems to me that an applicant may have good reasons for wanting to re-transmit a document which has already been served, and that it is not for the transmitting agencies or receiving agencies under Regulation No 1393/2007 to review the relevance of those reasons. It may be the case, for example, that service of a document does not take place within the time-limit for effecting such service laid down by national law.
79.
Moreover, to conclude otherwise and to entrust the transmitting and receiving agencies in particular with the task of reviewing appropriateness would be to burden them with a responsibility that they are not necessarily able to carry.
80.
I therefore take the view that one and the same document may legitimately be served on successive occasions by one and the same means or by different means and, consequently, that the answer to the third question should be that an extrajudicial document which has already been served on its addressee may be served again under the procedures laid down in Regulation No 1393/2007, even if the first service was itself effected in accordance with that regulation.
IV – Conclusion
81.
In the light of the foregoing considerations, I propose that the Court answer the questions referred by the Juzgado de Primera Instancia No 7 de Las Palmas de Gran Canaria as follows:
(1)
A document drawn up or certified by a public authority, an official or any person so competent under the law of the Member State of origin, as well as any document the transmission of which to its addressee is necessary for the purposes of exercising, proving or safeguarding a right, constitutes an ‘extrajudicial document’ within the meaning of Article 16 of Regulation (EC) No 1393/2007 of the European Parliament and of the Council of 13 November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents), and repealing Council Regulation (EC) No 1348/2000.
(2)
There is no need to determine, in each individual case and on the basis of an assessment of the particular circumstances of that case, whether the transmission of a document satisfying either of those two criteria has cross-border implications and is necessary for the proper functioning of the internal market.
(3)
An extrajudicial document which has already been served on its addressee may be served again under the procedures laid down in Regulation No 1393/2007, even if the first service was itself effected in accordance with that regulation.
( ) Original language: French.
( ) C‑14/08, EU:C:2009:395.
( ) OJ 2000 L 160, p. 37.
( ) Paragraphs 47 and 50 of that judgment.
( ) Paragraph 58 of the judgment.
( ) Regulation of the European Parliament and of the Council of 13 November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents), and repealing Council Regulation (EC) No 1348/2000 (OJ 2007 L 324, p. 79).
( )
( )
( )
( ) OJ 1997 C 261, p. 2, ‘the 1997 Convention’.
( ) ‘The transmitting agencies.’
( ) ‘The receiving agencies.’
( ) C‑14/08, EU:C:2009:395.
( ) C‑14/08, EU:C:2009:395.
( ) See Article 67(4) TFEU which provides that the European Union is to facilitate access to justice, in particular through the principle of mutual recognition of ‘judicial and extrajudicial decisions’ in civil matters; Article 81 TFEU which provides that the Union is to develop judicial cooperation in civil matters having cross-border implications, based on the principle of mutual recognition of ‘judgments and of decisions in extrajudicial cases’, and that the European Parliament and the Council are to adopt measures, particularly when necessary for the proper functioning of the internal market, aimed at ensuring the mutual recognition and enforcement between Member States of ‘judgments and of decisions in extrajudicial cases’ and the cross-border service of judicial and extrajudicial documents; and Article 11(6) of Protocol No 5 on the Statute of the European Investment Bank which states that the President or, if he is prevented, a Vice-President is to represent the Bank in ‘judicial and other matters’.
( ) See the ‘Report of the Special Commission presented by Mr Vasco Taborda Ferreira’, Conférence de La Haye de droit international privé — Actes et documents de la Dixième session — Tome III — Notification, The Hague, 1965, p. 74, which states, on p. 108, that Article 17 ‘is intended to make available to individuals, in relation to extrajudicial documents, the means of transmission provided for, in transmission by the Central Authority’, but that ‘the Convention may be applied only to the international transmission of documents emanating from authorities or judicial officers of a Contracting State acting in such capacity’. It also states that ‘[t]he preliminary draft makes no reference to the means of transmitting documents emanating from private individuals. It was decided that the Convention should not be applied if there were not, at the outset, a document issued by an official body capable of screening or reviewing documents’. See also the ‘Explanatory Report of Mr V. Taborda Ferreira’, op. cit., p. 363, which specifies that, ‘in cases where a notary is not regarded as a judicial officer by the State in which he practises, it was agreed that documents issued by him may not be taken into account for the purposes of the Convention’ (p. 380).
( ) Practical Handbook on the Operation of the Hague Service Convention, Permanent Bureau of the Hague Conference on Private International Law, 3rd edition, Wilson & Lafleur, Montreal, 2006.
( ) Paragraph 67, p. 85.
( ) Idem. The draft revised version of the Handbook drawn up in May 2014 by the Permanent Bureau of the Hague Conference on Private International Law adds to that list notarial documents, notice of dates of mediation hearings, notices served by creditors upon debtors, testamentary documents, notifications to beneficiaries of a deceased estate, decisions concerning child support payments and decisions concerning the granting of separation and divorce orders issued by an administrative entity, summons by huissiers, deeds, and documents related to the execution conducted by a bailiff. At the time of delivery of this Opinion, that draft revised version is available at http://www.hcch.net/upload/wop/2014/2014sc_pd02en.pdf.
( ) Paragraph 67, p. 85.
( ) Paragraph 70, p. 86.
( ) Paragraph 68, p. 85.
( ) Paragraph 68, pp. 85 and 86.
( ) Paragraph 70, p. 86.
( ) OJ 1997 C 261, p. 26.
( ) See the fourth subparagraph of Article 1(1) of that report.
( ) OJ 2001 L 298, p. 1 and — corrigenda — OJ 2002 L 31, p. 88 and OJ 2003 L 60, p. 3.
( ) OJ 2008 L 173, p. 17.
( ) This category includes Ireland (‘All judicial or non-judicial documents concerning any matter coming within the scope of the Regulation’); the Italian Republic (‘extra-judicial documents in general’); the Grand Duchy of Luxembourg, which made express reference to its national law (‘all judicial and extra-judicial documents provided for by Luxembourg laws and regulations in civil and commercial matters’); the Kingdom of the Netherlands (‘judicial and extra-judicial documents in civil and commercial matters’); and the Kingdom of Sweden (‘The documents which may be served on the basis of the Regulation are originating applications to the court, applications for an injunction to pay a debt, and any other judicial or extra-judicial documents which should or must be served in civil or commercial matters’).
( ) This is true of the Kingdom of Belgium (‘Documents from court registrars, public prosecutors, bailiffs and notaries’); the Kingdom of Spain (‘[a]s regards the extra-judicial documents that may be served, these are non-judicial documents issued by public authorities that are competent to effect service under Spanish law’); and the French Republic (‘extra-judicial documents issued by the authorities and ministry officials’).
( ) The Member States in question are the Federal Republic of Germany (‘Extra-judicial documents are documents which are served for the purposes of safeguarding, enforcing or repealing a civil or commercial claim outside the context of a judicial procedure. These include [notarised deeds and out-of-court settlements]’); the Republic of Austria (‘extra-judicial documents — namely documents seeking to safeguard, pursue or counter a civil or commercial claim, but without involving civil court proceedings [—] may be served’); and the United Kingdom of Great Britain and Northern Ireland (‘Legal documents required to be served in connection with any non-judicial civil or commercial matter’).
( ) These Member States include the Hellenic Republic, whose list — moreover — appears to relate to judicial documents only, the Portuguese Republic and the Republic of Finland.
( ) C‑14/08, EU:C:2009:134.
( ) C‑14/08, EU:C:2009:395.
( ) Paragraphs 47 and 50.
( ) Paragraph 48.
( ) Paragraph 49.
( ) Paragraph 59.
( ) C‑14/08, EU:C:2009:134.
( ) Point 93.
( ) Judgment in Roda Golf & Beach Resort (C‑14/08, EU:C:2009:395, paragraph 56).
( ) C‑14/08, EU:C:2009:395.
( ) Idem.
( ) On the distinction in relation to unilateral legal documents, see Flour, J., Aubert, J.-L., and Savaux, E., Les obligations — 1. L’acte juridique, 14th edition, Dalloz, Paris, 2010, p. 465, No 494.
( ) C‑14/08, EU:C:2009:395.
( ) Emphasis added.
( ) See my analysis in point 56 of this Opinion.
( ) See the judgment in Alder (C‑325/11, EU:C:2012:824, paragraph 25).
( ) Ibidem (paragraph 31). |
JUDGMENT OF THE GENERAL COURT (Sixth Chamber)
9 June 2016 ( *1 )
‛Failure to comply with a judgment of the Court of Justice finding that a Member State has failed to fulfil its obligations — Periodic penalty payment — Judgment quantifying the amount of the periodic penalty payment — Method of calculating the interest applicable to the recovery of unlawful aid — Compound interest’
In Case T‑122/14,
Italian Republic, represented by G. Palmieri, acting as Agent, and by S. Fiorentino, avvocato dello Stato,
applicant,
v
European Commission, represented by V. Di Bucci, G. Conte and B. Stromsky, acting as Agents,
defendant,
APPLICATION under Article 263 TFEU for annulment of Commission Decision C(2013) 8681 final of 6 December 2013, by which, in order to comply with the judgment of 17 November 2011, Commission v Italy (C‑496/09, EU:C:2011:740), the Commission fixed the amount of the periodic penalty owed by the Italian Republic for the six months from 17 May to 17 November 2012,
THE GENERAL COURT (Sixth Chamber),
composed of S. Frimodt Nielsen (Rapporteur), President, F. Dehousse and A.M. Collins, Judges,
Registrar: J. Palacio González, Principal Administrator,
having regard to the written procedure and further to the hearing on 27 January 2016,
gives the following
Judgment
Background to the proceedings
Decision relating to unlawful and incompatible aid (recovery decision)
By Decision 2000/128/EC of 11 May 1999 concerning aid granted by Italy to promote employment (OJ 2000 L 42, p. 1; the ‘recovery decision’), the European Commission ordered the Italian Republic to recover aid granted to promote employment which was unlawful and incompatible with the internal market. By note SG(99) D/4068 of 4 June 1999 the Commission notified the Italian Republic of the recovery decision.
The action brought by the Italian Republic against the recovery decision was dismissed by judgment of 7 March 2002 in Italy v Commission (C‑310/99, EU:C:2002:143).
Action and judgment finding a failure to fulfil obligations
By application lodged at the Registry of the Court of Justice on 15 March 2002, the Commission brought an action pursuant to the second subparagraph of Article 88(2) EC for a declaration that, by not adopting, within the period prescribed, all measures necessary for recovery from the recipients of the aid which had, according to the decision at issue, been found to be unlawful and incompatible with the common market, and in any event by not notifying the Commission of the measures taken, the Italian Republic had failed to fulfil its obligations under the recovery decision and under the EC Treaty.
By judgment of 1 April 2004 in Commission v Italy (C‑99/02, ‘the judgment finding a failure to fulfil obligations’, EU:C:2004:207), the Court of Justice upheld the Commission’s action and ruled that, by failing to adopt, within the prescribed period, all the measures necessary to ensure recovery from the recipients of the aid which, pursuant to the recovery decision, had been declared unlawful and incompatible with the internal market, the Italian Republic had failed to fulfil its obligations under the recovery decision.
Fresh action and the judgment to be complied with
By application lodged at the Registry of the Court of Justice on 30 November 2009, the Commission requested the Court of Justice, first, to declare that, by not adopting all the necessary measures to comply with the judgment finding a failure to fulfil obligations, the Italian Republic had failed to fulfil its obligations under the recovery decision and under Article 228(1) EC and, second, to order the Italian Republic to pay to the Commission a daily penalty payment with the amount initially set at EUR 285696, later reduced to EUR 244800, for the delay in complying with the judgment finding a failure to fulfil obligations, to be calculated from the delivery of the judgment in that new case until compliance with the judgment finding a failure to fulfil obligations.
By judgment of 17 November 2011 in Commission v Italy (C‑496/09, the ‘judgment to be complied with’, EU:C:2011:740), the Court of Justice upheld the Commission’s action.
In the judgment to be complied with, the Court of Justice held as follows:
‘52.
… [T]he Italian Republic should be ordered to pay a periodic payment calculated by multiplying a basic amount by the percentage of the unlawful aid that has not yet been recovered, or not shown to have been recovered, compared to the total amount not yet recovered on the date of delivery of the present judgment …
53.
For calculating the penalty payment …, recovery of the aid may be taken into account only on condition that the Commission has been informed of it and has been able to assess the adequacy of the evidence communicated to it in this respect …
54.
The periodicity of the penalty payment should therefore be fixed by determining it on a half-yearly basis, so as to allow the Commission to assess the state of progress of the recovery operations by reference to the situation prevailing at the end of that period, while allowing the defendant Member State the time needed to compile and transmit to the Commission the evidence capable of establishing, for the period in question, the recovery of the sums wrongly paid.
55.
Consequently, the penalty payment will be quantified on a half-yearly basis and its amount calculated by multiplying a basic amount by the percentage of the unlawful aid that has not yet been recovered, or not shown to have been recovered, at the end of the period concerned, compared to the total amount not yet recovered on the date of delivery of the present judgment.
…
67.
… [T]he Court considers that in the present case it is appropriate to impose a penalty payment of a basic amount of EUR 30 million per half-year.
68.
Consequently, the Italian Republic must be ordered to pay to the Commission, into the “European Union own resources” account, a penalty payment of an amount calculated by multiplying the basic amount of EUR 30 million by the percentage of the unlawful aid that has not yet been recovered, or not shown to have been recovered, at the end of the period concerned, compared to the total amount not yet recovered on the date of delivery of the present judgment, for every six months of delay in implementing the necessary measures to comply with the judgment [finding a failure to fulfil obligations (EU:C:2004:207)], from the present judgment until compliance with the judgment [finding a failure to fulfil obligations (EU:C:2004:207)].
…
69.
… it is for the Member State concerned to provide the Commission with direct and reliable evidence that [the recovery decision] has been implemented and the unlawful aid actually recovered.
…
72.
In cases in which the aid has to be recovered from undertakings which are bankrupt or subject to bankruptcy proceedings whose purpose is to realise the assets and clear the liabilities, it is settled case-law that the fact that undertakings are in difficulties or bankrupt does not affect the obligation of recovery …
73.
It is also settled case-law that the restoration of the previous situation and the elimination of the distortion of competition resulting from the unlawfully paid aid may in principle be achieved by registration of the liability relating to the repayment of the aid in question in the schedule of liabilities …
74.
For the purpose of calculating the penalty payment in the present case, the Italian Republic is therefore required to provide the Commission with evidence of the registration of the liabilities in question in the bankruptcy proceedings. If it is not possible to do this, the Italian Republic must report everything capable of showing that it has made every effort to that end. In particular, should the application to register a liability be refused, it must provide proof that it has initiated all procedures under national law capable of challenging that refusal.
75.
Consequently, contrary to the Commission’s claims, the Italian Republic cannot be required, for the purpose of calculating the penalty payment in the present case and where bankrupt undertakings or undertakings involved in bankruptcy proceedings are concerned, to prove not only the registration of the liabilities against them but also the sale of their assets under market conditions. As the Italian Republic rightly submits, the sums which have not yet been recovered from undertakings in bankruptcy, but which that State has made its best efforts to recover, should not be taken into account for the purpose of allowing the Commission’s application relating to the payment of the penalty payments due in accordance with the present judgment. Otherwise that penalty payment would no longer be appropriate and proportionate to the infringement that has been found … in that it would impose on the Italian Republic a financial burden deriving from the very nature of bankruptcy proceedings and from their irreducible length, over which that State has no direct influence’.
At the conclusion of its assessment, the Court of Justice, first, declared that, by failing, by the date of expiry of the period laid down in the reasoned opinion issued by the Commission on 1 February 2008 pursuant to Article 228 EC, to take all the measures needed to comply with the judgment finding a failure to fulfil obligations, the Italian Republic had failed to fulfil its obligations under the recovery decision and Article 228(1) EC (judgment to be complied with, paragraph 1 of the operative part).
Second, in paragraph 2 of the operative part of the judgment to be complied with, the Court of Justice ordered the Italian Republic to pay to the Commission, into the ‘European Union own resources’ account, a penalty payment of an amount calculated by multiplying the basic amount of EUR 30 million by the percentage of the unlawful aid ‘that [had] not yet been recovered, or [had] not [been] shown to have been recovered, at the end of the period concerned’ (‘the aid amount not yet recovered’), calculated in relation to the ‘total amount not yet recovered on the date of delivery of the [judgment to be complied with (EU:C:2011:740)]’ (‘the aid amount to be recovered as of 17 November 2011’), for every six months of delay in implementing the necessary measures to comply with the judgment [finding a failure to fulfil obligations] from the date of the judgment to be complied with until compliance with the judgment finding a failure to fulfil obligations.
Application for interpretation of the judgment and order concerning interpretation
By application lodged at the Registry of the Court of Justice on 14 February 2013, the Italian Republic, pursuant to Article 43 of the Statute of the Court of Justice of the European Union and Article 158 of the Rules of Procedure of the Court of Justice, lodged an application for the interpretation of paragraphs 52, 55 and 68 of the grounds of the judgment to be complied with and of paragraph 2 of the operative part of that judgment.
In the application lodged at the Registry of the Court of Justice on 14 February 2013, the Italian Republic accordingly asked the Court of Justice to interpret, first, the expression ‘amount not yet recovered on the date of delivery of the [judgment to be complied with (EU:C:2011:740)]’, which appears in paragraphs 52, 55 and 68 of the grounds of that judgment and paragraph 2 of the operative part of that judgment, in that that expression refers to the amount not yet recovered on the date on which, during the procedure, the collection of evidence stage came to an end, that is, the moment of the procedural crystallisation of the factual situation on the basis of which the Court of Justice settled the dispute, and, second, the expression ‘that has not yet been recovered, or not shown to have been recovered, at the end of the period concerned’ used in paragraphs 52, 55 and 68 of the grounds of that judgment and paragraph 2 of the operative part of the same judgment in that that expression obliges the Commission to take account, for the purposes of the six-monthly evaluation of progress made by the Italian Republic in recovering the aid concerned, not only of the documents relating to that six-month period communicated to the Commission before the expiry thereof, but also of any document relating to the relevant six-month period.
By order of 11 July 2013 in Commission v Italy (C‑496/09 INT, the ‘order concerning interpretation’, EU:C:2013:461), the Court of Justice dismissed the Italian Republic’s application for interpretation as inadmissible.
The Court of Justice was of the view that ‘it [had to] be noted that the operative part of the judgment [to be complied with (EU:C:2011:740)] which the Court is asked to interpret in accordance with the grounds stated at paragraphs 52, 55 and 68 expressly [referred] to the date on which that judgment was delivered as a date of reference for the determination of the total amount of aid not yet recovered, which should serve as a basis for the calculation of the gradually decreasing penalty payment which that Member State [had] been ordered to pay’ (order concerning interpretation, paragraph 9).
In the same way, the Court of Justice expressed the view that ‘it [was] not disputed that a strictly literal reading of the operative part of the judgment [to be complied with was] capable of justifying the taking into account by the Commission, for the purposes of the calculation of the percentage of aid which must be considered as not recovered at the end of a specified six-monthly period, of only the documentary evidence which it [had received] before the expiry of the relevant period’ (order concerning interpretation, paragraph 10).
The Court of Justice held that ‘the Italian Republic’s application [sought] to call into question the consequences of such a strict reading of the operative part of the judgment [to be complied with (EU:C:2011:740), since] such a calling into question cannot be reconciled either with Articles 43 of the Statute of the Court and 158(1) of the Rules of Procedure of the Court or with the force of res judicata which attaches to judgments of the Court’ (order concerning interpretation, paragraph 11).
Accordingly, ‘[s]ince it is not founded on any difficulty as to the meaning and scope of the judgment [to be complied with (EU:C:2011:740)], the present application [had to be] therefore … deemed inadmissible’ (order concerning interpretation, paragraph 12).
First decision and judgment on the first periodic payment
On 11 March 2013, the Italian Republic was notified of Commission Decision C(2013) 1264 final of 7 March 2013, ordering it to pay into the account ‘European Union own resources’ the amount of EUR 16533000 as a penalty for the first six months following the delivery of the judgment to be complied with.
On 21 May 2013, the Italian Republic brought an action before the General Court under Article 263 TFEU against that decision (Case T‑268/13).
By judgment of 21 October 2014 in Italy v Commission (T‑268/13, ‘judgment on the first penalty’, not published, EU:T:2014:900), the General Court dismissed the action brought by the Italian Republic.
Second decision on the amount of the periodic penalty (contested decision)
After giving the Italian authorities the opportunity to submit comments on its preliminary assessment, the Commission adopted Decision C(2013) 8681 final of 6 December 2013, by which, in compliance with the judgment to be complied with, the Commission fixed the amount of the penalty owed by the Italian Republic for the second six-month period following that judgment (‘the contested decision’).
In the contested decision, the Commission, inter alia, assessed the progress made by the Italian Republic with regard to the recovery of aid during the period under consideration (from 17 May to 17 November 2012), and established that the remaining aid to be recovered as of 17 November 2012 represented 20.84% of the outstanding aid as on the date of the judgment to be complied with. On that basis, the Commission imposed on the Italian Republic a penalty payment equivalent to 20.84% of the basic amount of EUR 30 million, namely EUR 6252000.
Procedure and forms of order sought
The Italian Republic brought the present action by application lodged at the Court Registry on 19 February 2014.
By way of measures of organisation of procedure, the Court put to the parties several questions and requested the production of several documents relating to the case.
First, the Court asked the Italian Republic to state whether, following the judgment on the first penalty payment, by which it had rejected a plea similar to the first plea in the present case, the Italian Republic maintained that first plea.
The Italian Republic informed the Court, within the time allowed, that it was withdrawing the first plea, a matter of which the Court took formal note.
Second, the Court asked the parties to clarify how the application of compound interest in the present case could have affected the amount of the penalty payment which is the subject of the contested decision. If it did affect that amount, the Commission was asked to provide further details concerning its argument that the second plea in the present case should be declared inadmissible or ineffective, since the Court did not have to rule on the legality of the taking-into-account of compound interest.
The parties submitted their answers to that question to the Court within the time allowed.
Third, the Court invited the parties to submit to it their observations on the impact that the judgment of 3 September 2015 in A2A (C‑89/14, EU:C:2015:537) might have on the answer to be given to the second plea.
The parties submitted their answers to that question to the Court within the time allowed.
Fourth, the Court requested the Commission to transmit to it documents which gave it grounds for its assertion, in essence, that the Italian Republic had agreed to derogate from the rule laid down in Articles 1282 and 1283 of the Codice civile (Italian Civil Code) as regards the application of compound interest to the recovery of the State aid in dispute (see, inter alia, contested decision, paragraphs 29 and 32), for the entire period in question.
The Commission sent to the Court, within the time allowed, the documents which had been requested, which were also sent to the Italian Republic. Those documents are:
—
a letter of 12 June 2013 from the Commission to the Italian Republic, which included a preliminary assessment of the state of progress of the recovery during the second sixth-month period following the judgment to be complied with;
—
a letter of 31 October 2003 from the Commission to the Italian Republic, which pointed out that ‘in order to calculate the amount to be reimbursed, account had to be taken of the compound interest in accordance with the Commission Communication on the interest rates to be applied when aid granted unlawfully is recovered …’;
—
a letter of 29 January 2004 from the Commission to the Italian Republic, which also pointed out that compound interest had to be taken into consideration in the calculation of the amount to be reimbursed in accordance with the Commission Communication on the interest rates to be applied when aid granted unlawfully is being recovered (OJ 2003 C 110, p. 21);
—
a letter of 17 January 2005 from the Italian Republic to the Commission, which included as an annex a note forwarding to the Commission the figures relating to unlawful aid in which it is stated that ‘the interest had been calculated on a compound basis, as indicated by the Commission’s services, based on the reference rate implemented under the conditions set out on the website of the European Union’.
The Italian Republic claims that the Court should:
—
annul the contested decision;
—
order the Commission to pay the costs.
The Commission contends that the Court should:
—
dismiss the action;
—
order the Italian Republic to pay the costs.
Law
At this point, the Italian Republic relies on a single plea in support of its action (see paragraphs 24 and 25 above). It argues that the contested decision infringes the applicable legislation in that, in order to set the amount of the penalty, the Commission required the inclusion of compound interest on the amount of aid to be recovered. According to case-law, in order for recovery decisions preceding the date of entry into force of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of [108 TFEU] (OJ 2004 L 140, p. 1), as amended (OJ 2004 L 286, p. 3), compound interest could be taken into account only if it reflects the method normally applied under national law. That, the Italian Republic submits, is not be the case here pursuant to the application of Article 1283 of the Italian Civil Code, under which accrued interest does not automatically generate interest.
The Commission argues that this plea must be declared inadmissible or ineffective, or, in any event, that it must be rejected as unfounded. First of all, the Commission contends that the calculation of the penalty payment made in the contested decision was not influenced by the request made in paragraph 34 of the contested decision, in an obiter dictum, to take account of compound interest on unlawful aid. That invitation did not change the amount of the penalty determined by the Commission, which took into account only the data previously provided by the Italian authorities. Moreover, the Italian Republic cannot dispute the request for the inclusion of compound interest made at the time of the administrative procedure, since the Court of Justice had referred to data provided by Italy which took into account compound interest when it determined the basic amount of the penalty in the judgment to be complied with (paragraph 64). The taking into account of compound interest is therefore not only lawful under the criteria set out in the EU legislation concerning the recovery of the aid and the agreement between the parties in that regard, but also benefits from the authority of res judicata which applies in respect of the judgment to be complied with.
Preliminary observations
Legal context
– Regulation No 659/1999
Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1), entitled ‘Recovery of aid’, provides in its paragraphs 2 and 3:
‘2. The aid to be recovered pursuant to a recovery decision shall include interest at an appropriate rate fixed by the Commission. Interest shall be payable from the date on which the unlawful aid was at the disposal of the beneficiary until the date of its recovery.
3. … recovery shall be effected without delay and in accordance with the procedures under the national law of the Member State concerned, provided that they allow the immediate and effective execution of the Commission’s decision. …’
– Commission Communication on the interest rates to be applied when aid granted unlawfully is recovered
The Commission Communication on the interest rates to be applied when aid granted unlawfully is being recovered, published in the Official Journal of the European Union of 8 May 2003 (OJ 2003 C 110, p. 21), states:
‘…
As part of the process of loyal collaboration between the Commission and Member States during the execution of certain recovery decisions, the question has arisen whether this interest rate should be applied on a simple basis or on a compound basis … The Commission accordingly considers it necessary to clarify urgently its position on the matter, having regard to the objectives of the recovery of unlawful aid and its place in the system of State aid control laid down by the Treaty.
…
In market practice, simple interest would normally be calculated where the beneficiary of the funds does not have use of the interest amount before the end of the period, for example where interest is only paid at the end of the period. Compound interest would normally be calculated if each year (or period) the amount of interest can be considered as being paid to the beneficiary and so accruing to the initial capital amount. In this case, the beneficiary would earn interest on the interest paid for each period.
…Thus[,] despite the variety of situations, it appears that the effects of an unlawful aid are to provide funding to the beneficiary on similar conditions to a medium term non-interest bearing loan. Accordingly, the use of compound interest appears necessary to ensure that the financial advantages resulting from this situation are fully neutralised.
Accordingly, the Commission wishes to inform the Member States and interested parties that in any future decisions it may adopt ordering the recovery of aid unlawfully granted, it will apply the reference rate used for calculating the net grant equivalent of regional aids on a compound basis. In accordance with normal market practice, compounding should take place on an annual basis. Likewise, the Commission will expect the Member States to apply compound interest in the execution of pending recovery decisions, unless this would be contrary to a general principle of [EU] law.’
– Regulation No 794/2004
Articles 9 and 11 of Regulation No 794/2004, set out in Chapter V thereof, concern the interest rates applicable to the recovery of unlawful aid.
Article 9 of that regulation, entitled ‘Method for fixing the interest rate’, provides in its paragraph 1:
‘Unless otherwise provided for in a specific decision the interest rate to be used for recovering State aid granted in breach of Article 88(3) of the Treaty shall be an annual percentage rate fixed for each calendar year.’
Article 11 of Regulation No 794/2004, entitled ‘Method for applying interest’, states in its paragraph 2:
‘The interest rate shall be applied on a compound basis until the date of the recovery of the aid. The interest accruing in the previous year shall be subject to interest in each subsequent year.’
The first paragraph of Article 13 of Regulation No 794/2004, which appears in Chapter VI, entitled ‘Final Provisions’, provides that that regulation was to enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Since that regulation was published in the Official Journal of the European Union on 30 April 2004, it entered into force on 20 May 2004. Moreover, under the fifth paragraph of Article 13 of that regulation, Article 11 thereof is to apply in relation to any recovery decision notified after the date of entry into force of that regulation.
– Recovery decision
On 11 May 1999 the Commission adopted the recovery decision, which was notified to the Italian Republic on 4 June 1999 (see paragraph 1 above). In Articles 1 and 2 of that decision, the Commission found that certain employment measures put in place by the Italian Republic, which did not meet the conditions set out by those articles, were incompatible with the internal market. Under Article 3 of the recovery decision:
‘Italy shall take all necessary measures to recover from the recipients the aid which does not satisfy the conditions of Articles 1 and 2 and has already been unlawfully paid.
Repayment shall be made in accordance with the procedures of Italian law. The amounts to be repaid shall bear interest from the date on which the aid was paid until the date on which it is effectively recovered. The interest shall be calculated on the basis of the reference rate used to calculate the net grant equivalent of regional aid.’
– Italian law
Article 1283 of the Italian Civil Code provides:
‘Save where contrary practice applies, the interest which has fallen due may itself generate interest only from the date of the application to the court or as a result of an agreement concluded after the interest maturity date, and always provided that the interest has been owed for at least six months.’
Unlike the case which gave rise to the judgment of 3 September 2015 in A2A (C‑89/14, EU:C:2015:537, paragraphs 13 and 14), no other provision of Italian law was invoked by either party as a provision applicable to the present case.
Factors related to the definition of the amount of the penalty payment
On 17 November 2011, in the judgment to be complied with, the Court of Justice ordered the Italian Republic to pay a ‘penalty payment … for every six months of delay in implementing the necessary measures to comply with the judgment [finding a failure to fulfil obligations (EU:C:2004:207)]’.
According to paragraph 2 of the operative part of the judgment to be complied with, the factors relating to the definition of the amount of the penalty payment are as follows:
—
for every six months of delay in implementing the necessary measures to comply with the judgment finding a failure to fulfil obligations;
—
the penalty payment is calculated by multiplying the basic amount of EUR 30 million;
—
by the percentage of the amount of aid not yet recovered;
—
calculated in relation to the amount of aid to be recovered on 17 November 2011.
On 7 March 2013, in the first decision on the penalty amount (see paragraph 17 above and paragraphs 3 and 4 of the contested decision), the Commission set the amount of the penalty due for the period from 17 November 2011 to 17 May 2012 at EUR 16533000, taking into consideration the following:
—
the amount of aid to be recovered as of 17 November 2011 was set at EUR 118175296;
—
the amount of aid not yet recovered as of 17 May 2012 was set at approximately EUR 65130279, or 55.11% of the sum corresponding to the amount of aid to be recovered as of 17 November 2011;
—
the multiplication of the percentage of the aid not yet recovered as of 17 May 2012 (55.11%) by EUR 30 million made it possible to arrive at the penalty amount owed for the period from 17 November 2011 to 17 May 2012, namely EUR 16533000.
On 6 December 2013, in paragraphs 77 to 79 of the contested decision, the Commission set the penalty amount owed for the period from 17 May to 17 November 2012 at EUR 6252000, taking into consideration the following:
—
the amount of aid to be recovered as of 17 November 2011 was set at EUR 118175296;
—
the amount of aid not yet recovered as of 17 November 2012 was set at EUR 24627937.21, or 20.84% of the sum corresponding to the amount of aid to be recovered as of 17 November 2011;
—
the multiplication of the percentage of the aid not yet recovered as of 17 November 2012 (20.84%) by EUR 30 million made it possible to arrive at the penalty amount owed for the period from 17 May 2012 to 17 November 2012, namely EUR 6252000.
The parties’ arguments must be assessed in the light of those preliminary observations on the legal framework and the factors relating to the definition of the penalty amount.
Findings of the Court
In essence, under this plea, the Italian Republic argues that the contested decision must be annulled in that, for the purpose of setting the penalty amount owed for the six-month period from 17 May to 17 November 2012, the Commission unlawfully took into consideration sums which included compound interest.
In that regard, first, it is clear that, for the purpose of determining the amount of aid to be recovered as of 17 November 2011, the date of delivery of the judgment to be complied with, the data taken into account by the Commission did indeed include compound interest.
Thus, in paragraph 25 of the contested decision, the Commission noted that ‘all the figures given by the Italian authorities [corresponded to] the amounts of existing aid measures in 2007, at the date on which the formal recovery orders [had been] issued’. In paragraph 32 of the contested decision, it is stated in that regard that, ‘until 2007, the Italian authorities applied compound interest to the amounts of existing aid, as agreed with the Commission’s services’.
Similarly, in response to the second measure of organisation of procedure (see paragraph 26 above), the Commission indicated that ‘the figures that correspond[ed] to the amounts of aid in force in 2007 had been calculated by the Italian authorities by applying compound interest to the unlawful aid’.
In that reply, the Commission pointed out what follows from paragraphs 29 to 33 of the contested decision, namely that on 21 March 2013 the Italian authorities had informed the Commission that, contrary to what had been previously agreed, they had stopped, from 2007, calculating interest, whether simple or compound, and applying that interest to the unlawful aid to be recovered. The Commission also stated that ‘the amounts due in 2007 have never been updated to reflect the applicable interest’ and that, for that reason, it requested the Italian authorities, in paragraph 34 of the contested decision, to calculate compound interest on the unlawful aid as from 2007.
At the hearing, the parties also agreed that the amount of aid to be recovered as of 17 November 2011, which was taken into account in the contested decision, reflects the situation expressed in value terms as of 2007 when the Court of Justice delivered its judgment. The data taken into account at that time were therefore defined as of 17 November 2011 on the basis of the data provided by the Italian Republic when it sent formal recovery orders in 2007. It is not disputed that those data included, at least until 2007, compound interest.
Given that the amount of aid to be recovered as of 17 November 2011 included compound interest, the view must be taken that the penalty amount due for the six-month period from 17 May to 17 November 2012, calculated pursuant to the formula set out in paragraphs 46 and 48 above, also took into account data which included compound interest. The contested decision brings to a close, as such, the procedure for the quantification of penalty payments due for the six-month period from17 May to 17 November 2012 and adversely affects the Italian Republic, which is thus entitled to contest the legality of that procedure and to invoke, to that end, all the pleas of fact and law under the conditions provided by the Court’s Rules of Procedure.
Second, the Court must therefore determine whether there is a legal basis for allowing the application of compound interest in the present case, a contention which the Italian Republic disputes in the application.
Under Article 14(1) of Regulation No 659/1999, where negative decisions are taken in a case of unlawful aid, the Commission has to decide that the Member State concerned must take all necessary measures to recover the aid from its beneficiary. The aid to be recovered pursuant to a recovery decision is to include interest, in accordance with Article 14(2) of that regulation. However, the latter provision does not state whether that interest is to be applied on a simple or on a compound basis (judgment of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 26).
In that regard, it should be noted, in the first place, that, although Article 11(2) of Regulation No 794/2004 states that the interest rate is to be applied on a compound basis until the date of the recovery of the aid and that the interest accruing in the previous year is to be subject to interest in each subsequent year, it is nevertheless necessary to note that that provision is, in accordance with the fifth paragraph of Article 13 of that regulation, applicable only to recovery decisions notified after the date on which that regulation entered into force, namely after 20 May 2004 (judgment of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 27).
Consequently, given that the recovery decision, declaring that the aid subject to recovery in the present case is incompatible with the internal market, was notified to the Italian Republic on 4 June 1999, that is to say, before Regulation No 794/2004 entered into force, Article 11(2) of that regulation is not, as such, applicable ratione temporis in the present case (see, by analogy, judgment of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 28).
With regard, in the second place, to the question as to which legislation was applicable before the entry into force of Regulation No 794/2004 to determine whether interest has to be simple or compound, it should be recalled that, in the judgment of 11 December 2008 in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707, paragraph 46) the Court of Justice held that, at the time at which the decision at issue in the case giving rise to that judgment was adopted, namely on 12 July 2000, neither EU law nor the case-law of the Court of Justice or of the General Court specified whether the necessary interest on aid to be recovered was to be calculated on a simple or on a compound basis. In the absence of an EU-law provision on that subject, the Court of Justice took the view that the Commission’s practice, set out inter alia in its letter SG(91) D/4577 to the Member States of 4 March 1991, linked the question of charging interest to the procedural rules for recovery and referred, in that regard, to national law (judgments of 11 December 2008 in Commission v Département du Loiret, C‑295/07 P, EU:C:2008:707, paragraphs 82 to 84, and of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 29).
It was not until its Communication on the interest rates to be applied when aid granted unlawfully is being recovered, published on 8 May 2003, that the Commission expressly stated that it would apply a compound interest rate in any decision ordering the recovery of unlawful aid that it might adopt in the future and that it expected the Member States to apply compound interest during the execution of all recovery decisions (judgments of 11 December 2008 in Commission v Département du Loiret, C‑295/07 P, EU:C:2008:707, paragraph 46, and of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 30).
Article 3(2) of the recovery decision requires that recovery be effected in accordance with the procedures of national law, that the amounts to be recovered accrue interest from the date on which those amounts were placed at the disposal of the beneficiaries until their actual recovery, and that interest is to be calculated on the basis of the reference rate used for calculating the grant-equivalent of regional aid, without, however, providing further information as to whether that interest must be applied on a simple or on a compound basis (see, by analogy, judgment of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 31).
Since that decision was notified to the Italian Republic on 4 June 1999, that is to say, before the change in the Commission’s practice announced in its Communication on the interest rates to be applied when aid granted unlawfully is being recovered, the necessary conclusion, on the basis of the case-law developed in the judgment of 11 December 2008 in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707), is that it was for national law to determine whether, in this case, the interest rate had to be applied on a simple or on a compound basis (see, by analogy, judgment of 3 September 2015 in A2A, C‑89/14, EU:C:2015:537, paragraph 32).
On that point, as the Italian Republic argues, it follows clearly from the line of case-law initiated by the judgments of 11 December 2008 in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707) and of 3 September 2015 in A2A (C‑89/14, EU:C:2015:537) that, for recovery decisions preceding the entry into force of Regulation No 794/2004, compound interest can be taken into account only if that is the method normally applied under national law.
Consequently, in the absence of any other provision of national law invoked in the present case, the Court must take the view that the rules applicable in the present case are those set out in Article 1283 of the Italian Civil Code, under which, according to the submissions of the Italian Republic, which have not been challenged by the Commission, accrued interest does not automatically bear interest.
It follows that, by taking into account, for the purpose of determining the penalty amount due for the six-month period from 17 May to 17 November 2012, sums relating to the aid amount to be recovered which included compound interest, the Commission therefore erred in law.
None of the arguments relied on by the Commission in this regard is capable of calling that conclusion into question.
First, the Commission invokes the existence of an agreement between the parties that compound interest is to be taken into account. Paragraph 32 of the contested decision refers to an agreement on this point according to which it had been agreed ‘in 2003 and … in 2004, on the basis of Regulation No 794/2004 (see the letters from the Commission’s services of 31 October 2003 and 29 January 2004, followed by the letter from the Italian authorities of 17 January 2005)’.
However, from a reading of the documents cited in the contested decision which were produced in response to the fourth measure of organisation of procedure (see paragraph 31 above) the unavoidable conclusion is that, although the Italian Republic took compound interest into account, this was at the express demand of the Commission, set out in a letter of 31 October 2003 which cited as its legal basis provisions of EU law. In those circumstances, that which has been described as an agreement between the parties by the Commission amounts rather to a simple measure of adherence by the recipient of the Commission’s letter in consideration of provisions which have been shown not to have been applicable. The request set out by the Commission predates the delivery of the judgments of 11 December 2008 in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707) and of 3 September 2015 in A2A (C‑89/14, EU:C:2015:537), from which it follows that the law applicable to the recovery decision at issue here as regards the determination of the method for applying interest is national law and not EU law.
In such circumstances, since the Italian Republic was notified of the recovery decision on 4 June 1999, the request made by the Commission with respect to EU law cannot have had the effect of calling into question the scope of the applicable national legislation. To accept that this was the case would amount to an infringement of the principle of the protection of legitimate expectations and would be at variance with the solutions adopted by the Court of Justice in the judgments of 11 December 2008 in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707) and of 3 September 2015 in A2A (C‑89/14, EU:C:2015:537).
Second, in its written pleadings and its responses to the measures of organisation of procedure, the Commission refers to paragraph 64 of the judgment to be complied with as support for its argument that the Court of Justice expressly relied on data which included compound interest provided by the Italian authorities and which were compiled in agreement with the Commission.
In that regard, it must be stated that, in that paragraph, the Court of Justice indicated, first, that ‘as became apparent at the hearing [of 12 May 2011], the Italian Republic and the Commission [agreed] on the total amount of aid distributed, EUR 251271032.37’ and that, second, ‘[t]he Commission also [accepted] that aid of a total amount of EUR 63062555 [had to] be regarded as having been recovered’ (judgment to be complied with, paragraph 64).
On the basis of those observations, the Court of Justice was able to take note of the evolution, during the hearing, of the parties’ arguments. Initially, ‘the Commission [submitted] that, on the expiry of the period prescribed in the reasoned opinion, the Italian Republic had not recovered the entire amount of the aid unlawfully paid, namely EUR 519958761.97 …’ whereas ‘[t]he Italian Republic [contested] the total amount of the sums to be recovered, fixing it at EUR 251271032.37, while conceding that by July 2010 it had obtained repayment of only EUR 63062555.46, to which…, however, EUR 73353387.28 [should be added] on various bases …’ (judgment to be complied with, paragraphs 21, 23 and 24).
Paragraph 64 of the judgment to be complied with also follows on from paragraph 63 thereof, in which the Court of Justice stated that it ‘[was] common ground that a substantial part of the aid [had] not yet been recovered, or that proof of recovery [had] not been provided to the Commission’. The figures set out in paragraph 64 regarding the total amount of aid distributed and the amount of aid that can be regarded as having been recovered as of July 2010 accordingly allow the Court of Justice to frame the debate on the amount of the sums to be recovered. However, contrary to what the Commission contends, at no point does the judgment to be complied with address the question of compound interest. No reference is made to the factors to be taken into account when determining the amounts to be recovered. In those circumstances it cannot be inferred from the judgment to be complied with that there was the intention, in respect of the determination of the method for applying interest, to depart from the principles mentioned above in the earlier judgment of 11 December 2008 in Commission v Département du Loiret (C‑295/07 P, EU:C:2008:707), confirmed in the later judgment of 3 September 2015 in A2A (C‑89/14, EU:C:2015:537). It therefore follows that, in the judgment to be complied with, the Court of Justice did not give a ruling, either in the operative part or in the grounds of the judgment, on the question of compound interest.
Third, the Court cannot accept the Commission’s position when it argues at the outset that the Italian Republic, in its plea, is in fact challenging only an obiter dictum, namely paragraph 34 of the contested decision, in which the Italian Republic is invited to ‘calculate and apply interest, in respect of the recovery [of aid] for the period (or as of 2007), to all amounts of existing aid, that is to say, the amounts corresponding to all recipients, including those which have repaid the aid partially or completely, in order to meet their obligations’. It is clear from the foregoing that, at the request of the Commission, the interest rate was applied on a compound basis to all aid amounts which were the subject matter of the data taken into account when calculating the factors relating to the definition of the penalty amount, at least until 2007, and that the penalty payment set out in the contested decision was calculated by taking into account data which included compound interest. In addition, it appears from the application that the Italian Republic does indeed contest that taking into account of the compound interest and the impact that the latter had on the determination of the penalty amount. The Commission therefore errs in claiming that this plea is ineffective.
Consequently, the contested decision must be annulled in so far as the Commission, for the purpose of determining the amount of the penalty payable by the Italian Republic for the six-month period from 17 May to 17 November 2012, took into account sums relating to amounts of aid to be recovered which included compound interest, contrary to what was laid down by the applicable national law.
Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful, it must be ordered to bear its own costs and to pay those of the Italian Republic, in accordance with the form of order sought by the Italian Republic.
On those grounds,
THE GENERAL COURT (Sixth Chamber)
hereby:
1.
Annuls Commission Decision C(2013) 8681 final of 6 December 2013;
2.
Orders the European Commission to pay the costs.
Frimodt Nielsen
Dehousse
Collins
Delivered in open court in Luxembourg on 9 June 2016.
[Signatures]
( *1 ) Language of the case: Italian. |
JUDGMENT OF THE COURT (Grand Chamber)
16 July 2015 ( *1 )
‛Actions for annulment — Regulation (EU) No 1289/2013 — Article 1(1) and (4) — Regulation (EC) No 539/2001 — Article 1(4)(f) — Article 290 TFEU — Suspension of exemption from the visa requirement — Insertion of a footnote — Amendment of the legislative act’
In Case C‑88/14,
ACTION for annulment under Article 263 TFEU, brought on 21 February 2014,
European Commission, represented by B. Smulders, B. Martenczuk and G. Wils, acting as Agents,
applicant,
v
European Parliament, represented by L. Visaggio, A. Troupiotis and A. Pospíšilová Padowska, acting as Agents,
Council of the European Union, represented by K. Pleśniak and K. Michoel, acting as Agents,
defendants,
supported by
Czech Republic, represented by M. Smolek, D. Hadroušek and J. Škeřík, acting as Agents,
intervener,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts (Rapporteur), Vice-President, A. Tizzano, R. Silva de Lapuerta, T. von Danwitz and J.-C. Bonichot, Presidents of Chambers, A. Rosas, A. Arabadjiev, C. Toader, M. Safjan, D. Šváby, M. Berger, E. Jarašiūnas, C.G. Fernlund and J.L. da Cruz Vilaça, Judges,
Advocate General: P. Mengozzi,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 9 March 2015,
after hearing the Opinion of the Advocate General at the sitting on 7 May 2015,
gives the following
Judgment
By its application, the European Commission seeks the annulment of Article 1(1) and (4) of Regulation (EU) No 1289/2013 of the European Parliament and of the Council of 11 December 2013 amending Council Regulation (EC) No 539/2001 listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement (OJ 2013 L 347, p. 74), in so far as those provisions confer on the Commission a delegated power in accordance with Article 290(1) TFEU rather than an implementing power within the meaning of Article 291(2) TFEU.
Legal context
Regulation (EC) No 539/2001
Recital 5 in the preamble to Council Regulation (EC) No 539/2001 of 15 March 2001 listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement (OJ 2001 L 81, p. 1), as amended by Regulation (EU) No 610/2013 of the European Parliament and of the Council of 26 June 2013 (OJ 2013 L 182, p. 1), (‘Regulation No 539/2001’) reads as follows:
‘The determination of those third countries whose nationals are subject to the visa requirement, and those exempt from it, is governed by a considered, case-by-case assessment of a variety of criteria relating inter alia to illegal immigration, public policy and security, and to the European Union’s external relations with third countries, consideration also being given to the implications of regional coherence and reciprocity. Provision should be made for a Community mechanism enabling this principle of reciprocity to be implemented if one of the third countries included in Annex II to this Regulation decides to make the nationals of one or more Member States subject to the visa obligation.’
Article 1(1) and (2) of Regulation No 539/2011 provides:
‘1. Nationals of third countries on the list in Annex I shall be required to be in possession of a visa when crossing the external borders of the Member States.
…
2. Nationals of third countries on the list in Annex II shall be exempt from the requirement set out in paragraph 1 for stays of no more than 90 days in any 180-day period.
…’
Article 1(4) of that regulation laid down a mechanism for implementing the principle of reciprocity which could be set in motion in response to the introduction by a third country listed in Annex II of a visa requirement for nationals of a Member State.
Regulation No 1289/2013
Article 1(1)(a) of Regulation No 1289/2013 amends Article 1(4) of Regulation No 539/2001 to read as follows:
‘Where a third country listed in Annex II applies a visa requirement for nationals of at least one Member State, the following provisions shall apply:
(a)
within 30 days of the implementation by the third country of the visa requirement or, in cases where the visa requirement existing on 9 January 2014 is maintained, within 30 days of that date, the Member State concerned shall notify the European Parliament, the Council and the Commission thereof in writing.
…
Information about that notification shall be published without delay by the Commission in the Official Journal of the European Union, including information on the date of implementation of the visa requirement and the types of travel documents and visas concerned.
…
(e)
if the third country concerned has not lifted the visa requirement, the Commission shall, at the latest six months of the date of the publication referred to in the third subparagraph of point (a) and subsequently at intervals not exceeding six months within a total period which may not extend beyond the date on which the delegated act referred to in point (f) takes effect or is objected to:
(i)
adopt, at the request of the Member State concerned or on its own initiative, an implementing act temporarily suspending the exemption from the visa requirement for certain categories of nationals of the third country concerned for a period of up to six months. …
…
(f)
if within 24 months of the date of the publication referred to in the third subparagraph of point (a), the third country concerned has not lifted the visa requirement, the Commission shall adopt a delegated act in accordance with Article 4b temporarily suspending the application of Annex II for a period of 12 months for the nationals of that third country. The delegated act shall determine a date, within 90 days of its entry into force, on which the suspension of the application of Annex II is to take effect, taking into account the available resources in the consulates of the Member States and shall amend Annex II accordingly. That amendment shall be made through inserting next to the name of the third country in question a footnote indicating that the exemption from the visa requirement is suspended with regard to that third country and specifying the period of that suspension.
As of the date when the suspension of the application of Annex II for the nationals of the third country concerned takes effect or when an objection to the delegated act is expressed pursuant to Article 4b(5), any implementing act adopted pursuant to point (e) concerning that third country shall expire.
Where the Commission submits a legislative proposal as referred to in point (h), the period of suspension referred to in the first subparagraph of this point shall be extended by six months. The footnote referred to in that subparagraph shall be amended accordingly.
Without prejudice to the application of Article 4, during the periods of that suspension the nationals of the third country concerned by the delegated act shall be required to be in possession of a visa when crossing the external borders of the Member States;
…
(h)
if within six months of the entry into force of the delegated act referred to in point (f) the third country in question has not lifted the visa requirement, the Commission may submit a legislative proposal for amending this Regulation in order to transfer the reference to the third country from Annex II to Annex I;
(i)
the procedures referred to in points (e), (f) and (h) shall not affect the right of the Commission to submit at any time a legislative proposal for amending this Regulation in order to transfer the reference to the third country concerned from Annex II to Annex I;
(j)
where the third country in question lifts the visa requirement, the Member State concerned shall immediately notify the European Parliament, the Council and the Commission thereof. The notification shall be published without delay by the Commission in the Official Journal of the European Union.
Any implementing or delegated act adopted pursuant to point (e) or (f) concerning the third country in question shall expire seven days after the publication referred to in the first subparagraph of this point. … The footnote referred to in the first subparagraph of point (f) shall be deleted upon expiry of the delegated act concerned. The information on that expiry shall be published without delay by the Commission in the Official Journal of the European Union.
…’
Article 1(4) of Regulation No 1289/2013 inserts in Regulation No 539/2001 Article 4b defining the conditions governing the Commission’s power to adopt delegated acts conferred on it by Article 1(4)(f) of Regulation No 539/2001 as amended by Regulation No 1289/2013 (‘Regulation No 539/2001, as amended’). Article 4b(2), (3) and (5) of Regulation No 539/2001, as amended, provides:
‘2. The power to adopt delegated acts referred to in point (f) of Article 1(4) shall be conferred on the Commission for a period of five years from 9 January 2014. The Commission shall draw up a report in respect of the delegation of power not later than nine months before the end of the five-year period. The delegation of power shall be tacitly extended for periods of an identical duration, unless the European Parliament or the Council opposes such extension not later than three months before the end of each period.
3. The delegation of power referred to in point (f) of Article 1(4) may be revoked at any time by the European Parliament or by the Council. …
…
5. A delegated act adopted pursuant to point (f) of Article 1(4) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of four months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.’
Forms of order sought by the parties and procedure before the Court
The Commission claims that the Court of Justice should:
—
annul Article 1(1) of Regulation No 1289/2013, and Article 1(4) of that regulation in so far as it inserts a new Article 4b in Regulation No 539/2001;
—
declare that the effects of the annulled provisions and any implementing measure derived therefrom are definitive pending their replacement within a reasonable time-frame by acts adopted in accordance with the FEU Treaty as interpreted by the judgment of the Court; and
—
order the defendants to pay the costs of the proceedings.
In the alternative, should the Court consider those provisions not to be severable from the remainder of Regulation No 1289/2013, the Commission asks the Court to annul that regulation in its entirety.
The Parliament and the Council contend that the Court should dismiss the action and order the Commission to pay the costs. Should the Court annul Regulation No 1289/2013 in part or in whole, the Council asks the Court, in the alternative, to maintain the effects of the provisions annulled, and of all acts adopted on the basis thereof, until the entry into force within a reasonable period of a new act intended to replace them.
The Czech Republic was granted leave to intervene in support of the form of order sought by the defendants.
The action
In support of its action, the Commission puts forward a single plea in law, alleging breach of Articles 290 TFEU and 291 TFEU. According to the Commission, Article 1(4)(f) of Regulation No 539/2001, as amended, wrongly grants it a delegated power. While the form of order sought in the application seeks also the annulment of Article 4b of that regulation, that claim follows, according to the Commission, from the inseparable link between Article 4b, which defines the conditions governing the delegated power conferred on the Commission by Article 1(4)(f) of that regulation, and Article 1(4)(f).
Admissibility of an argument raised for the first time in the reply
The Council pleads the inadmissibility of the Commission’s argument, set out for the first time in its reply, that, even if the EU legislature enjoys a degree of discretion in determining whether a measure constitutes an amendment to the legislative act in question for the purposes of Article 290(1) TFEU, the grant of a delegated power to the Commission in Article 1(4)(f) of Regulation No 539/2001, as amended, is based on a manifest error.
As is apparent from Article 127(1) of the Court’s Rules of Procedure, no new plea in law may be introduced in the course of proceedings unless it is based on matters of law or of fact which come to light in the course of the procedure. However, an argument which may be regarded as amplifying a plea made previously, whether directly or by implication, in the original application must be considered admissible (see, to that effect, judgments in Italy v Commission, C‑66/02, EU:C:2005:768, paragraphs 85 and 86, and Naipes Heraclio Fournier v OHIM, C‑311/05 P, EU:C:2007:572, paragraphs 58 and 59).
The argument put forward by the Commission in its reply is linked to the plea in law in the application alleging infringement of Articles 290 TFEU and 291 TFEU and amplifies that plea. The argument is intended to support that plea questioning the lawfulness of Article 1(4)(f) of Regulation No 539/2001, as amended, in so far as that provision grants the Commission a delegated power in accordance with Article 290(1) TFEU. The argument cannot therefore be regarded as a new plea in law.
The Council’s plea of inadmissibility must therefore be rejected.
Substance
Arguments of the parties
The Commission submits that Article 1(4)(f) of Regulation No 539/2001, as amended, infringes Articles 290 TFEU and 291 TFEU, since it wrongly grants it a delegated power.
It submits in this respect, in the first place, that an act adopted on the basis of Article 1(4)(f) of that regulation does not supplement the regulation. Such an act forms part of the implementation of the regulation. It is the application to a specific situation of the rules which have already been stated in the legislative act. The Commission emphasises that Article 1(4)(f) gives it very little, if any, discretion.
If an act adopted on the basis of Article 1(4)(e) of Regulation No 539/2001, as amended, is accepted to be a measure implementing that legislative act, an act referred to in Article 1(4)(f) of that regulation should a fortiori be classified as such. When the Commission takes a decision on the basis of Article 1(4)(e) of the regulation, it enjoys a certain measure of discretion, which it does not appear to have when adopting a delegated act referred to in Article 1(4)(f) of the regulation.
In the second place, an act adopted on the basis of that latter provision does not amend the legislative act within the meaning of Article 290(1) TFEU.
The Commission submits that an amendment to a legislative act presupposes that the elements being amended are already present in the act. An amendment in accordance with Article 290(1) TFEU has the effect of changing the normative content of the legislative act. However, the adoption of an act on the basis of Article 1(4)(f) of Regulation No 539/2001, as amended, does not lead to the removal of the reference to the third country concerned from Annex II to the regulation and its insertion in Annex I to the regulation. That amendment to the legislative act would, in accordance with Article 1(4)(h) of that regulation, have to be done through the ordinary legislative procedure. Moreover, Regulation No 539/2001, as amended, does not contain any list of the third countries which are in a situation of suspension, the normative content of which is changed by the delegated act provided for in Article 1(4)(f) of that regulation. Instead, those countries are to be identified by application of the criteria laid down in that regulation. A delegated act which, on the basis of those criteria, suspends for a limited time the application of the exemption from the visa requirement merely implements the legislative act in question without supplementing or amending it.
Even if the insertion of a footnote in a legislative act in principle constitutes an amendment which could be the subject of a delegated act, the Commission considers that, in the present case, the insertion of the footnote provided for by that provision is a mere technical tool used abusively in order to disguise the implementing act as a delegated act.
Moreover, the insertion of the footnote also runs counter to the wish to make the mechanism for implementing the principle of reciprocity an automatic one, and will create numerous difficulties for the practical operation of the mechanism. Thus, in the case provided for in the third indent of Article 1(4)(f) of Regulation No 539/2001, as amended, of the submission of a legislative proposal by the Commission, that provision does not specify how the amendment to the footnote provided for in that provision is to be made, or how that footnote is to be deleted if the legislative proposal is not successful. In addition, in the case provided for in Article 1(4)(j) of that regulation of the visa requirement being lifted by the third country concerned, the regulation does not specify the procedure for deleting the footnote inserted on the basis of Article 1(4)(f) of that regulation.
In the third place, the Commission submits in its reply that, even if the EU legislature enjoys a margin of discretion when deciding whether a measure constitutes an ‘amendment’ of the legislative act in question for the purposes of Article 290(1) TFEU, the grant of a delegated power to the Commission in Article 1(4)(f) of Regulation No 539/2001 proceeds from a manifest error.
It submits in this respect, first, that the political sensitivity or gravity of an act adopted on the basis of that provision is alien to the question whether the act amends the legislative act concerned within the meaning of Article 290(1) TFEU.
Secondly, given that Article 1(4)(f) of Regulation No 539/2001, as amended, confers only a restricted discretion, if any, on the Commission, the question arises of what the purpose is of the right of objection given to the EU legislature under Article 290 TFEU. That right of objection resembles, in the present case, a right to veto an implementing measure, which is not consistent with the purpose of Article 290 TFEU.
Thirdly, the Commission notes that, in accordance with Article 4b(2) and (3) of Regulation No 539/2001, as amended, the duration of the delegation of power in question is limited in time, and the delegation may be revoked. However, since the adoption of the delegated act provided for in Article 1(4)(f) of that regulation is an integral part of the overall mechanism for implementing the principle of reciprocity established by Article 1(4) of Regulation No 539/2001, as amended, the Commission submits that that mechanism can no longer function after the delegation in question has expired or been revoked.
The Parliament and the Council, supported by the Czech Republic, submit that Article 1(4)(f) of Regulation No 539/2001, as amended, confers power on the Commission to amend that regulation within the meaning of Article 290(1) TFEU. Consequently, the EU legislature did not commit a manifest error or act unreasonably by conferring a delegated power on the Commission. On the contrary, it stayed within the bounds of its discretion.
Findings of the Court
According to the case-law, the EU legislature has discretion when it decides to confer on the Commission a delegated power pursuant to Article 290(1) TFEU or an implementing power pursuant to Article 291(2) TFEU (judgment in Commission v Parliament and Council, C‑427/12, EU:C:2014:170, paragraph 40). However, that discretion must be exercised in compliance with the conditions laid down in Articles 290 TFEU and 291 TFEU.
With respect to the conferral of a delegated power, Article 290(1) TFEU states that a legislative act may delegate to the Commission the power to adopt non-legislative acts of general application to supplement or amend certain non-essential elements of the legislative act. In accordance with the second subparagraph of that provision, the objectives, content, scope and duration of the delegation of power must be explicitly defined in the legislative act granting the delegation. That requirement implies that the purpose of granting a delegated power is to achieve the adoption of rules coming within the regulatory framework as defined by the basic legislative act (judgment in Commission v Parliament and Council, C‑427/12, EU:C:2014:170, paragraph 38).
With respect to the conferral of an implementing power, Article 291(2) TFEU states that legally binding Union acts are to confer such power on the Commission or, in duly justified specific cases and the cases provided for in Articles 24 TEU and 26 TEU, on the Council, where uniform conditions for implementing those acts are needed. In the exercise of the implementing power conferred on it, the institution concerned must provide further detail in relation to the content of a legislative act, in order to ensure that it is implemented under uniform conditions in all the Member States (see judgment in Commission v Parliament and Council, C‑427/12, EU:C:2014:170, paragraph 39).
It also follows from the Court’s case-law that, in exercising an implementing power, the Commission may neither amend nor supplement the legislative act, even as to its non-essential elements (judgment in Parliament v Commission, C‑65/13, EU:C:2014:2289, paragraph 45).
Contrary to the Commission’s arguments, neither the existence nor the extent of the discretion conferred on it by the legislative act is relevant for determining whether the act to be adopted by the Commission comes under Article 290 TFEU or Article 291 TFEU. It follows from the wording of Article 290(1) TFEU that the lawfulness of the EU legislature’s choice to confer a delegated power on the Commission depends solely on whether the acts the Commission is to adopt on the basis of the conferral are of general application and whether they supplement or amend non-essential elements of the legislative act.
In the present case, the Commission does not dispute that Article 1(4)(f) of Regulation No 539/2001, as amended, confers power on it to adopt acts of general application which relate only to non-essential elements of the legislative act. Moreover, the defendants do not contest the correctness of the Commission’s argument that those acts are not such as to supplement the legislative act in question within the meaning of Article 290(1) TFEU.
In those circumstances, it must be examined whether the EU legislature remained within the bounds of its discretion, referred to in paragraph 28 above, when conferring on the Commission in Article 1(4)(f) of that regulation the power to ‘amend’, within the meaning of Article 290(1) TFEU, the normative content of that regulation (see, to that effect, judgment in Commission v Parliament and Council, C‑427/12, EU:C:2014:170, paragraphs 40 and 52).
It must be recalled that, as stated in recital 5 in the preamble to Regulation No 539/2001, that regulation aims to make provision for a mechanism enabling the principle of reciprocity to be implemented if one of the third countries included in Annex II to the regulation decides to make the nationals of one or more Member States subject to the visa obligation. The mechanism consists essentially of three stages.
Article 1(4)(e) of Regulation No 539/2001, as amended, provides, as the first response of the European Union to the action of the third country concerned, the adoption by the Commission of an implementing act suspending the exemption from the visa requirement for certain categories of nationals of the third country concerned for a period of six months, which may be extended.
Article 1(4)(f) of Regulation No 539/2001, as amended, relates to the second stage of the mechanism for implementing the principle of reciprocity. Where, despite the selective suspension of the visa exemption under the implementing act adopted on the basis of Article 1(4)(e) of that regulation, the third country concerned maintains its visa requirement for the nationals of at least one Member State, Article 1(4)(f) of that regulation provides for the adoption by the Commission of a delegated act suspending for all nationals of that third country, for 12 months, the exemption from the visa obligation deriving from its inclusion in Annex II to that regulation and inserting in that annex ‘a footnote indicating that the exemption from the visa requirement is suspended with regard to that third country and specifying the period of that suspension’.
The third stage of the mechanism for implementing the principle of reciprocity relates to the permanent reinstatement of the visa obligation, and hence the transfer of the reference to the third country concerned from Annex II to Annex I to Regulation No 539/2001, as amended, which involves the use of the ordinary legislative procedure. Thus Article 1(4)(h) of that regulation provides that, if within six months of the entry into force of the delegated act the third country in question has not lifted the visa requirement, the Commission may submit a legislative proposal for amending the regulation in order to effect that transfer. If the Commission takes such a legislative initiative, the period of suspension resulting from an act adopted on the basis of Article 1(4)(f) of that regulation is extended by six months.
The mechanism for implementing the principle of reciprocity is thus characterised by measures of increasing gravity and political sensitivity, to which instruments of different kinds correspond.
Contrary to the Commission’s claims, the fact that the act adopted in the first stage of the mechanism for implementing the principle of reciprocity is classified as an implementing measure cannot, as such, have the consequence that the act adopted in the second stage of the mechanism must also be classified as an implementing measure.
As to the question whether Article 1(4)(f) of Regulation No 539/2001, as amended, confers power on the Commission to amend that regulation within the meaning of Article 290(1) TFEU, it should be recalled that, pursuant to Article 1(1) of Regulation No 539/2001, nationals of the third countries on the list in Annex I to that regulation must be in possession of a visa when crossing the external borders of the Member States. Pursuant to Article 1(2) of that regulation, nationals of the third countries on the list in Annex II to the regulation are exempt from that requirement for stays of no more than 90 days in any 180-day period.
An act adopted on the basis of Article 1(4)(f) of Regulation No 539/2001, as amended, has the effect of reintroducing for a period of 12 or 18 months a visa obligation for all nationals of a third country listed in Annex II to that regulation for stays which, in accordance with Article 1(2) of that regulation, are exempt from that obligation. For all those nationals, the act adopted on the basis of Article 1(4)(f) of that regulation thus has the effect of amending, if only temporarily, the normative content of the legislative act in question. Apart from their temporary nature, the effects of the act adopted on the basis of that provision are identical in all respects with those of a formal transfer of the reference to the third country concerned from Annex II to Annex I of Regulation No 539/2001, as amended.
The insertion in Annex II to that regulation of a footnote next to the name of the third country concerned, provided for by that provision, demonstrates, as the Advocate General observes in point 64 of his Opinion, the intention of the EU legislature to insert the act adopted on the basis of that provision in the actual body of Regulation No 539/2001, as amended.
In those circumstances, the EU legislature conferred power on the Commission to amend the normative content of that legislative act within the meaning of Article 290(1) TFEU.
That conclusion is not called in question by the Commission’s argument relating to the difficulties that might arise from the need for a subsequent change to the footnote inserted in Annex II to Regulation No 539/2001, or from the characteristics inherent in a delegation of power, such as its limited period, the possibility of revocation and the power of objection of the Parliament and the Council.
Such difficulties have no bearing on whether the power conferred on the Commission in Article 1(4)(f) of Regulation No 539/2001, as amended, is intended to amend the normative content of that legislative act within the meaning of Article 290(1) TFEU, an amendment which, as follows from the case-law cited in paragraph 31 above, can only be done in the exercise of a delegated power.
The single plea in law put forward by the Commission in support of its action must consequently be rejected as unfounded.
The action must therefore be dismissed.
Costs
Under Article 138(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Parliament and the Council have asked that the Commission be ordered to pay the costs and the Commission has been unsuccessful, the Commission must be ordered to pay the costs. In accordance with Article 140(1) of the Rules of Procedure, under which Member States which have intervened in the proceedings are to bear their own costs, the Czech Republic must be ordered to bear its own costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Dismisses the action;
2.
Orders the European Commission to pay the costs;
3.
Orders the Czech Republic to bear its own costs.
[Signatures]
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Third Chamber)
11 June 2015 ( *1 )
‛Reference for a preliminary ruling — Electronic communications networks and services — Directive 2002/22/EC — Articles 4, 9, 13 and 32 — Universal service obligations and social obligations — Provision of access at a fixed location and provision of telephone services — Affordability of tariffs — Special tariff options — Financing of the universal service obligations — Additional mandatory services — Mobile communication services and/or internet subscription services’
In Case C‑1/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Grondwettelijk Hof (Belgium), made by decision of 19 December 2013, received at the Court on 2 January 2014, in the proceedings
Base Company NV, formerly KPN Group Belgium NV,
Mobistar NV
v
Ministerraad,
intervener:
Belgacom NV,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Chamber, A. Ó Caoimh, C. Toader, E. Jarašiūnas (Rapporteur) and C.G. Fernlund, Judges,
Advocate General: P. Cruz Villalón,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 12 November 2014,
after considering the observations submitted on behalf of:
—
Base Company NV and Mobistar NV, by T. De Cordier and E. Taelman, advocaten,
—
the Belgian Government, by J. Van Holm and M. Jacobs, acting as Agents, and S. Depré and D. Schrijvers, advocaten,
—
the European Parliament, by R. van de Westelaken and J. Rodrigues, acting as Agents,
—
the Council of the European Union, by I. Šulce, K. Michoel and J. Herrmann, acting as Agents,
—
the European Commission, by L. Nicolae, G. Braun, F. Wilman and P.J. Loewenthal, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 29 January 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 9 and 32 of Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive) (OJ 2002 L 108, p. 51), as amended by Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 (OJ 2009 L 337, p. 11) (‘the Universal Service Directive’), and the validity of the Universal Service Directive in the light of the principle of equality as provided for in Article 20 of the Charter of Fundamental Rights of the European Union (‘the Charter’).
The request has been made in proceedings between, on the one hand, Base Company NV (‘Base Company’) and Mobistar NV (‘Mobistar’) and the Ministerraad (Council of Ministers) concerning an action for the annulment of national-law provisions requiring operators providing consumers with mobile communication services and/or internet subscription services to contribute to the financing of the net cost of those services.
Legal context
European Union law
Recitals 4, 8, 25 and 46 in the preamble to the Universal Service Directive state:
‘(4)
Ensuring universal service (that is to say, the provision of a defined minimum set of services to all end-users at an affordable price) may involve the provision of some services to some end-users at prices that depart from those resulting from normal market conditions ...
...
(8)
A fundamental requirement of universal service is to provide users on request with a connection to the public telephone network at a fixed location, at an affordable price. ...
...
(25)
… Member States are not permitted to impose on market players financial contributions which relate to measures which are not part of universal service obligations. Individual Member States remain free to impose special measures (outside the scope of universal service obligations) and finance them in conformity with Community law but not by means of contributions from market players.
...
(46)
Where a Member State seeks to ensure the provision of other specific services throughout its national territory, such obligations should be implemented on a cost efficient basis and outside the scope of universal service obligations. ...’
Article 1(2) of that directive provides:
‘This Directive establishes the rights of end-users and the corresponding obligations of undertakings providing publicly available electronic communications networks and services. With regard to ensuring provision of universal service within an environment of open and competitive markets, this Directive defines the minimum set of services of specified quality to which all end-users have access, at an affordable price in the light of specific national conditions, without distorting competition. This Directive also sets out obligations with regard to the provision of certain mandatory services.’
Articles 3 to 9 of the Universal Service Directive — which appear under Chapter II of that directive entitled ‘Universal service obligations including social obligations’ — concern respectively (i) the availability of universal service (Article 3), (ii) provision of access at a fixed location and the provision of telephone services (Article 4), (iii) directory enquiry services and directories (Article 5), (iv) public pay telephones (Article 6), (v) special measures for disabled users (Article 7), (vi) the detailed rules for the designation of the undertakings having universal service obligations (Article 8) and (vii) the possibility of requiring that designated undertakings provide special tariff options or packages to consumers which depart from those provided under normal commercial conditions, in particular to ensure that those on low incomes or with special social needs are not prevented from accessing the services referred to in Chapter II of that directive (Article 9).
Article 3 of the Universal Service Directive, entitled ‘Availability of universal service’, provides at paragraph 1:
‘Member States shall ensure that the services set out in this Chapter are made available at the quality specified to all end-users in their territory, independently of geographical location, and, in the light of specific national conditions, at an affordable price.’
Article 4 of that directive, entitled ‘Provision of access at a fixed location and provision of telephone services’, provides:
‘1. Member States shall ensure that all reasonable requests for connection at a fixed location to a public communications network are met by at least one undertaking.
2. The connection provided shall be capable of supporting voice, facsimile and data communications at data rates that are sufficient to permit functional Internet access, taking into account prevailing technologies used by the majority of subscribers and technological feasibility.
3. Member States shall ensure that all reasonable requests for the provision of a publicly available telephone service over the network connection referred to in paragraph 1 that allows for originating and receiving national and international calls are met by at least one undertaking.’
Article 9 of the Universal Service Directive, entitled ‘Affordability of tariffs’, provides at paragraphs 1 to 3:
‘1. National regulatory authorities shall monitor the evolution and level of retail tariffs of the services identified in Articles 4 to 7 as falling under the universal service obligations and either provided by designated undertakings or available on the market, if no undertakings are designated in relation to those services, in particular in relation to national consumer prices and income.
2. Member States may, in the light of national conditions, require that designated undertakings provide to consumers tariff options or packages which depart from those provided under normal commercial conditions, in particular to ensure that those on low incomes or with special social needs are not prevented from accessing the network referred to in Article 4(1) or from using the services identified in Article 4(3) and Articles 5, 6 and 7 as falling under the universal service obligations and provided by designated undertakings.
3. Member States may, besides any provision for designated undertakings to provide special tariff options or to comply with price caps or geographical averaging or other similar schemes, ensure that support is provided to consumers identified as having low incomes or special social needs.’
Article 12 of that directive lays down the detailed rules relating to the calculation of universal service obligations that the national regulatory authorities must determine where they consider that the provision of universal service represents an unfair burden on undertakings designated to provide it.
Article 13 of the Universal Service Directive, entitled ‘Financing of universal service obligations’, provides at paragraph 1:
‘ Where, on the basis of the net cost calculation referred to in Article 12, national regulatory authorities find that an undertaking is subject to an unfair burden, Member States shall, upon request from a designated undertaking, decide:
...
(b)
to share the net cost of universal service obligations between providers of electronic communications networks and services.’
Article 32 of that directive, entitled ‘Additional mandatory services’, provides:
‘Member States may decide to make additional services, apart from services within the universal service obligations as defined in Chapter II, publicly available in its own territory but, in such circumstances, no compensation mechanism involving specific undertakings may be imposed.’
Under Article 2(j) of Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) (OJ 2002 L 108, p. 33), as amended by Directive 2009/140/EC of the European Parliament and of the Council of 25 November 2009 (OJ 2009 L 337, p. 37) (‘the Framework Directive’):
‘“universal service” means the minimum set of services, defined in [ the Universal Service Directive], of specified quality which is available to all users regardless of their geographical location and, in the light of specific national conditions, at an affordable price.’
Belgian Law
Article 74 of the Law of 13 June 2005 on electronic communications (Wet van 13 juni 2005 betreffende de elektronische communicatie, Belgisch Staatsblad, 20 June 2005, p. 28070) (‘the Law of 13 June 2005’), as amended by Article 50 of the Law of 10 July 2012 concerning various provisions regarding electronic communications (Wet van 10 juli 2012 houdende diverse bepalingen inzake elektronische communicatie, Belgisch Staatsblad, 25 July 2012, p. 40969) (‘the Law of 10 July 2012’), is worded as follows:
‘1. The social component of universal service shall consist in the provision, by the operators listed in paragraphs 2 and 3 who offer consumers a publicly available electronic communications service, of special tariff conditions for certain categories of beneficiary.
...
2. All operators offering consumers a publicly available electronic communications service and whose turnover with regard to publicly available electronic communications services exceeds fifty million euros shall provide the social component of universal service referred to in the first paragraph.
...
3. All operators offering consumers a publicly available electronic communications service and whose turnover with regard to publicly available electronic communications services is less than or equal to fifty million euros, and who have declared to the [Belgisch Instituut voor postdiensten en telecommunicatie (the Belgian Institute for Postal Services and Telecommunications) (“the Institute”)] their intention of providing the social component of universal service referred to in paragraph 1 on a fixed or mobile terrestrial network, or both, shall provide that component for a period of five years.
...’
Article 74/1 of the Law of 13 June 2005, as inserted by Article 51 of the Law of 10 July 2012, is worded as follows:
‘1. When the Institute is of the view that the delivery of the social component may represent an unfair burden for a provider, it shall ask each provider of social tariffs to supply the information referred to in paragraph 2 and it shall compile a calculation of the net costs.
2. Each provider of social tariffs shall notify the Institute, according to the detailed rules established in accordance with Article 137(2), at the latest by 1 August of the calendar year following the year under review, of the indexed amount of the cost assessment for the year under review, calculated according to the calculation method set out in the Annex.
...
3. The Institute shall determine, for each provider concerned, that an unfair burden exists if the provision of the social component of universal service is excessive in relation to its capacity to pay, taking into account all its own characteristics, in particular the quality of its equipment, its economic and financial situation and its share of the market for publicly available electronic communications services.
4. A fund shall be created for universal service provision in respect of social tariffs, aimed at compensating each provider of social tariffs for whom the provision of the social component of universal service represents an unfair burden and who has submitted a request to the Institute in that regard. The compensation shall correspond to the net cost borne by the operator for whom the provision of the social component of universal service represents an unfair burden. That fund shall have legal personality and shall be administered by the Institute.
The fund shall be financed by contributions from the operators who provide the social component of universal service.
Their contributions shall be determined in proportion to their turnover with regard to publicly available electronic communications services.
The turnover which is taken into account shall correspond to the turnover achieved before tax with regard to the provision of publicly available electronic communications services within the national territory, in accordance with Article 95(2).
The administrative costs of the fund shall comprise all the costs connected with the operation of the fund, including the costs inherent in the definition of a cost model based on an efficient theoretical operator according to the type of electronic communications network through which the social component of universal service is provided. The King shall determine the maximum amount of the administrative costs of the fund by decree, after deliberation in the Ministerraad (Council of Ministers).
The administrative costs of the fund shall be financed by the operators referred to in the second paragraph, in proportion to their turnover referred to in the third paragraph.
5. The King shall determine the detailed rules for the operation of that mechanism by decree, after deliberation in the Ministerraad, and following advice from the Institute.’
Pursuant to Article 146(2) of the Law of 10 July 2012, Article 51 of the Law of 13 June 2005 takes effect ‘as of 30 June 2005’.
The dispute in the main proceedings and the questions referred for a preliminary ruling
It is apparent from the decision to refer that the Belgian legislature, in response in particular to the judgments in Commission v Belgium (C‑222/08, EU:C:2010:583) and Base and Others (C‑389/08, EU:C:2010:584), adopted the Law of 10 July 2012 in order to amend the mechanism for financing the provision of universal service, in particular as regards the social telephone tariffs set out in the Law of 25 April 2007 on miscellaneous provisions (IV) (Belgisch Staatsblad of 8 May 2007, p. 25103), which had amended and interpreted the Law of 13 June 2005.
On 28 January 2013, Base Company and Mobistar, two operators providing electronic communications services in Belgium, brought an action before the referring court for the annulment of Articles 50, 51 and 146 of the Law of 10 July 2012 which established a sectoral financing mechanism — requiring payment of a contribution by operators whose turnover reaches or exceeds the thresholds laid down by that Law — for the net cost of providing mobile communication services and/or internet subscription services as components of ‘the social component of the universal service’. That social component consists, within the meaning of that Law, in the provision of specific tariff conditions to certain categories of beneficiary.
In support of their action, Base Company and Mobistar submit in particular that those provisions do not comply with Articles 10 and 11 of the Belgian Constitution, in conjunction with Articles 170 and 172 thereof, nor with Articles 9 and 32 of the Universal Service Directive.
Base Company and Mobistar submit that the obligation to contribute to the financing of the net costs arising from the provision of mobile communication services and/or internet subscriptions, incumbent on them since the amendments made by the Law of 10 July 2012, is contrary to EU law. Those undertakings submit that they are discriminated against compared with taxpayers who are not subject to taxes based on national-law provisions contrary to EU law.
The referring court states that Article 74/1 of the Law of 13 June 2005, as inserted by Article 51 of the Law of 10 July 2012, created a ‘fund for universal service provision in respect of social tariffs’, aimed at compensating each provider of social tariffs for whom the provision of the social component of universal service represents an unfair burden. The fund is financed by the operators providing the social component and by those providing mobile communication services and/or internet subscriptions. The referring court states that, in establishing that financing mechanism, the Belgian legislature made use of the option provided for by Article 13(1)(b) of the Universal Service Directive.
The referring court is uncertain as to whether the provisions of the Law of 10 July 2012 comply with the Universal Service Directive, given that it appears to that court, in particular, from Article 9 of that directive that the ‘voice, facsimile and data communications at data rates that are sufficient to permit functional Internet access’, referred to in Article 4(2) of that directive, are excluded from the social component of the universal service. The referring court notes that Article 32 of that directive provides that Member States may decide to make additional mandatory services, apart from services within the universal service obligations, publicly available but, in such circumstances, no compensation mechanism involving specific undertakings may be imposed.
In addition, the referring court states that, in the context of the proceedings before it, the Ministerraad clarified that all the universal services established by the Law of 10 July 2012 were drafted on the basis of the view that Article 9(3) of the Universal Service Directive makes it possible to provide support to consumers for services other than those which are set out in Articles 4 to 7 of the directive, including mobile communication services and/or internet subscription services.
In those circumstances the Grondwettelijk Hof (the Constitutional Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Should the Universal Service Directive, and in particular Articles 9 and 32 thereof, be interpreted as meaning that the social tariff for universal service as well as the compensation mechanism provided for in Article 13(1)(b) of the Universal Service Directive are not only applicable to electronic communications by means of a telephone connection at a fixed location to a public communications network but also to … mobile communication services and/or internet subscriptions?
(2)
Should Article 9(3) of the Universal Service Directive be interpreted as allowing Member States to add special tariff options to the universal service for services other than those defined in Article 9(2) of [that directive]?
(3)
If the answers to the first and second questions are in the negative, are the relevant provisions of the Universal Service Directive compatible with the principle of equality, as set out inter alia in Article 20 of the [Charter]?’
Consideration of the questions referred
The first and second questions
By its first and second questions, which must be examined together, the referring court asks, in essence, whether the Universal Service Directive must be interpreted as meaning that the special tariffs and the financing mechanism provided for in Articles 9 and 13(1)(b) of that directive respectively apply to mobile communication services and/or internet subscription services.
The Court notes that, according to Article 1(2) of the Universal Service Directive, the purpose of that directive is to define, as provided for in Article 2(j) of the Framework Directive, the minimum set of services of specified quality which is available to all users, at an affordable price in the light of specific national conditions, without distorting competition. That minimum set of universal services is defined in Chapter II of the Universal Service Directive.
Under Article 3(1) of the Universal Service Directive, Member States must ensure that the services set out in Chapter II are made available at the quality specified to all end-users in their territory, independently of geographical location, and, in the light of specific national conditions, at an affordable price.
Recital 4 of that directive states that ensuring universal service may involve the provision of some services to some end-users at prices that depart from those resulting from normal market conditions.
Consequently, in accordance with Article 9(1) and (2) of the Universal Service Directive, Member States may require that undertakings designated to provide universal service provide to consumers tariff options and packages which depart from those provided under normal commercial conditions, in particular to ensure that those on low incomes or with special social needs are not prevented from accessing the minimum set of universal services defined in Articles 4 to 7 of that directive.
If follows from Article 9(3) of the Universal Service Directive that, in addition to any provision for undertakings designated to provide universal service to provide special tariff options or to comply with price caps or geographical averaging or other similar schemes, the Member States may ensure that support is provided to consumers identified as having low incomes or special social needs.
Article 13(1)(b) of the Universal Service Directive provides that where, on the basis of the net cost calculation referred to in Article 12 of that directive, national regulatory authorities find that undertakings designated to assume universal service obligations, such as those listed in Articles 3 to 10 of the directive, are subject to an unfair burden, Member States must, upon request from one of those undertakings, decide to share the net cost of those obligations between providers of electronic communications networks and services.
It follows from all those provisions that the special tariffs and the financing mechanism provided for in Articles 9 and 13(1)(b) of the Universal Service Directive apply only to the universal services listed in Chapter II of that directive.
In those circumstances, it must be ascertained whether the mobile communication services and/or internet subscription services are part of the universal service obligations referred to in that chapter.
In that regard, it must be recalled that Article 4 of the Universal Service Directive, entitled ‘Provision of access at a fixed location and provision of telephone services’, provides at paragraphs 1 and 2 that a connection at a fixed location to a public communications network must support voice, facsimile and data communications at data rates that are sufficient to permit functional Internet access. Article 4(3) states that Member States must ensure that all reasonable requests for the provision of a publicly available telephone service over a connection at a fixed location to a public communications network that allows for originating and receiving national and international calls are met by at least one undertaking.
Therefore, both the title and wording of Article 4 of the Universal Service Directive expressly impose an obligation on the Member States to ensure the connection at a fixed location to a public communications network.
That obligation is also apparent from recital 8 of that directive which states that a fundamental requirement of universal service is to provide end-users on request with a connection to the public telephone network at a fixed location, at an affordable price.
It must, however, be noted that the term ‘at a fixed location’ means the opposite of the term ‘mobile’.
Therefore it must be held that mobile communication services are, by definition, as the Advocate General observed in point 46 of his Opinion, excluded from the minimum set of universal services defined in Chapter II of the Universal Service Directive, because their provision does not presuppose access and a connection at a fixed location to a public communications network. Similarly, it must be found that internet subscription services provided by means of mobile communication services do not come within that minimum set. On the other hand, internet subscription services are included in that set if in order for them to be provided there must be a connection to the internet at a fixed location.
In addition, it must be noted that, in accordance with Article 32 of the Universal Service Directive, Member States may decide to make additional services, over and above services within the universal service obligations as defined in Chapter II of that directive, publicly available in its own territory.
In that regard, recitals 25 and 46 of the Universal Service Directive state that Member States remain free to impose special measures which should be implemented on a cost efficient basis and outside the scope of universal service obligations.
Consequently, Member States are free to consider mobile communication services, including internet subscription services provided by means of mobile communication services, as additional mandatory services, for the purposes of Article 32 of the Universal Service Directive.
However, under Article 32, when Member States decide to make additional mandatory services publicly available in their own territory, a financing mechanism for those services involving specific undertakings cannot be imposed. Consequently, the financing mechanism provided for in Article 13(1)(b) of the Universal Service Directive cannot be extended to such services.
As recital 25 of the Universal Service Directive states, Member States are not permitted to impose on market players financial contributions which relate to measures which are not part of the universal service obligations. Therefore, while individual Member States remain free to finance special measures in conformity with EU law, they may not do so by means of contributions from market players.
In the light of all the foregoing considerations, the answer to the first and second questions is that the Universal Service Directive must be interpreted as meaning that the special tariffs and the financing mechanism provided for in Articles 9 and 13(1)(b) of that directive respectively apply to internet subscription services requiring a connection to the internet at a fixed location, but not to mobile communication services, including internet subscription services provided by means of those mobile communication services. If those services are made publicly available within the national territory as ‘additional mandatory services’ for the purposes of Article 32 of the Universal Service Directive, they cannot be financed, under national law, by a mechanism involving specific undertakings.
The third question
By its third question, the referring court asks in essence whether, if the answers to the first and second questions are in the negative, Articles 9 and 13(1)(b) of the Universal Service Directive are valid in the light of the principle of equality, as set out in Article 20 of the Charter.
It must be borne in mind that when a question on the validity of a measure adopted by the EU institutions is raised before a national court, it is for that court to decide whether a decision on the matter is necessary to enable it to give judgment and consequently whether it should request the Court to rule on that question. Accordingly, where the national court’s questions relate to the validity of a rule of EU law, the Court is obliged in principle to give a ruling (order in Adiamix, C‑368/12, EU:C:2013:257, paragraph 16 and the case-law cited).
However, it follows from the spirit of cooperation which must prevail in the operation of the preliminary reference procedure that the national court must set out in its order for reference the precise reasons why it considers that an answer to its questions concerning the interpretation or validity of certain provisions of EU law is necessary in order to determine the outcome of the case before it (order in Adiamix, C‑368/12, EU:C:2013:257, paragraph 21 and the case-law cited).
In that context, it is important that the national court should set out, in particular, the precise reasons which led it to question the validity of certain EU law provisions and set out the grounds of invalidity which, consequently, appear to it capable of being upheld (order in Adiamix, C‑368/12, EU:C:2013:257, paragraph 22 and the case-law cited).
Further, it is clear from the settled case-law of the Court that the information provided in orders for reference serves not only to enable the Court to give useful answers but also to ensure that Governments of the Member States and other interested parties have the opportunity to submit observations in accordance with Article 23 of the Statute of the Court of Justice of the European Union. It is for the Court to ensure that that opportunity is safeguarded, given that, under that provision, only the orders for reference are notified to the interested parties, accompanied by a translation in the official language of each Member State, but excluding any case-file that may be sent to the Court by the national court (order in Adiamix, C‑368/12, EU:C:2013:257, paragraph 24 and the case-law cited).
In that regard, it must be found that the referring court has not provided, in its decision to refer, any information or explanation which could establish that there has been a failure to observe the principle of equality, as set out in Article 20 of the Charter, or the reasons which led it to question the validity of Articles 9 and 13(1)(b) of the Universal Service Directive.
In those circumstances, the Court does not have before it the factual and legal material necessary to give a useful answer to the question referred to it.
It follows that the third question is inadmissible.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive), as amended by Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009, must be interpreted as meaning that the special tariffs and the financing mechanism provided for in Articles 9 and 13(1)(b) of that directive respectively apply to internet subscription services requiring a connection to the internet at a fixed location, but not to mobile communication services, including internet subscription services provided by means of those mobile communication services. If those services are made publicly available within the national territory as ‘additional mandatory services’ for the purposes of Article 32 of Directive 2002/22, as amended by Directive 2009/136, they cannot be financed, under national law, by a mechanism involving specific undertakings.
[Signatures]
( *1 ) Language of the case: Dutch. |
JUDGMENT OF THE COURT (Tenth Chamber)
25 June 2015 ( *1 )
‛Reference for a preliminary ruling — Community trade mark — Regulation (EC) No 207/2009 — Article 9(1)(b) — Effects — Rights conferred by a Community trade mark — Identical or similar signs — Prohibition of use — Likelihood of confusion — Assessment — Taking into consideration the use of a language other than an official language of the European Union’
In Case C‑147/14,
Request for a preliminary ruling pursuant to Article 267 TFEU from the Hof van beroep te Brussel (Belgium), made by decision of 17 March 2014, received at the Court on 28 March 2014, in the proceedings
Loutfi Management Propriété intellectuelle SARL
v
AMJ Meatproducts NV,
Halalsupply NV,
THE COURT (Tenth Chamber),
composed of C. Vajda, President of the Chamber, E. Juhász (Rapporteur) and D. Šváby, Judges,
Advocate General: M. Szpunar,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Loutfi Management Propriété intellectuelle SARL, by P. Péters, advocaat,
—
AMJ Meatproducts NV and Halalsupply NV, by C. Dekoninck and K. Roox, advocaten,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the Finnish Government, by H. Leppo, acting as Agent,
—
the European Commission, by F. Wilman and F. Bulst, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
The request for a preliminary ruling concerns the interpretation of Article 9(1)(b) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1).
The request has been made in proceedings between Loutfi Management Propriété intellectuelle SARL (‘Loufti’), on the one hand, and AMJ Meatproducts NV (‘Meatproducts’) and Halalsupply NV (‘Halalsupply’), on the other hand, concerning an alleged infringement of two Community trade marks registered by Loutfi.
Legal context
Article 9(1) of Regulation No 207/2009 entitled ‘Rights conferred by a Community trade mark’, establishes the rights that are conferred on the proprietor of a Community trade mark. That provision states:
‘A Community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
a)
any sign which is identical with the Community trade mark in relation to goods or services which are identical with those for which the Community trade mark is registered;
b)
any sign where, because of its identity with, or similarity to, the Community trade mark and the identity or similarity of the goods or services covered by the Community trade mark and the sign, there exists a likelihood of confusion on the part of the public; the likelihood of confusion includes the likelihood of association between the sign and the trade mark;
…’
The main proceedings and the question submitted for a preliminary ruling
Loutfi is the proprietor of the following Community trade marks:
—
Community trade mark No 8572638, filed on 24 September 2009 and registered on 22 March 2010 for goods in Class 29 (including meat, fish, poultry and game), in Class 30 (including sugar, bread, pastry products and honey) and Class 32 (including beers, mineral waters and other non-alcoholic beverages) of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended (‘the Nice Agreement’). That Community trade mark refers to the following sign combining the colours red, white and green:
—
Community trade mark No 10217198, filed on 24 August 2011 and registered on 8 January 2012 for goods in Class 29 (including meat, fish, poultry and game) and in Class 30 (including sugar, bread, pastry products and honey) of the Nice Classification, for the following sign combining the colours red, white and green.
On 3 November 2011 Meatproducts, then known as ‘Deko Vleeswarenfabriek’, filed the Benelux trade mark EL BAINA for goods in:
—
Class 29 of the Nice Classification (‘Meat, meat products, prepared meat products, prepared poultry products, processed meats, processed meats with beef, processed meats with poultry, processed meats with game, prepared meals with beef, fish, poultry and game not included in other classes; meat extracts; the aforementioned products prepared in accordance with Islamic precepts’), and
—
Class 30 of the Nice Classification (‘Prepared dishes not included in other classes; coffee, tea, cocoa, sugar, rice, tapioca, … flours, cereal products, bread, pastry and patisserie products …, the aforementioned products prepared in accordance with Islamic precepts’).
The trade mark EL BAINA was registered on 10 February 2012 under number 909776 and refers to the following sign, without any colour combination (‘the sign considered’):
Halalsupply has taken over the business of Meatproducts, including the latter’s trade mark portfolio.
Loutfi submitted an application for seizure on grounds of counterfeiting to the President of the Rechtbank van koophandel te Brussel (Commercial Court, Brussels) under Article 9(1)(a) and (b) of Regulation (EC) No 207/2009, for the purpose, in particular, of ‘Deko, Halalsupply and any party holding the products [sold under the mark EL BAINA], their packaging and related documents, being prohibited from disposing of them, on pain of a penalty payment’.
That application was granted by order of 5 April 2012.
By order of 31 July 2012 the President of the Rechtbank van koophandel te Brussel, in response to an application made by Meatproducts and Halalsupply, ordered the lifting of the protective measures granted under the order of 5 April 2012.
Loufti appealed against the order of 31 July 2012 to the Hof van beroep te Brussel (Court of Appeal, Brussels).
In its judgment the national court found, inter alia, that the sign considered refers to the same goods, or at least to similar goods to those identified in the two Community trade marks.
Furthermore, the national court observed that the goods marketed both by Loufti and by Meatproducts and Halalsupply are ‘halal’ products prepared in accordance with a ritual prescribed by the Muslim religion and, consequently, mainly intended for a Muslim public.
The national court concluded that the relevant public must, in the present case, be defined as being the public composed of Muslim consumers of Arab origin who consume ‘halal’ food products in the European Union and who have at least a basic knowledge of written Arabic.
The national court notes that the word elements ‘EL BNINA’, ‘EL BENNA’ and ‘EL BAINA’, which are Arabic terms written in Latin script, are dominant both in the Community trade marks and in the sign considered as are those in Arabic script, although those latter elements are less dominant than the former.
In addition, the national court notes that, while the Arabic words appearing in Latin and Arabic script on the two Community marks and in the sign considered present a certain visual similarity, it remains the case that the pronunciation of those words in that language differs substantially, as does the significance which each holds. In that regard, the national court states that in that language ‘el benna’ means ‘taste’, ‘el bnina’, ‘softness’ and ‘el baina’, ‘sight’.
Having regard to all of those matters, the national court concludes that the examination of the likelihood of confusion between the two Community marks and the sign considered can vary according to whether or not the meaning and the pronunciation of the word elements in the Arabic language, in both Latin and Arabic script and contained in each of those Community marks and in the sign under consideration, are taken into account.
In those circumstances, the Hof van beroep te Brussel decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Having regard, in particular, to Articles 21 and 22 of the Charter of Fundamental Rights of the European Union, must Article 9(1)(b) of Regulation No 207/2009 be interpreted as meaning that, in the assessment of the likelihood of confusion between a Community trade mark in which an Arabic word is dominant and a sign in which a different, but visually similar, Arabic word is dominant, the difference in pronunciation and meaning between those words may, or even must, be examined and taken into account by the competent courts of the Member States, even though Arabic is not an official language of the European Union or of the Member States?’
The question referred for a preliminary ruling
By its question the national court asks, in essence, if Article 9(1)(b) of Regulation No 207/2009 must be interpreted as meaning that, in order to assess the likelihood of confusion which may exist between a Community mark and a sign which cover the same or similar goods and which both contain a dominant Arabic word in Latin and Arabic script, those words being visually similar, in circumstances where the relevant public for the Community mark and for the sign at issue has a basic understanding of written Arabic, the meaning and the pronunciation of those words may or must be taken into account.
It should be noted at the outset that Regulation No 207/2009, and in particular Article 9(1)(b) thereof, do not make reference to the use of any particular language or alphabet which should or should not be taken into account in assessing the likelihood of confusion which might exist on the part of the public.
The likelihood of confusion must in particular be assessed by reference to the perception of the relevant public, which consists of average consumers of the products or services in question, who are reasonably well informed and reasonably observant and circumspect (see, to that effect, judgment in Henkel v OHIM, C‑456/01 P and C‑457/01 P, EU:C:2004:258, paragraph 35 and the case-law cited).
The determination of the relevant public and the finding of the identity or similarity of the goods and services covered by the Community trade marks and the sign considered, stem from the factual assessment that the national court must undertake. In the present case, the national court has found that the relevant public must be defined as being the public consisting of Muslim consumers of Arab origin who consume ‘halal’ food products in the European Union and who have at least a basic knowledge of written Arabic. In addition it has held, as is apparent from paragraph 12 of the present judgment, that the goods covered by the two Community marks and the sign considered are identical or at least similar.
As to the likelihood of confusion on the part of the public that may exist between the Community marks and the sign considered, according to the settled case-law of the Court the existence of such a likelihood must be appreciated globally, taking into account all factors relevant to the circumstances of the particular case. That assessment includes a visual, aural or conceptual comparison of the signs at issue, bearing in mind, in particular, their distinctive and dominant components (see, to that effect, judgments in Aceites del Sur-Coosur v Koipe, C‑498/07 P, EU:C:2009:503, paragraphs 59 and 60, and XXXLutz Marken v OHIM, C‑306/11 P, EU:C:2012:401, paragraph 39).
In this case the national court has held that the word elements ‘EL BNINA’, ‘EL BENNA’ and ‘EL BAINA’ were dominant both in the two Community trade marks and in the sign considered, as were, to a lesser extent, the words in Arabic script. It has also indicated that while visually those verbal elements presented a certain similarity, it followed from the documents lodged before it by Meatproducts and Halalsupply that the pronunciation and meaning of those word elements differed substantially.
It follows from the above that those phonetic and conceptual differences should be taken into account because, if they are not, the assessment of the likelihood of confusion could be made only partially and, as a result, without taking into account the overall impression made by the Community trade marks and the sign considered on the relevant public.
Therefore, the answer to the question referred for preliminary ruling is that Article 9(1)(b) of Regulation No 207/2009 must be interpreted as meaning that, in order to assess the likelihood of confusion that may exist between a Community trade mark and a sign which cover the same or similar goods and which both contain a dominant Arabic word in Latin and Arabic script, those words being visually similar, in circumstances where the relevant public for the Community mark and for the sign at issue has a basic knowledge of written Arabic, the meaning and pronunciation of those words must be taken into account.
Given that the reply to the question referred for a preliminary ruling can be inferred from the wording of Regulation No 207/2009 and the case-law of the Court relating to that regulation, it is not necessary to examine the possible effects of the provisions of the Charter of Fundamental Rights of the European Union on that reply.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Tenth Chamber) hereby rules:
Article 9(1)(b) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark must be interpreted as meaning that, in order to assess the likelihood of confusion that may exist between a Community trade mark and a sign which cover identical or similar goods and which both contain a dominant Arabic word in Latin and Arabic script, those words being visually similar, in circumstances where the relevant public for the Community trade mark and for the sign at issue has a basic knowledge of written Arabic, the meaning and pronunciation of those words must be taken into account.
[Signatures]
( *1 ) Language of the case: Dutch. |
JUDGMENT OF THE COURT (Second Chamber)
6 October 2015 ( * )
‛Reference for a preliminary ruling — Freedom of movement of persons — Articles 45 TFEU and 49 TFEU — Workers — Employment in the public service — Directive 2005/36/EC — Recognition of professional qualifications — Definition of ‘regulated profession’ — Admission to a competition to recruit legal secretaries at the Cour de cassation (Belgium)’
In Case C‑298/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Conseil d’État (Belgium), made by decision of 15 May 2014, received at the Court on 16 June 2014, in the proceedings
Alain Brouillard
v
Jury du concours de recrutement de référendaires près la Cour de cassation,
Belgian State,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta (Rapporteur), President of the Chamber, J.C. Bonichot, A. Arabadjiev, J.L. da Cruz Vilaça and C. Lycourgos, Judges,
Advocate General: E. Sharpston,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 25 March 2015,
after considering the observations submitted on behalf of:
—
Mr Brouillard, by himself,
—
the Belgian Government, by M. Jacobs, L. Van den Broeck and C. Pochet, acting as Agents, and P. Levert and P.-E. Paris, avocats,
—
the Italian Government, by G. Palmieri, acting as Agent, and S. Fiorentino, avvocato dello Stato,
—
the European Commission, by J. Hottiaux and H. Støvlbæk, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 18 June 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 45 TFEU and 49 TFEU and of Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications (OJ 2005 L 255, p. 22).
The request has been made in proceedings between Mr Brouillard and the Jury du concours de recrutement de référendaires près la Cour de cassation (‘the selection board’) and the Belgian State concerning the selection board’s decision to reject Mr Brouillard’s application to register for that competition.
Legal context
EU law
Recital 41 of Directive 2005/36 states:
‘This Directive is without prejudice to the application of Articles [45(4) TFEU] and [51 TFEU] concerning notably notaries.’
Article 1 of that directive, entitled ‘Subject’, provides:
‘This Directive establishes rules according to which a Member State which makes access to or pursuit of a regulated profession in its territory contingent upon possession of specific professional qualifications (referred to hereinafter as the host Member State) shall recognise professional qualifications obtained in one or more other Member States (referred to hereinafter as the home Member State) and which allow the holder of the said qualifications to pursue the same profession there, for access to and pursuit of that profession.’
Article 2 of that directive, entitled ‘Scope’, provides:
‘1. This Directive shall apply to all nationals of a Member State wishing to pursue a regulated profession in a Member State, including those belonging to the liberal professions, other than that in which they obtained their professional qualifications, on either a self-employed or employed basis.
...’
Article 3 of Directive 2005/36, entitled ‘Definitions’, provides as follows:
‘1. For the purposes of this Directive, the following definitions apply:
(a)
“regulated profession”: a professional activity or group of professional activities, access to which, the pursuit of which, or one of the modes of pursuit of which is subject, directly or indirectly, by virtue of legislative, regulatory or administrative provisions to the possession of specific professional qualifications; in particular, the use of a professional title limited by legislative, regulatory or administrative provisions to holders of a given professional qualification shall constitute a mode of pursuit. Where the first sentence of this definition does not apply, a profession referred to in paragraph 2 shall be treated as a regulated profession;
(b)
“professional qualifications”: qualifications attested by evidence of formal qualifications, an attestation of competence referred to in Article 11, point (a) (i) and/or professional experience;
(c)
“evidence of formal qualifications”: diplomas, certificates and other evidence issued by an authority in a Member State designated pursuant to legislative, regulatory or administrative provisions of that Member State and certifying successful completion of professional training obtained mainly in the Community. Where the first sentence of this definition does not apply, evidence of formal qualifications referred to in paragraph 3 shall be treated as evidence of formal qualifications;
…
(e)
‘regulated education and training’: any training which is specifically geared to the pursuit of a given profession and which comprises a course or courses complemented, where appropriate, by professional training, or probationary or professional practice.
…’
Article 4 of that directive, entitled ‘Effects of recognition’, provides:
‘1. The recognition of professional qualifications by the host Member State allows the beneficiary to gain access in that Member State to the same profession as that for which he is qualified in the home Member State and to pursue it in the host Member State under the same conditions as its nationals.
2. For the purposes of this Directive, the profession which the applicant wishes to pursue in the host Member State is the same as that for which he is qualified in his home Member State if the activities covered are comparable.’
Article 13 of Directive 2005/36, entitled ‘Conditions for recognition’, states:
‘1. If access to or pursuit of a regulated profession in a host Member State is contingent upon possession of specific professional qualifications, the competent authority of that Member State shall permit access to and pursuit of that profession, under the same conditions as apply to its nationals, to applicants possessing the attestation of competence or evidence of formal qualifications required by another Member State in order to gain access to and pursue that profession on its territory.
…’
Belgian law
Article 135a of the Belgian Judicial Code states:
‘The Cour de cassation shall be assisted by legal secretaries, whose number shall not be less than five or more than 30, which shall be determined by the Minister for Justice.
The First President and the Principal Crown Counsel shall, by common accord, determine the number of legal secretaries under their respective authority.
The legal secretaries shall prepare the work of the judges and public prosecutors; they shall participate in documentation activities and in the translation and publication of judgments and the alignment of French and Dutch texts.’
Article 259 of that code provides:
‘To be appointed a legal secretary at the Cour de cassation, a candidate must be aged 25 or over and hold a doctorate or licentiate degree in law.
The candidates shall be classified during the competition with a view to their recruitment.
The Court shall determine the subject-matter of the competitions according to the requirements of the service. It shall lay down the conditions for the competitions and shall constitute the selection boards.
Each selection board, while respecting the linguistic balance, shall consist of two members of the Court designated by the First President of the Court of cassation, two members of the Public Prosecutor’s Office designated by the Principal Crown Counsel to that court, and four persons external to the institution designated by the King on two lists composed of four candidates each, both respecting the linguistic balance and proposed by the First President and the Principal Crown Counsel respectively.
The validity of a competition shall be (six) years.’
Under Article 259l of that code:
‘Legal secretaries shall be appointed by the King for an internship of three years in accordance with the ranking referred to in Article 259k. At the end of the three years, the appointment shall become permanent except where a decision to the contrary by the King is made, exclusively on the proposal of the First President or the Principal Crown Counsel, at the latest during the third quarter of the third year of the internship.
The First President of the Court of cassation and the Principal Crown Counsel at that court shall, by common agreement, designate the trainee legal secretaries and the legal secretaries appointed to permanent posts who shall be placed under the authority of one and those who are to be placed under the authority of the other.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Mr Brouillard, a Belgian national, is employed in the documentation and text alignment service of the Cour de cassation. He holds a licentiate degree in translation, a degree in law and a diploma in specialised studies in human rights awarded by a Belgian university, and a master’s degree in law, economics and management, private law, lawyer-linguist specialism awarded by the University of Poitiers (France), (‘the vocational master’s degree’), following completion of a correspondence course.
On 24 May 2011, Mr Brouillard registered for a competition to recruit legal secretaries at the Cour de cassation.
On 23 June 2011, he applied to the French Community of Belgium for recognition that his vocational master’s degree was fully equivalent to the qualification of Master’s Degree 2 in Belgian law.
On 6 September 2011, the President of the Cour de cassation notified Mr Brouillard of the decision of the selection board declaring his application to enter the competition to be inadmissible, on the ground that, in order to be appointed as a legal secretary at the Court of cassation, the candidate must hold a doctorate or licentiate degree in law from a Belgian university in order to ensure the candidate’s ability to pursue that profession in Belgium. In its decision, the selection board pointed out that Mr Brouillard did not satisfy that condition, since the French Community of Belgium had not recognised the equivalence of his vocational master’s degree with one of the grades of doctor, licentiate or master in law awarded in Belgium, and as he had not completed an equivalence programme at a Belgian university.
On 27 October 2011, the French Community of Belgium rejected Mr Brouillard’s application for recognition of the vocational master’s degree as equivalent to an academic master’s degree in law and limited the equivalence to the generic academic level of master’s degree. That rejection was based on an unfavourable opinion of the Equivalence Committee, Law and Criminology Section, of the French Community of Belgium, which set out its reasons as follows:
‘—
Holding a degree attesting to the completion of legal studies demonstrates that the holder has ability and technical expertise relating to the particular features of the legal system in which the degree was awarded; therefore, such studies completed abroad do not meet the requirements of the law faculties in Belgium’s French Community, faculties which train their students in the duties of jurists in the Belgian legal system;
–
some educational components which are necessary in order to complete, in Belgium’s French Community, postgraduate studies in law (including the law of obligations, contract law, administrative law and employment law) are not taught as part of the French vocational master’s degree in law, economics and management, private law, lawyer-linguist specialism, in respect of which equivalence is sought.’
The Federal Public Service Justice published a notice stating that, by Royal Decrees of 20 September 2012, three legal secretaries had been appointed to the Cour de cassation for a three-year internship (Moniteur belge of 28 September 2012, p. 59905).
By two actions brought before the referring court, Mr Brouillard sought the annulment of the decisions of the selection board and the royal decrees.
It is on that basis that the Conseil d’État decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Are Articles 45 TFEU and 49 TFEU and Directive 2005/36 to be interpreted as applying in a situation where a Belgian national, who resides in Belgium and who has not pursued a professional activity in another Member State, relies in support of his application to participate in a competition to recruit legal secretaries at the Belgian Cour de cassation on a degree awarded by a French university, namely a vocational master’s degree awarded on 22 November 2010 by the University of Poitiers in France?
(2)
Is the office of legal secretary at the Belgian Cour de cassation, in respect of which Article 259k of the Judicial Code makes appointment conditional on holding a doctorate or licentiate degree in law, a regulated profession within the meaning of Article 3 of Directive 2005/36?
(3)
Is the function of legal secretary at the Cour de cassation, the duties of which are defined in Article 135a of the Judicial Code, employment in the public service within the meaning of Article 45(4) TFEU, and is the application of Articles 45 TFEU and 49 TFEU and Directive 2005/36 therefore precluded by Article 45(4) TFEU?
(4)
If Articles 45 TFEU and 49 TFEU and Directive 2005/36 apply in the present case, must they be interpreted as precluding the selection board charged with the recruitment of legal secretaries at the Cour de cassation from making participation in that competition conditional on the holding of a doctorate or licentiate degree in law awarded by a Belgian university, or on recognition by the French Community, which has competence in the field of education, that the master’s degree awarded to the applicant by the University of Poitiers in France is equivalent to the qualification of doctorate, licentiate degree or master’s degree in law awarded by a Belgian university?
(5)
If Articles 45 TFEU and 49 TFEU and Directive 2005/36 apply in the present case, must they be interpreted as requiring the selection board charged with the recruitment of legal secretaries at the Cour de cassation to compare the applicant’s qualifications resulting from his degrees as well as from his professional experience with those resulting from a doctorate or licentiate degree in law awarded by a Belgian university and, if necessary, to impose a compensation measure on him under Article 14 of Directive 2005/36?’
The application to reopen the oral proceedings
Following the presentation of the Advocate General’s Opinion, the applicant in the main proceedings, by document lodged on 17 August 2015, requested the Court to reopen the oral part of the proceedings. To that end, Mr Brouillard essentially raises issues concerning translation errors in certain language versions of the request for a preliminary ruling and the Advocate General’s Opinion, and a risk of conflict between the judgment of the Court in the present case and that of the General Court in Brouillard v Court of Justice (T‑420/13, EU:T:2015:633), if it is not possible to argue that that opinion fails to examine in depth the question of the ‘validation of acquired experience’ which he relies upon in both those cases.
It should be borne in mind that, according to Article 83 of the Rules of Procedure, the Court may, after hearing the Advocate General, order the reopening of the oral part of the procedure, in particular if it considers that it lacks sufficient information or where a party has, after the close of that part of the procedure, submitted a new fact which is of such a nature as to be a decisive factor for the decision of the Court, or where the case must be decided on the basis of an argument which has not been debated between the parties or the interested persons referred to in Article 23 of the Statute of the Court of Justice of the European Union.
The Court considers that there is nothing to justify an order to reopen the oral phase of the proceedings in the present case, since the arguments put forward by Mr Brouillard do not relate to any specific situations laid down in that provision of the Rules of Procedure.
The application for the oral procedure to be reopened must therefore be rejected.
Consideration of the questions referred for a preliminary ruling
The first and third questions
By its first and third questions, which it is appropriate to examine together, the referring court asks essentially, first, whether Articles 45 TFEU and 49 TFEU apply to a situation, such as that at issue in the main proceedings, in which a national of a Member State, residing and working in that Member State, holds a diploma obtained in another Member State, which he relies on in order to apply for registration for a competition to recruit legal secretaries at the Cour de cassation in the first Member State, and, second, whether such a situation is covered by Article 45(4) TFEU.
In that connection, it must be observed at the outset, that Article 49 TFEU, which concerns access to and the pursuit of activities by self-employed persons, is not applicable to the dispute in the main proceedings.
First, as regards Article 45 TFEU, it is time that the Court has consistently held that the provisions of the FEU Treaty on the freedom of movement of persons cannot be applied to cases which have no factor linking them with any of the situations governed by E|U law and where all elements of which are purely internal to a single Member State (see judgments in López Brea and Hidalgo Palacios, C‑330/90 and C‑331/90, EU:C:1992:39, paragraph 7, and Uecker and Jacquet, C‑64/96 and C‑65/96, EU:C:1997:285, paragraph 16).
However, the Court has held that the freedom of movement of persons would not be fully realised if the Member States were able to refuse to grant the benefit of the provisions of EU law to those of their nationals who had taken advantage of its provisions to acquire vocational qualifications in a Member State other than that of which they were nationals. The same consideration applies where a national of a Member State has obtained in another Member State a university qualification which supplements his basic education and training and of which he intends to make use after he returns to his country of origin (see judgment in Kraus, C‑19/92, EU:C:1993:125, paragraphs 16 and 17).
In the present case, Mr Brouillard intends to make use of a university diploma that he obtained in another Member State, in the Member State of which he is a national.
Therefore, the benefit of the provisions of the FEU Treaty relating to free movement of persons cannot be denied to him. The fact that that diploma was obtained following completion of a correspondence course is irrelevant in that respect.
Second, Article 45(4) TFEU provides that the provisions of that article are not to apply to employment in the public service.
However, that exception concerns only the access of nationals of other Member States to certain posts in the civil service (see judgments in Vougioukas, C‑443/93, EU:C:1995:394, paragraph 19; Grahame and Hollanders, C‑248/96, EU:C:1997:543, paragraph 32; Schöning-Kougebetopoulou, C‑15/96, EU:C:1998:3, paragraph 13; and Österreischer Gewerkschaftsbund, C‑195/98, EU:C:2000:655, paragraph 36).
That provision takes account of the legitimate interest which Member States have in reserving to their own nationals a range of posts connected with the exercise of powers conferred by public law and with the protection of general interests (see judgments in Commission v Belgium, 149/79, EU:C:1980:297, paragraph 19, and Vougioukas, C‑443/93, EU:C:1995:394, paragraph 20).
It follows that, regardless of whether the post to which Mr Brouillard wishes to gain access falls within the scope of Article 45(4) TFEU, that provision is not applicable to a situation such as that at issue in the main proceedings, since Mr Brouillard wishes to gain access to a post in the civil service of the Member State of which he is a national.
In those circumstances, the answer to the first and third questions is that Article 45 TFEU must be interpreted as meaning, first, that it applies to a situation, such as that at issue in the main proceedings, in which a national of a Member State, residing and working in that State, holds a diploma obtained in another Member State, which he intends to use in order to register for a competition to recruit legal secretaries at the Cour de cassation of the first Member State, and, second, that such a situation does not fall within Article 45(4) TFEU.
The second question
By its second question, the referring court asks whether the office of legal secretary at the Cour de cassation is a ‘regulated profession’ within the meaning of Directive 2005/36.
It should be borne in mind that the definition of ‘regulated profession’ within the meaning of Directive 2005/36 is a matter of EU law (see judgments in Rubino, C‑586/08, EU:C:2009:801, paragraph 23 and Peňarroja Fa, C‑372/09 and C‑373/09, EU:C:2011:156, paragraph 27).
Under Article 3(1)(a) of Directive 2005/36, ‘regulated profession’ means ‘a professional activity or group of professional activities, access to which, the pursuit of which, or one of the modes of pursuit of which is subject, directly or indirectly, by virtue of legislative, regulatory or administrative provisions to the possession of specific professional qualifications’.
As the Advocate General noted, in points 53 to 55 of her Opinion, it follows from Article 3(1)(b), (c) and (e) of Directive 2005/36 that the concept of ‘specific professional qualifications’ in Article 3(1)(a) thereof does not cover all qualifications attested by evidence of formal qualifications, but only these relating to training which is specifically designed to prepare candidates to exercise a given profession.
In the present case, the evidence of formal qualifications required by Article 259k of the Judicial Code in order to gain access to the office of legal secretary at the Cour de cassation do not specifically aim to prepare holders for that post, but give access to a wide range of legal careers.
Therefore, that evidence of formal qualifications does not confer ‘specific professional qualifications’ within the meaning of Article 3(1)(a) of Directive 2005/36, on the possession of which access to or the pursuit of the office of legal secretary at the Cour de cassation is contingent.
Furthermore, the provisions relating to that post are less like those regulating a profession but are more similar to those relating to a post at a court.
Therefore, that post does not constitute a ‘regulated profession’ for the purposes of Directive 2005/36, so that the latter is not applicable to the situation at issue in the main proceedings.
The fact that the legal secretaries at the Cour de cassation are appointed as a result of a competition, the subject-matter of which is determined in accordance with the requirements of the service, and which is valid for six years, is irrelevant to that assessment. The Court has already held that fact of having been successful in a procedure to select a predefined number of persons on the basis of a comparative assessment of the candidates rather than by application of absolute criteria, which confers a qualification the validity of which is strictly limited in time, cannot be regarded as a ‘professional qualification’ within the meaning of Article 3(1)(b) of Directive 2005/36 (see judgment in Rubino, C‑586/08, EU:C:2009:801, paragraph 32).
That is also the case where, according to the provisions of the Judicial Code, the appointment of legal secretaries to the Cour de cassation becomes permanent only after an internship of three years. It is clear from those provisions and the explanations given by the Belgian Government at the hearing that that the internship is similar to a probationary period, at the end of which a decision may be taken not to make a permanent appointment. Therefore, such an internship does not correspond to a training period which is necessary to pursue the office of legal secretary at the Cour de cassation.
In those circumstances, the answer to the second question is that Directive 2005/36 must be interpreted as meaning that the office of legal secretary at the Cour de cassation is not a ‘regulated profession’ for the purposes of that directive.
The fourth and fifth questions
Having regard to the answers to the first to third Questions, the fourth and fifth questions need be examined with regard only to Article 45 TFEU.
By its fourth and fifth questions, the referring court asks essentially whether Article 45 TFEU must be interpreted as meaning that the selection board for the competition to recruit legal secretaries for a court of a Member State, when it examines an application to take part in that competition submitted by a national of that Member State, may not make participation contingent on the possession of the diplomas required by the law of that Member State or to the recognition of academic equivalence of a master’s degree awarded by the university of another Member State without taking into consideration all the diplomas, certificates and other titles and the relevant professional experience of the person concerned, by making a comparison of the professional qualifications attested by those qualifications and those required by that law.
In this regard, it must be stated first of all that in the absence of harmonisation of the conditions of access to a particular occupation the Member States are entitled to lay down the knowledge and qualifications needed in order to pursue it and to require the production of a diploma certifying that the holder has the relevant knowledge and qualifications (see judgments in Vlassopoulou, C‑340/89, EU:C:1991:193, paragraph 9, and Peśla, C‑345/08, EU:C:2009:771, paragraph 34).
Since the conditions for access to the office of legal secretary at a court of a Member State have not, up to the present time, been harmonised at EU level, the Member States retain the power to define those conditions.
It follows that, in the present case, EU law does not preclude Belgian law from making access to the office of legal secretary at the Cour de cassation contingent on the possession of the knowledge and qualifications deemed to be necessary.
However, the fact remains that the Member States must exercise their powers in this area in a manner which respects the basic freedoms guaranteed by the FEU Treaty (see judgments in Commission v France, C‑496/01, EU:C:2004:137, paragraph 55; Colegio de Ingenieros de Caminos, Canales y Puertos, C‑330/03, EU:C:2006:45, paragraph 29; and Nasiopoulos, C‑575/11, EU:C:2013:430, paragraph 20).
In particular, the provisions of national law adopted in that connection must not constitute an unjustified obstacle to the effective exercise of the fundamental freedoms guaranteed by Article 45 TFEU (see judgments in Kraus, C‑19/92, EU:C:1993:125, paragraph 28, and Peśla, C‑345/08, EU:C:2009:771, paragraph 35).
Thus, according to settled case-law, the national rules establishing the conditions for national qualifications, even when applied in an indiscriminate manner in relation to nationality, may infringe the exercise of those fundamental freedoms if the national rules at issue fail to take account of learning, skills and qualifications already acquired by the person concerned in another Member State (see judgments in, Vlassopolou, C‑340/89, EU:C:1991:193, paragraph 15; Morgenbesser, C‑313/01, EU:C:2003:612, paragraph 62; and Peśla, C‑345/08, EU:C:2009:771, paragraph 36).
In that context, it must be recalled that the authorities of a Member State which receive a request for authorisation, submitted by an EU national, to pursue a profession to which access, under national law, depends upon the possession of a diploma or a professional qualification or periods of practical experience must take into consideration all of the diplomas, certificates and other evidence of qualifications and lies relevant experience by comparing the specialised knowledge and abilities so certified and that experience with the knowledge and qualifications required by the national legislation (see judgments in Vlassopoulou, C‑340/89, EU:C:1991:193, paragraph 16; Fernández de Bobadilla, C‑234/97, EU:C:1999:367, paragraph 31; Dreessen, C‑31/00, EU:C:2002:35, paragraph 24; and Morgenbesser, C‑313/01, EU:C:2003:612, paragraphs 57 and 58).
That comparative examination procedure must enable the authorities of the host Member State to assure themselves, on an objective basis, that the foreign diploma certifies that its holder has knowledge and qualifications which are, if not identical, at least equivalent to those attested by the national diploma. That assessment of the equivalence of the foreign diploma must be carried out exclusively in the light of the level of knowledge and qualifications which its holder can be assumed, by virtue of that diploma, to possess, having regard to the nature and duration of the studies and practical training to which the diploma relates (see judgments in Vlassopoulou, C‑340/89, EU:C:1991:193, paragraph 17; Morgenbesser, C‑313/01, EU:C:2003:612, paragraph 62; and Peśla, C‑345/08, EU:C:2009:771, paragraph 39).
In the course of the comparative examination, a Member State may however take into consideration objective differences relating to both the legal framework of the profession in question in the Member State of origin and to its field of activity (see judgments in Vlassopoulou, C‑340/89, EU:C:1991:193, paragraph 18; Morgenbesser, C‑313/01, EU:C:2003:612, paragraph 69; and Peśla, C‑345/08, EU:C:2009:771, paragraph 44).
If that comparative examination of diplomas results in the finding that the knowledge and qualifications attested by the foreign diploma correspond to those required by the national provisions, the Member State must recognise that diploma as fulfilling the requirements laid down by its national provisions. If, on the other hand, the comparison reveals that the knowledge and qualifications attested by the foreign diploma and those required by the national provisions correspond only partially, the host Member State is entitled to require the person concerned to show that he has acquired the knowledge and qualifications which are lacking (see judgments in Vlassopoulou, C‑340/89, EU:C:1991:193, paragraph 19; Fernández de Bobadilla, C‑234/97, EU:C:1999:367, paragraph 32; Morgenbesser, C‑313/01, EU:C:2003:612, paragraph 70; and Peśla, C‑345/08, EU:C:2009:771, paragraph 40).
In that regard, it is for the competent national authorities to assess whether the knowledge acquired in the host Member State, either during a course of study or by way of practical experience, is sufficient in order to prove possession of the knowledge which is lacking (see judgments in Vlassopoulou, C‑340/89, EU:C:1991:193, paragraph 20; Fernández de Bobadilla, C‑234/97, EU:C:1999:367, paragraph 33; Morgenbesser, C‑313/01, EU:C:2003:612, paragraph 71; and Peśla, C‑345/08, EU:C:2009:771, paragraph 41).
In so far as all practical experience in the pursuit of related activities can increase an applicant’s knowledge, it is incumbent on the competent national authorities to take into consideration all practical experience of use in the pursuit of the profession to which access is sought. The precise value to attach to such experience will be for the competent national authority to determine in the light of the specific functions carried out, knowledge acquired and applied in pursuit of those functions, responsibilities assumed and the level of independence accorded to the person concerned (see judgment in Vandorou and Others, C‑422/09, C‑425/09 and C‑426/09, EU:C:2010:732, paragraph 69).
The case-law set out in paragraphs 53 to 59 of the present judgment does not prevent a recruitment body, such as the selection board, from relying on a decision taken by a competent authority, such as the Equivalence Committee, Law and Criminology Section, of the French Community of Belgium, in order to determine whether the foreign qualifications in question are equivalent to the national qualifications required.
However, as regards the dispute in the main proceedings, it is apparent from the documents before the Court that the selection board rejected Mr Brouillard’s application to register for the competition to recruit legal secretaries at the Cour de cassation before that committee had given its decision on the application by the person concerned to have his vocational master’s degree recognised as equivalent to the academic master’s degree in Belgian law.
It is also clear from the documents before the Court that Mr Brouillard has not completed a course of legal training, such as that attested by the doctorate, licentiate degree or master’s degree in law from a Belgian university.
Thus, as confirmed at the hearing, it is also apparent that the vocational master’s degree relied on by Mr Brouillard does not consist of any instruction in Belgian law and does not attest to any studies of administrative law and social law, whereas the Equivalence Committee, Law and Criminology Section, of the French Community of Belgium considers that teaching in those field to be essential to the completion of postgraduate legal studies in the French Community of Belgium.
However, he also indicated at the hearing that the master’s degree consists of the study of French civil law, including the law of obligations and contract law. Therefore, it was conceivable that the knowledge and qualifications attested by that master’s degree had some relevance for the assessment of the possession of the knowledge and qualifications required to pursue the office of legal secretary at the Cour de cassation.
Furthermore, Mr Brouillard emphasised his professional experience, in particular the experience he acquired in the documentation and text alignment service of the Cour de cassation. That experience could appear to be relevant in that assessment.
Therefore, the selection board was required to examine whether Mr Brouillard’s vocational master’s degree and professional experience demonstrated that he had acquired the knowledge and qualifications required. It is for the referring court to verify whether, having regard to all the relevant circumstances of the case in the main proceedings, the selection board complied with that obligation and, if appropriate, whether the person concerned has sufficiently demonstrated that he has the necessary qualifications.
In those circumstances, the answer to the fourth and fifth questions is that Article 45 TFEU must be interpreted as meaning that it precludes, in circumstances such as those at issue in the main proceedings, the selection board for a competition for recruitment of legal secretaries at a court of a Member State, where it examines an application to participate in that competition submitted by a national of that Member State, from making that participation contingent on the possession of diplomas required by the legislation of that Member State or the recognition of academic equivalence of a master’s degree awarded by the university of another Member State, without taking into consideration all of the diplomas, certificates and other qualifications, and the relevant professional experience of the person concerned, by comparing the professional qualifications attested by those qualifications with those required by that legislation.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Second Chamber) hereby rules:
1.
Article 45 TFEU must be interpreted as meaning, first, that it applies to a situation, such as that at issue in the main proceedings, in which a national of a Member State, residing and working in that State, holds a diploma obtained in another Member State, which he intends to use in order to register for a competition to recruit legal secretaries at the Cour de cassation of the first Member State, and, second, that such a situation does not fall within Article 45(4) TFEU.
2.
Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications must be interpreted as meaning that the office of legal secretary at the Cour de cassation is not a ‘regulated profession’ within the meaning of that directive.
3.
Article 45 TFEU must be interpreted as meaning that it precludes, in circumstances such as those at issue in the main proceedings, the selection board for a competition for recruitment of legal secretaries at a court of a Member State, where it examines an application to participate in that competition submitted by a national of that Member State, from making that participation contingent on the possession of diplomas required by the legislation of that Member State or the recognition of academic equivalence of a master’s degree awarded by the university of another Member State, without taking into consideration all of the diplomas, certificates and other qualifications, and the relevant professional experience of the person concerned, by comparing the professional qualifications attested by those qualifications with those required by that legislation.
[Signatures]
( * ) Language of the case: French. |
JUDGMENT OF THE COURT (Third Chamber)
14 April 2016 ( *1 )
‛Reference for a preliminary ruling — Freedom of establishment — Article 49 TFEU — Legislation of a Member State requiring credit institutions to notify the tax authorities of deceased customers’ assets for purposes related to the collection of inheritance tax — Application of that legislation to branches established in another Member State in which banking secrecy prohibits, in principle, the disclosure of such information’
In Case C‑522/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Finance Court, Germany), made by decision of 1 October 2014, received at the Court on 19 November 2014, in the proceedings
Sparkasse Allgäu
v
Finanzamt Kempten,
THE COURT (Third Chamber),
composed of L. Bay Larsen, President of the Chamber, D. Šváby, J. Malenovský, M. Safjan, and M. Vilaras (Rapporteur), Judges,
Advocate General: M. Szpunar,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Sparkasse Allgäu, by W.-R. Bub, Rechtsanwalt,
—
Finanzamt Kempten, by L. Bachmann, acting as Agent,
—
the German Government, by T. Henze and B. Beutler, acting as Agents,
—
the Greek Government, by A. Dimitrakopoulou and A. Magrippi, acting as Agents,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the European Commission, by W. Mölls and M. Wasmeier, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 26 November 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 49 TFEU.
The request has been made in proceedings between Sparkasse Allgäu and Finanzamt Kempten (Kempten tax office) concerning the refusal of that credit institution to disclose to the Kempten tax office information relating to the accounts held with its dependent branch established in Austria by persons who, at the time of their death, had their place of residence for tax purposes in Germany.
Legal context
EU law
Directive 2006/48/EC
Article 23 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (OJ 2006 L 177, p. 1), reads as follows:
‘The Member States shall provide that the activities listed in Annex I may be carried on within their territories, in accordance with Articles 25, 26(1) to (3), 28(1) and (2) and 29 to 37 either by the establishment of a branch or by way of the provision of services, by any credit institution authorised and supervised by the competent authorities of another Member State, provided that such activities are covered by the authorisation.’
The activities referred to in Annex I to Directive 2006/48 include ‘acceptance of deposits and other repayable funds’.
Article 31 of that directive states:
‘Articles 29 and 30 shall not affect the power of host Member States to take appropriate measures to prevent or to punish irregularities committed within their territories which are contrary to the legal rules they have adopted in the interests of the general good. This shall include the possibility of preventing offending credit institutions from initiating further transactions within their territories.’
Directive 2011/16/EU
Article 8(3a) of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OJ 2011 L 64, p. 1), as amended by Council Directive 2014/107/EU of 9 December 2014 (OJ 2014 L 359, p. 1), (‘Directive 2011/16’) provides:
‘Each Member State shall take the necessary measures to require its Reporting Financial Institutions to perform the reporting and due diligence rules included in Annexes I and II and to ensure effective implementation of, and compliance with, such rules in accordance with Section IX of Annex I.
Pursuant to the applicable reporting and due diligence rules contained in Annexes I and II, the competent authority of each Member State shall, by automatic exchange, communicate within the deadline laid down in point (b) of paragraph 6 to the competent authority of any other Member State, the following information regarding taxable periods as from 1 January 2016 concerning a Reportable Account:
(a)
the name, address, [tax identification number(s) (TIN)] and date and place of birth (in the case of an individual) of each Reportable Person that is an Account Holder of the account and, in the case of any Entity that is an Account Holder and that, after application of due diligence rules consistent with the Annexes, is identified as having one or more Controlling Persons that is a Reportable Person, the name, address, and TIN(s) of the Entity and the name, address, TIN(s) and date and place of birth of each Reportable Person;
(b)
the account number (or functional equivalent in the absence of an account number);
(c)
the name and identifying number (if any) of the Reporting Financial Institution;
(d)
the account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year or period, the closure of the account;
…’
Pursuant to point D(1) of section VIII of Annex I to Directive 2011/16, the term ‘Reportable Account’ means, inter alia, a financial account that is maintained by a reporting financial institution of a Member State and is held by one or more reportable persons, provided that it has been identified as such pursuant to the due diligence procedures described in Sections II through VII of that annex.
German law
Under Paragraph 33(1) of the Law on Inheritance Tax and Gift Tax (Erbschaftsteuer- und Schenkungsteuergesetz; ‘the ErbStG’), any person who engages by way of business in the custody or management of third-party assets is required to notify, in writing, the tax office responsible for the administration of inheritance tax of those assets in his custody and those claims directed against him which, at the time of the death of the owner of those assets, formed part of the latter’s estate.
Austrian law
Under Paragraph 9(1) and (7) of the Law on Banking (Bankwesengesetz; ‘the BWG’), branches of credit institutions which have their head office in other Member States may pursue activities within the territory of the Republic of Austria but are required to comply with a number of provisions of Austrian law, including those set out in Paragraph 38 of the BWG.
Paragraph 38 of the BWG is worded as follows:
‘1. Credit institutions, their members, officers, employees and persons otherwise acting on behalf of credit institutions shall not disclose or exploit secrets which are entrusted or made accessible to them solely by reason of their business relations with customers ... (banking secrecy)…
2. There shall be no obligation to maintain banking secrecy:
…
(5)
where the customer gives express written consent to disclosure of the secret;
…’
Paragraph 101 of the BWG provides for criminal penalties in the event of a breach of banking secrecy.
The dispute in the main proceedings and the question referred for a preliminary ruling
Sparkasse Allgäu is a credit institution within the meaning of Directive 2006/48 which operates pursuant to an authorisation issued by the German authorities. It operates, inter alia, a dependent branch in Austria.
On 25 September 2008 the Kempten tax office asked Sparkasse Allgäu to supply it with the information referred to in Paragraph 33 of the ErbStG, for the period from 1 January 2001, in relation to clients of its branch established in Austria who were resident in Germany at the time of their death.
Sparkasse Allgäu lodged an appeal against that decision, but the appeal was dismissed, as was the subsequent action brought by Sparkasse Allgäu before the court of first instance. In those circumstances, the appellant in the main proceedings appealed on a point of law (‘Revision’) to the Bundesfinanzhof (Federal Finance Court).
The referring court expresses uncertainty as to whether Paragraph 33(1) of the ErbStG restricts the freedom of establishment even though the notification obligation laid down in that provision applies in the same way to all German credit institutions. According to the referring court, that requirement has the result that German credit institutions may be deterred from exercising, by means of a branch office, commercial operations in Austria. However, the referring court is also unsure (i) whether a restriction on the freedom of establishment may also arise from the combined effect of the legislation of the Member State in which the credit institution’s head office is situated, namely the Federal Republic of Germany, and the legislation of the Member State in which the branch is situated, namely the Republic of Austria, and (ii) to which Member State such a restriction must be attributed.
It was in those circumstances that the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Does the freedom of establishment (Article 49 TFEU, formerly Article 43 EC) preclude a provision in a Member State under which a credit institution established in its national territory must, on the death of a domestic testator, also notify the tax office responsible for the administration of inheritance tax in the national territory of those of the testator’s assets which are held or managed in a dependent branch of the credit institution in another Member State, where there is no similar notification obligation in the other Member State and credit institutions in that State are subject to banking secrecy any breach of which constitutes a criminal offence?’
The question referred for a preliminary ruling
By its question, the referring court essentially asks whether Article 49 TFEU must be interpreted as precluding legislation of a Member State which requires credit institutions having their head office in that Member State to notify the national authorities of assets held or managed at their dependent branches established in another Member State in the event of the death of the owner of those assets who is resident in the first Member State, in the case where there is no similar notification obligation in that second Member State and the credit institutions there are subject to banking secrecy breach of which constitutes a criminal offence.
As a preliminary point, it should be noted that Article 49 TFEU requires the elimination of restrictions on freedom of establishment. According to this provision, freedom of establishment for nationals of one Member State in the territory of another Member State includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings under the conditions laid down for its own nationals by the law of the Member State of establishment. The abolition of restrictions on freedom of establishment also applies to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of another Member State (see, inter alia, judgments in Commission v France, 270/83, EU:C:1986:37, paragraph 13; Royal Bank of Scotland, C‑311/97, EU:C:1999:216, paragraph 22; and CLT-UFA, C‑253/03, EU:C:2006:129, paragraph 13).
Under the second paragraph of Article 54 TFEU, legal persons governed by public law, save for those which are non-profit-making, also constitute companies or firms to which Article 49 TFEU applies. According to the information provided by the referring court, Sparkasse Allgäu is a legal person governed by public law to which Article 49 TFEU is applicable.
It is settled case-law that, even though, according to their wording, the provisions of the FEU Treaty on freedom of establishment are aimed at ensuring the benefit of national treatment in the host Member State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated in accordance with its legislation (judgment in Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 33 and the case-law cited).
Further, it should also be borne in mind that, under Paragraph 33(1) of the ErbStG, any person who engages by way of business in the custody or management of third-party assets is required to notify, in writing, the tax office responsible for the administration of inheritance tax of those assets in his custody and those claims directed against him which, at the time of the death of the owner of those assets, formed part of the latter’s estate.
That provision is drafted in general terms and does not make any distinction on the basis of the location in which the custody or management of the third-party assets to which it relates takes place. Consequently, the appellant in the main proceedings, which is a legal person established under German law and has its head office in Germany, is subject to the obligations arising from that provision not only with respect to the accounts held by its various agencies and branches established in Germany, but also with respect to accounts opened at its dependent branch established in Austria.
The referring court raises the question of whether the activity of a German credit institution which has opened a branch in Austria is impeded by reason of both the requirement to transmit information set out in Paragraph 33(1) of the ErbStG and the requirement to respect banking secrecy in Austria laid down by Paragraph 38(2) and Paragraph 101 of the BWG. In that regard, the referring court observes that, in order to comply with those two requirements, a credit institution in the position of the appellant in the main proceedings is obliged, under Paragraph 38(2)(5) of the BWG, to seek its clients’ consent to the possible transmission of information concerning them to the German authorities. The requirement of such consent might, in its view, lead potential clients of the Austrian branch of such a credit institution to have recourse to Austrian banks or Austrian subsidiaries of German banks inasmuch as neither of these are subject to a similar obligation to divulge information.
While it is not inconceivable that Paragraph 33(1) of the ErbStG might deter credit institutions established in Germany from opening branches in Austria, inasmuch as compliance with that obligation would place them at a disadvantage simply because they would then be subject to an obligation which is not imposed on credit institutions established in Austria, it nevertheless cannot be concluded that the existence of that obligation is liable to be classified as a restriction on freedom of establishment for the purposes of Article 49 TFEU.
In the light of the information supplied by the referring court, it must be held that, in circumstances such as those at issue in the main proceedings, the adverse consequences which might arise from an obligation such as that laid down in Paragraph 33(1) of the ErbStG result from the exercise in parallel by two Member States of their powers (i) in regard to regulating the obligations of banks and other credit institutions towards their clients with regard to maintaining banking secrecy and (ii) of fiscal supervision (see, to that effect, judgments in Kerckhaert and Morres, C‑513/04, EU:C:2006:713, paragraph 20; Columbus Container Services, C‑298/05, EU:C:2007:754, paragraph 43; and CIBA, C‑96/08, EU:C:2010:185, paragraph 25).
More specifically, under German law, compliance with banking secrecy cannot take precedence over the need to ensure that fiscal supervision is effective, for which reason Paragraph 33(1) of the ErbStG imposes, in the circumstances which it covers, an obligation to forward information to the tax authorities without the consent of the account holder concerned. By contrast, Austrian law, under Paragraph 38 of the BWG, has made the opposite choice, namely that banking secrecy must, in principle, be maintained in all regards, including with regard to the tax authorities.
It is true that a bilateral agreement concluded between the two Member States concerned, as well as measures taken at EU level, such as the mandatory automatic exchange of information provided for in Article 8(3a) of Directive 2011/16, ensure administrative cooperation in the field of taxation and therefore, in circumstances such as those in the main proceedings, make it easier for the German tax authorities to obtain the information concerned by the measure at issue in the main proceedings.
The referring court observes, however, that, even though there is an agreement providing for the exchange of information relating to tax matters, which was concluded between the Federal Republic of Germany and the Republic of Austria and entered into force on 1 March 2012, that agreement applies only to tax years or assessment periods beginning on or after 1 January 2011, and therefore does not apply to the request sent by the Kempten tax office to Sparkasse Allgäu. Likewise, Directive 2011/16 was adopted only after the facts which gave rise to the action in the main proceedings.
It must therefore be held that, under EU law as it applied at the time of the facts in the main proceedings, and in the absence of any harmonising measure in relation to the exchange of information for the requirements of fiscal supervision, Member States were free to impose on national credit institutions an obligation concerning their branches operating abroad, such as that at issue in the main proceedings, with the objective of ensuring the effectiveness of fiscal supervision, on condition that the transactions carried out in those branches are not treated in a manner that is discriminatory in comparison with transactions carried out by their national branches (see, to that effect, judgment in Columbus Container Services, C‑298/05, EU:C:2007:754, paragraphs 51 and 53, and order in KBC Bank and Beleggen, Risicokapitaal, Beheer, C‑439/07 and C‑499/07, EU:C:2009:339, paragraph 80).
As has already been noted in paragraph 22 above, Paragraph 33(1) of the ErbStG applies, according to its wording, to credit institutions which have their head office in Germany, with regard to transactions carried out both in Germany and in other Member States.
The mere fact that a notification obligation, such as that at issue in the main proceedings, is not prescribed by Austrian law cannot lead to the conclusion that the Federal Republic of Germany is precluded from imposing such an obligation. It follows from the Court’s case-law that freedom of establishment cannot be understood as meaning that a Member State is required to draw up its tax rules and, in particular, a notification obligation such as that at issue in the main proceedings on the basis of those in another Member State in order to ensure, in all circumstances, that any disparities arising from national rules are removed (see, to that effect, judgments in Columbus Container Services, C‑298/05, EU:C:2007:754, paragraph 51, and National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 62).
In view of all of the foregoing considerations, the answer to the question referred is that Article 49 TFEU must be interpreted as not precluding legislation of a Member State which requires credit institutions having their head office in that Member State to notify the national authorities of assets held or managed at their dependent branches established in another Member State in the event of the death of the owner of those assets who is resident in the first Member State, in the case where there is no similar notification obligation in that second Member State and credit institutions there are subject to banking secrecy breach of which constitutes a criminal offence.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
Article 49 TFEU must be interpreted as not precluding legislation of a Member State which requires credit institutions having their head office in that Member State to notify the national authorities of assets held or managed at their dependent branches established in another Member State in the event of the death of the owner of those assets who is resident in the first Member State, in the case where there is no similar notification obligation in that second Member State and credit institutions there are subject to banking secrecy breach of which constitutes a criminal offence.
[Signatures]
( *1 ) * Language of the case: German. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 22 April 2015 ( )
Case C‑126/14
UAB ‘Sveda’
v
Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos
(Request for a preliminary ruling from the Lietuvos vyriausiasis administracinis teismas (Lithuania))
‛Tax legislation — Value added tax — Article 168 of Council Directive 2006/112/EC — Deduction of input tax on the acquisition and manufacture of capital goods — Primary use for untaxed transactions — Secondary use for taxed transactions’
I – Introduction
1.
This request for a preliminary ruling concerns the charging of value added tax (VAT) in relation to a Baltic mythology recreational path. A Lithuanian company provides this path to visitors free of charge. The tax authorities have therefore refused the company’s application to deduct the input VAT paid on the costs of creating the path. The company regards this decision as mistaken because ultimately the visitors are indeed meant to make some sort of payment, if not for using the path itself then at least for food and drink, souvenirs and other services provided by the company.
2.
Determining who is right in the case in the main proceedings thus depends on how a direct and immediate link is to be established between input and output transactions, which in case-law is decisive for the question of VAT deduction. Although the abstract requirements for this link have been set out previously, their specific application may sometimes require further clarification, as in this case.
II – Legal framework
3.
During the period to which the case in the main proceedings relates, VAT is governed in the European Union by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’). ( )
4.
The first subparagraph of Article 9(1) of the VAT Directive defines the term ‘taxable person’ as any person who, ‘independently, carries out in any place any economic activity, whatever the purpose or results of that activity’. The second subparagraph of the provision adds:
‘Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’
5.
Under Article 2(1)(a) and (c) of the VAT Directive the ‘supply of goods’ and ‘services’‘for consideration within the territory of a Member State by a taxable person acting as such’ is taxable.
6.
Article 26(1) of the VAT Directive adds:
‘Each of the following transactions shall be treated as a supply of services for consideration:
(a)
the use of goods forming part of the assets of a business for the private use of a taxable person or of his staff or, more generally, for purposes other than those of his business, where the VAT on such goods was wholly or partly deductible;
…’
7.
Article 168 of the VAT Directive provides for the following right of deduction of a taxable person:
‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a)
the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
…’
8.
This provision corresponds to Article 17(2) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, ( ) which was in force until 31 December 2006. The case-law adopted by the Court in respect of this legislation will also be taken into consideration in this case.
9.
Finally, Article 187 of the VAT Directive provides the following regarding the adjustment of the VAT deduction:
‘1. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured.
…
2. The annual adjustment shall be made only in respect of one fifth of the VAT charged on the capital goods …
The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.’
10.
Lithuanian law contains provisions equivalent to those provisions of the VAT Directive.
III – Main proceedings
11.
The company Sveda UAB (‘Sveda’) is the applicant in the main proceedings. The question at issue in this dispute is its right of deduction.
12.
In 2012 Sveda was working on the creation of a ‘Baltic mythology recreational/discovery path’ (‘the recreational path’). It created paths, steps, observation decks, campfire sites, an information stand and car parks.
13.
The work on creating this recreational path was performed on the basis of the obligations under an agreement that Sveda had entered into with the National Paying Agency under the Ministry of Agriculture (‘the Agency’). Under this agreement Sveda is required to provide the public with access to the recreational path free of charge. The agreement also establishes that Sveda is to be reimbursed up to 90% of the costs of setting up the path in the form of a ‘grant’.
14.
According to the findings of the national court, Sveda intends to carry out an independent economic activity within the meaning of Article 9(1) of the VAT Directive in the tourism sector. Visitors to the recreational path would thus be offered services, such as the sale of food or souvenirs, for consideration.
15.
In its VAT declaration Sveda claimed the input VAT that it had paid on goods and services purchased during the work of creating the recreational path. However, the Lithuanian tax authorities refused to reimburse those input VAT amounts because it had not, in their view, been shown that the goods and services purchased by Sveda were used for an activity subject to VAT.
IV – Procedure before the Court
16.
The Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania), seised of the case, referred the following question to the Court on 17 March 2014 under Article 267(3) TFEU:
‘Can Article 168 of the VAT Directive be interpreted as granting a taxable person the right to deduct the input VAT paid in producing or acquiring capital goods intended for business purposes, such as those in the present case, which (i) are directly intended for use by members of the public free of charge, but (ii) may be recognised as a means of attracting visitors to a location where the taxable person, in carrying out his economic activities, plans to supply goods and/or services?’
17.
In the proceedings before the Court, the Republic of Lithuania, the United Kingdom of Great Britain and Northern Ireland, and the European Commission all submitted written observations in July 2014 and attended the hearing held on 4 February 2015.
V – Legal assessment
18.
By referring this question for a preliminary ruling the national court seeks to ascertain whether a taxable person in a situation like that in the main proceedings enjoys a right of deduction under Article 168 of the VAT Directive.
19.
This provision states that a ‘taxable person’ is entitled to deduct the tax on his input transactions in so far as [the goods and services] ‘are used for the purposes of the taxed transactions’.
A – Allocation of the capital goods to the assets of the business
20.
In the case at hand, the Republic of Lithuania regards any right of deduction as excluded precisely because Sveda, although in principle a taxable person, did not act as such when creating the recreational path.
21.
According to settled case-law, the deduction of input VAT paid on purchased goods does indeed require that the taxable person should act as such when purchasing the goods, i.e. at least also for the purposes of his economic activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive. ( ) The same applies to goods produced by the taxable person. ( )
22.
In the final analysis, the purpose of this requirement is that goods should be allocated to the taxable person’s business assets in whole or in part so that any deduction of input VAT in respect of the purchase or manufacture of the goods is not excluded at the outset. ( ) According to the case-law, whether this is the case must be determined in the light of all the circumstances of the case, including the nature of the goods concerned and the period between the acquisition of the goods and their use for the purposes of the taxable person’s economic activity. ( )
23.
It is on this basis that the Republic of Lithuania questions the finding already made by the national court, whereby the capital goods at issue would belong to Sveda’s business assets. It argues that, under the agreement entered into with the Agency, Sveda is required to make the recreational path available to the public free of charge and may not use it for an economic activity until a later date. It follows from this that Sveda did not initially act as a taxable person.
24.
However, the Court has several times ruled that a person who acquires goods for the purposes of an economic activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive does so as a taxable person, even if the goods were not immediately used for such economic activities. ( )
25.
Consequently, the national court correctly found that Sveda did act as a taxable person when acquiring or manufacturing the capital goods and that those capital goods must therefore be allocated to its business assets.
B – Use for the purposes of taxed transactions
26.
In order for Sveda to have a right of deduction, however, the capital goods would have not only to be allocated to its business assets, in other words, serve its economic activity generally, but also be used for the purposes of its taxed transactions in accordance with Article 168 of the VAT Directive.
27.
The use to which the goods are put, or intended to be put, determines the extent of the deduction of input tax. ( ) The intended use is often decisive in this respect, for, in accordance with Articles 63 and 167 of the VAT Directive, the right to deduct arises in principle as soon as the taxable person receives goods or services, in other words often before he himself has provided his output transactions. ( )
28.
The intended use of the capital goods acquired or manufactured by Sveda has already been established in the main proceedings.
29.
On the one hand, the recreational path is to be made available to the public free of charge. This operation is not taxed. There is no tax obligation deriving either from Article 2(1)(c) of the VAT Directive, because Sveda does not make visitors pay, or from its Article 26(1)(a), because the capital goods are not used for purposes other than those of its business within the meaning of this provision. Use for purposes other than those of his business is certainly excluded when the use of capital goods must be allocated to the taxable person’s economic activity. ( ) None the less, the national court has previously found that Sveda did act for the purposes of its economic activity when creating the path. ( )
30.
On the other hand, the recreational path is also meant to attract visitors so that Sveda can offer them goods and services. These processes would be taxed under Article 2(1)(a) and (c) of the VAT Directive.
31.
The acquisition or manufacture of the capital goods thus serves two different aims. First and foremost of these is the provision of the recreational path to the public free of charge (primary use), which confers no right of deduction under Article 168 of the VAT Directive. However, besides that there is the use of the recreational path as a means of providing visitors with taxable services (secondary use), which gave rise to a right of deduction. Hence the question is: which of these two aims is decisive under Article 168 of the VAT Directive?
32.
In BLP Group, the Court came to the general conclusion on this question that a direct and immediate link of the acquired goods or services with the taxable transactions is necessary and that the ‘ultimate’ aim pursued by the taxable person is irrelevant in this respect. ( ) The Court therefore refused the deduction of input VAT in a situation in which services had been provided to the taxable person in relation to the exempt sale of shares, even though this sale was a means of enabling the taxable activity of the taxable person. In other words, the Court made a distinction in this case between the solely decisive primary and the merely secondary use of an input transaction.
33.
However, the Court has further developed its case-law since that case. It still remains the case that for Article 168 of the VAT Directive to apply a direct and immediate link must have been found between a given input transaction under examination and a particular output transaction or transactions giving rise to the right of deduction. ( ) Such a link may nevertheless also exist with the economic activity of the taxable person as a whole if the costs of the input transactions form part of the general costs of the taxable person and are therefore cost components of all goods or services delivered or provided by him. ( )
34.
According to recent case-law, the decisive factor for a direct and immediate link is consistently that the cost of the input transactions be incorporated in the cost of individual output transactions or of all goods and services supplied by the taxable person. ( ) This applies irrespective of whether the use of goods or services by the taxable person is at issue. ( )
35.
Consequently, there is a right of deduction in the present case if the cost of acquiring or manufacturing the capital goods of the recreational path is incorporated, in accordance with case-law, in the cost of the output transactions, taxed under the VAT Directive.
36.
In the situation to which the case in the main proceedings relates there are various output transactions that could meet this requirement. One possibility might be the taxable services that Sveda wishes to provide to visitors of the recreational path and that are the subject of the question referred for a preliminary ruling (see point 2 below). On the other hand, a relevant taxed output transaction could also be the creation of the recreational path itself. This possibility was not considered by the national court in its order for reference. However, it must be the first possibility to be examined, since the outcome could make the answer to the specific question referred irrelevant for the main proceedings (see point 1 below).
1. The creation of the recreational path as a taxed output transaction
37.
It might be possible to assert that there exists a right of deduction in the main proceedings — irrespective of the answer to the specific question referred for a preliminary ruling — if the creation of the recreational path by Sveda itself constituted a taxed output transaction. In other words, the creation of the recreational path could constitute a service for consideration with respect to the Agency, which would be taxable under Article 2(a) or (c) of the VAT Directive.
38.
According to settled case-law, a transaction effected for a consideration requires only there to be a direct link between the supply of goods or the provision of services and the consideration actually received by the taxable person. ( ) Such a direct link merely requires there to be a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, ( ) as well as the reciprocal condition of service and consideration. ( ) Even supplying goods or services at less than the cost price does not mean that there can be no direct link between supply and consideration. ( )
39.
According to the information provided by the national court, Sveda undertook to create the recreational path under an agreement with the Agency. In return, Sveda received from the party contracting its services a payment of 90% of the costs incurred, described as a ‘grant’. However, it is not possible to arrive at a definitive assessment of whether there is a direct link as understood in the cited case-law between the creation of the recreational path and the ‘grant’ without knowing the precise content of the agreement.
40.
Should the examination of the national court conclude that Sveda has already provided a taxed transaction under Article 2(a) or (c) of the VAT Directive by creating the recreational path, the acquisition or manufacture of the capital goods of the recreational path would be linked directly and immediately with this taxed output transaction. For there is no doubt in that case that the costs of these input transactions would be incorporated into the price, since the amount of the payment by the Agency is calculated precisely on the basis of those costs.
2. Reply to the question referred
41.
However, should the national court find that the creation of the recreational path by Sveda does not represent a taxed transaction, the right of deduction would then depend solely on whether the capital goods of the recreational path are used, for the purposes of Article 168 of the VAT Directive, for the provision of chargeable services to visitors in the future. For that to be the case, the costs of the acquisition and manufacture of these capital goods would have to be incorporated into the cost of these services.
a) Objective definition of costs
42.
Contrary to the view of the United Kingdom, this question is independent of the taxable person’s intention of incorporating the relevant costs into the pricing of his output transaction.
43.
In accordance with the judgment in Becker, the finding of a direct and immediate link between the input and output transactions depends on the objective content of the input supplies acquired. ( ) In the BLP Group judgment the Court had already found to this effect that the link required between input and output transactions may not be determined by the taxable person’s intentions. ( )
44.
Furthermore, in the common system of VAT services are also taxed which were provided at less than cost price. ( ) Where this occurs, the pricing is set subjectively by the taxable person without including all the costs of providing the output transaction. None the less, where this is the case there is no doubt that all input transactions that objectively belong to the cost components of the output transactions in accordance with the second subparagraph of Article 1(2) of the VAT Directive also confer entitlement to deduct input VAT. According to settled case-law, the right of deduction is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities, ( ) because in the common system of VAT it is ultimately not the taxable trader, but the final consumer who is intended to be taxed. ( )
45.
The existence of an objective economic link between input and output transactions is therefore crucial to the question whether the costs are incorporated into the price of a service as understood in case-law. ( ) A merely causal link is clearly not sufficient. ( ) However, if an input transaction objectively serves the purpose of the performance of certain or all output transactions of a taxable person, there is a direct and immediate link between the two as understood in case-law. This is because in such a case the input transaction constitutes, from an economic perspective, a cost component in the provision of the respective output transaction. As the wording of Article 168 of the VAT Directive already indicates, that therefore depends on the objective purpose of the use of an input transaction.
46.
In the present case the national court found that the creation of the recreational path serves to attract visitors who may then be supplied with goods and services for consideration. Consequently, the creation of the recreational path belongs, from an economic perspective, to the cost components of these transactions.
47.
It follows that there is in principle a direct and immediate link, as understood in case-law, between the acquisition or manufacture of the capital goods of the recreational path and the chargeable services offered to visitors.
b) Primary use for untaxed output transactions
48.
The fact that the recreational path is made available to visitors free of charge does not exclude the right of deduction.
49.
Although this is the primary use of the capital goods of the recreational path, such use may break the direct and immediate link with secondary use for taxed output transactions in two cases only. ( )
50.
The first case is if the primary use is for supplies provided for a consideration but exempt from VAT. Here the input transactions belong to the cost components of exempt output transactions and are thus incorporated into their price. However, Article 168 et seq. of the VAT Directive provides, in principle, no right of deduction for these transactions. According to case-law, it is irrelevant in such a situation that the input transactions serve an additional ‘ultimate’ aim that also entails taxed output transactions. ( )
51.
In the case at hand, however, the primary use is not for exempt chargeable transactions, but for use free of charge.
52.
The second case in which a direct and immediate link would be broken between the input transactions and the provision of chargeable services to visitors is if the primary use of the recreational path for use by visitors free of charge represented a non-economic activity of Sveda. This is because in the case-law there is no right of deduction for a taxable person’s expenditure in so far as it is linked to the exercise of non-economic activities. ( )
53.
However, this is not the case here, according to the findings of the national court. ( ) The mere fact that a service is provided free of charge does not form the basis — contrary to the Commission’s view — for a non-economic activity of a taxable person. In this respect the United Kingdom rightly referred at the hearing to the example of a shopping centre that provides customers with free parking.
c) Breach of the agreement with the Agency
54.
Moreover, even if including the costs involved in creating the recreational path in the pricing of the chargeable services that it is envisaged will be offered to visitors might be in breach of the agreement with the Agency, this would be irrelevant to the right of deduction. This point has been considered by the national court.
55.
However, such a breach cannot impinge on the VAT assessment nor, as indicated, ( ) is it relevant for the VAT deduction whether Sveda does in fact incorporate the costs in its pricing.
d) Infringement of Regulation (EC) No 1698/2005
56.
Nor, likewise, does Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development, ( ) cited by the national court, have any bearing on the assessment of the present case in the light of VAT law.
57.
Even if use of the recreational path by Sveda were to be in breach of Article 36(b)(vii) of this Regulation, cited by the national court and on the basis of which support for ‘non-productive investments’ may be granted, this would not affect the right of deduction. According to well-established case-law, the principle of fiscal neutrality precludes a differentiation between lawful and unlawful transactions. ( )
e) Influence of the adjustment period
58.
The objection raised by the Republic of Lithuania relating to the provisions dealing with the adjustment of the input VAT deduction does not prevent the right of deduction in this case, either.
59.
Under Article 187 of the VAT Directive, the original deduction of input VAT when acquiring or manufacturing capital goods is adjusted if there are any variations of significance to the deduction entitlement within a period of five years.
60.
The Republic of Lithuania concludes from this that capital goods must be used for an economic activity within a period of five years of their acquisition or manufacture. Otherwise there would be no right of deduction.
61.
First, according to the case-law the adjustment period has no influence on the determination of whether a taxable person acts for the purposes of his economic activity at the time he acquires or manufactures the goods. ( ) Second, nor is it apparent in the present case that the capital goods are used within the adjustment period for purposes that would exclude the deduction of input VAT. Even if visitors to the recreational path are not initially offered any services that must be paid for, this alters nothing in the use of the capital goods for Sveda’s economic activity if it can be established, on the basis of objective circumstances, that such offers are still envisaged.
f) Amount of the deduction
62.
Finally, it must be examined whether the fact that the Agency has reimbursed Sveda up to 90% of the costs for the acquisition or manufacture of the capital goods at issue has a bearing on the amount of the deduction.
63.
The United Kingdom considers this aspect to be crucial in appraising the question of the extent to which the input transactions are incorporated in the price of the output transactions.
64.
Together with the Republic of Lithuania and the Commission, however, I take the view that the partial reimbursement of costs by the Agency has no effect on the amount of the deduction. What matters under Article 168 of the VAT Directive is solely whether the input transactions are used for taxed output transactions. How the input transactions are financed, conversely, has no bearing.
65.
Accordingly, the Court has previously ruled that legislation by a Member State under which the right to deduct VAT is limited to those cases in which the purchased goods are financed by means of a state subsidy is not compatible with the European Union’s VAT legislation. ( )
66.
A taxable person in the circumstances of the case in the main proceedings has, therefore, in principle a right to the full deduction of VAT paid on input transactions relating to the acquisition or manufacture of the capital goods at issue.
VI – Conclusion
67.
In the light of the foregoing I propose that the reply to the question referred should be:
Article 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted to the effect that a taxable person has the right to deduct input VAT paid in producing or acquiring capital goods, which (i) are directly intended for use by members of the public free of charge, but which (ii) are used as a means of attracting visitors to a place where the taxable person, in carrying out his economic activities, plans to supply goods and/or services.
( ) Original language: German.
( ) OJ 2006 L 347, p. 1.
( ) OJ 1977 L 145, p. 1.
( ) See judgments in Lennartz (C‑97/90, EU:C:1991:315, paragraph 15); Bakcsi (C‑415/98, EU:C:2001:136, paragraph 29); Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraphs 57 and 58); and Klub (C‑153/11, EU:C:2012:163, paragraphs 39 and 40).
( ) See my Opinion in X (C‑334/10, EU:C:2012:108, point 25 and the case-law cited therein).
( ) See, to this effect, judgments in Bakcsi (C‑415/98, EU:C:2001:136, paragraphs 28 and 29), and Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraphs 56 to 59); see also Article 168a of the VAT Directive.
( ) Judgments in Lennartz (C‑97/90, EU:C:1991:315, paragraph 21); Bakcsi (C‑415/98, EU:C:2001:136, paragraph 29); Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraph 58); and Klub (C‑153/11, EU:C:2012:163, paragraphs 39 and 40).
( ) Judgments in Lennartz (C‑97/90, EU:C:1991:315, paragraph 14); Klub (C‑153/11, EU:C:2012:163, paragraph 44); and Gran Via Moineşti (C‑257/11, EU:C:2012:759, paragraph 25).
( ) See, inter alia, judgments in Lennartz (C‑97/90, EU:C:1991:315, paragraph 15); X (C‑334/10, EU:C:2012:473, paragraph 17); and FIRIN (C‑107/13, EU:C:2014:151, paragraph 49).
( ) See judgment in Klub (C‑153/11, EU:C:2012:163, paragraph 36); see also my Opinion in X (C‑334/10, EU:C:2012:108, No 81 and the case-law cited therein).
( ) See, to this effect, judgment in BCR Leasing IFN (C‑438/13, EU:C:2014:2093, paragraph 26); see also further judgments in Vereniging Noordelijke Land- en Tuinbouw Organisatie (C‑515/07, EU:C:2009:88, paragraph 38), and Gemeente ’s-Hertogenbosch (C‑92/13, EU:C:2014:2188, paragraph 25).
( ) See points 23 to 25 above.
( ) Judgment in BLP Group (C‑4/94, EU:C:1995:107, paragraph 19); similarly the recent judgment in Portugal Telecom (C‑496/11, EU:C:2012:557, paragraph 38).
( ) See, inter alia, judgments in Midland Bank (C‑98/98, EU:C:2000:300, paragraph 24); Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 79); and Malburg (C‑204/13, EU:C:2014:147, paragraph 34).
( ) See, to this effect, inter alia, judgments in Midland Bank (C‑98/98, EU:C:2000:300, paragraphs 30 and 31); Investrand (C‑435/05, EU:C:2007:87, paragraph 24); SKF (C‑29/08, EU:C:2009:665, paragraphs 58 and 60); Becker (C‑104/12, EU:C:2013:99, paragraph 20); and Malburg (C‑204/13, EU:C:2014:147, paragraph 38).
( ) See, inter alia, judgments in SKF (C‑29/08, EU:C:2009:665, paragraph 60); X (C‑651/11, EU:C:2013:346, paragraph 55); and PPG Holdings (C‑26/12, EU:C:2013:526, paragraph 23); see previously, to this effect, judgment in Kretztechnik (C‑465/03, EU:C:2005:320, paragraph 36).
( ) See, in this regard, my Opinion in TETS Haskovo (C‑234/11, EU:C:2012:352, point 31 and the case-law cited therein).
( ) See, in particular, judgment in Serebryannay vek (C‑283/12, EU:C:2013:599, paragraph 37 and the case-law cited therein).
( ) See, inter alia, judgments in Tolsma (C‑16/93, EU:C:1994:80, paragraph 14); MKG-Kraftfahrzeuge-Factoring (C‑305/01, EU:C:2003:377, paragraph 47); and Le Rayon d’Or (C‑151/13, EU:C:2014:185, paragraph 29).
( ) See, inter alia, judgments in Tolsma (C‑16/93, EU:C:1994:80, paragraphs 13 to 20); and Fillibeck (C‑258/95, EU:C:1997:491, paragraphs 12 to 17); see also the Opinion of Advocate General Stix-Hackl in Bertelsmann (C‑380/99, EU:C:2001:129, point 32).
( ) See, to this effect, judgment in Hotel Scandic Gåsabäck (C‑412/03, EU:C:2005:47, paragraph 22).
( ) Judgment in Becker (C‑104/12, EU:C:2013:99, paragraphs 22, 23 and 33).
( ) See judgment in BLP Group (C‑4/94, EU:C:1995:107, paragraph 24).
( ) See point 38 above.
( ) See, inter alia, judgments in Rompelman (268/83, EU:C:1985:74, paragraph 19); Ghent Coal Terminal (C‑37/95, EU:C:1998:1, paragraph 15); Halifax and Others (C‑255/02, EU:C:2006:121, paragraph 78); Securenta (C‑437/06, EU:C:2008:166, paragraph 25); and Idexx Laboratories Italia (C‑590/13, EU:C:2014:2429, paragraph 32).
( ) See, inter alia, judgments in Elida Gibbs (C‑317/94, EU:C:1996:400, paragraph 19); Pelzl and Others (C‑338/97, C‑344/97 and C‑390/97, EU:C:1999:285, paragraph 21); KÖGÁZ and Others (C‑283/06 and C‑312/06, EU:C:2007:598, paragraph 51); and Lebara (C‑520/10, EU:C:2012:264, paragraph 25).
( ) See judgment in AES-3C Maritza East 1 (C‑124/12, EU:C:2013:488, paragraph 31).
( ) See judgment in Becker (C‑104/12, EU:C:2013:99, paragraph 31).
( ) On the possibility of breaking this link, see judgment TETS Haskovo (C‑234/11, EU:C:2012:644, paragraph 34).
( ) See judgments in BLP Group (C‑4/94, EU:C:1995:107, paragraph 19); SKF (C‑29/08, EU:C:2009:665, paragraphs 62 and 71); and X (C‑651/11, EU:C:2013:346, paragraph 56).
( ) Judgments in Securenta (C‑437/06, EU:C:2008:166, paragraph 30), and Vereniging Noordelijke Land- en Tuinbouw Organisatie (C‑515/07, EU:C:2009:88, paragraph 37).
( ) See points 23 to 25 above.
( ) See points 42 to 45 above.
( ) OJ 2005 L 277, p. 1.
( ) See, in particular, judgments in Fischer (C‑283/95, EU:C:1998:276, paragraph 28); CPP (C‑349/96, EU:C:1999:93, paragraph 33); and GfBk (C‑275/11, EU:C:2013:141, paragraph 32).
( ) See judgment Lennartz (C‑97/90, EU:C:1991:315, paragraph 20).
( ) See judgment in Commission v France (C‑243/03, EU:C:2005:589, paragraph 33). |
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 10 September 2015 ( )
Case C‑428/14
DHL Express (Italy) Srl,
DHL Global Forwarding (Italy) SpA
v
Autorità Garante della Concorrenza e del Mercato
(Request for a preliminary ruling from the Consiglio di Stato (Italy))
‛Competition policy — Article 101 TFEU — Agreements, decisions and concerted practices — International freight forwarding sector — Leniency — Cooperation between the Commission and the competition authorities of the Member States (NCA) — European competition network (ECN) — ECN Model Leniency Programme — Binding nature or otherwise of the ECN Model Leniency Programme for NCAs — Relationship between an application for immunity submitted to the Commission and a summary application for immunity submitted to an NCA’
I – Introduction
1.
The present request for a preliminary ruling, lodged at the Registry of the Court by the Council of State (Consiglio di Stato, Italy) on 18 September 2014, concerns the interpretation of Article 101 TFEU, Article 4(3) TEU and Article 11 of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 [EC] and 82 [EC]. ( )
2.
The request was made in the context of proceedings brought by DHL Express (Italy) Srl and DHL Global Forwarding (Italy) SpA (together referred to as ‘DHL’), which are subsidiaries of Deutsche Post AG, against the Autorità Garante della Concorrenza e del Mercato (Authority responsible for competition compliance and enforcement of market rules; ‘the Autorità’).
II – Legal background
A – Regulation No 1/2003
3.
Recital 15 of Regulation No 1/2003 reads:
4.
Article 11 of Regulation No 1/2003, headed ‘Cooperation between the Commission and the competition authorities of the Member States’, is worded as follows:
‘1. The Commission and the competition authorities of the Member States shall apply the Community competition rules in close cooperation.
2. The Commission shall transmit to the competition authorities of the Member States copies of the most important documents it has collected with a view to applying Articles 7, 8, 9, 10 and Article 29(1). At the request of the competition authority of a Member State, the Commission shall provide it with a copy of other existing documents necessary for the assessment of the case.
3. The competition authorities of the Member States shall, when acting under Article 81 [EC] or Article 82 [EC], inform the Commission in writing before or without delay after commencing the first formal investigative measure. This information may also be made available to the competition authorities of the other Member States.
4. No later than 30 days before the adoption of a decision requiring that an infringement be brought to an end, accepting commitments or withdrawing the benefit of a block exemption regulation, the competition authorities of the Member States shall inform the Commission. To that effect, they shall provide the Commission with a summary of the case, the envisaged decision or, in the absence thereof, any other document indicating the proposed course of action. This information may also be made available to the competition authorities of the other Member States. At the request of the Commission, the acting competition authority shall make available to the Commission other documents it holds which are necessary for the assessment of the case. The information supplied to the Commission may be made available to the competition authorities of the other Member States. National competition authorities may also exchange between themselves information necessary for the assessment of a case that they are dealing with under Article 81 [EC] or 82 [EC].
5. The competition authorities of the Member States may consult the Commission on any case involving the application of Community law.
6. The initiation by the Commission of proceedings for the adoption of a decision under Chapter III shall relieve the competition authorities of the Member States of their competence to apply Articles 81 [EC] and 82 [EC]. If a competition authority of a Member State is already acting on a case, the Commission shall only initiate proceedings after consulting with that national competition authority.’
B – Commission Notice on Cooperation within the Network of Competition Authorities ( )
5.
Paragraph 1 of the Notice on Cooperation within the NCA states:
6.
Under paragraph 38 of that notice:
C — The ECN Model Leniency Programme
7.
Within the framework of the ECN, a model leniency programme was adopted during the year 2006 (‘the 2006 ECN Model Leniency Programme’). That programme, which has not been published and is available only in English, French and German, can be consulted on the Commission Internet site. ( ) It was revised in November 2012 ( ) (‘the 2012 ECN Model Leniency Programme’), that is to say, after the events in the main proceedings, including the contested decision of the Autorità.
8.
Paragraph 5 of the 2006 ECN Model Leniency Programme provides, with regard to immunity from ‘Type 1A’ fines:
9.
According to paragraph 2 of the Explanatory notes annexed to the 2006 ECN Model Leniency Programme, ‘[t]he purpose of leniency programmes is to assist CAs in their efforts to detect and terminate cartels and to punish cartel participants. The CAs consider that … voluntary assistance with the above objectives has an intrinsic value for the economic well-being of individual Member States as well as the Common Market which may justify immunity in certain cases (Type 1A and 1B) and a reduction of … any fine in others (Type 2).’
10.
Paragraphs 22 to 25 of the 2006 ECN Model Leniency Programme concern ‘[s]ummary applications in Type 1A cases’.
11.
Paragraph 22 of the 2006 ECN Model Leniency Programme provides that ‘where the Commission is “particularly well placed” to deal with a case in accordance with paragraph 14 of the Network Notice, the applicant that has or is in the process of filing an application for immunity with the Commission may file summary applications with any NCAs which the applicant considers might be “well placed” to act under the Network Notice. Summary applications should include a short description of the following:
—
the name and address of the applicant;
—
the other parties to the alleged cartel;
—
the affected product(s);
—
the affected territory(-ies);
—
the duration;
—
the nature of the alleged cartel conduct;
—
the Member State(s) where the evidence is likely to be located; and
—
information on its other past or possible future leniency applications in relation to the alleged cartel.’
12.
Paragraph 24 of the 2006 ECN Model Leniency Programme provides that ‘[s]hould an NCA having received a summary application decide to request specific further information, the applicant should provide such information promptly. Should an NCA decide to act upon the case, it will determine a period of time within which the applicant must make a full submission of all relevant evidence and information required to meet the threshold. If the applicant submits such information within the set period, the information provided will be deemed to have been submitted on the date when the summary application was made.’
C – National law
13.
On 15 February 2007, the Autorità adopted a Notice on the non-imposition or reduction of penalties under Article 15 of Law No 287/90 (‘Communicazione sulla non imposizione e sulla riduzione delle sanzioni ai sensi dell’articolo 15 della legge 287/90), which contains the national leniency programme (‘the Autorità Notice’).
14.
Article 16 of that programme, entitled ’Summary application’, provides as follows:
‘In cases where the Commission is best placed to deal with a case and conduct the procedure, an undertaking which has submitted or is preparing to submit to the Commission an application for non-imposition of penalties may submit to the Autorità a similar application for leniency, drafted in “summary” form, where it considers that the Autorità is also in a position to take action in the matter. Pursuant to [paragraph] 14 of the Commission Notice on Cooperation within the Network of Competition Authorities, the Commission is best placed where one or more agreements or practices, including networks of agreements or of similar practices, have an impact on competition in more than three Member States.’
15.
Article 17 of that programme provides that ‘a summary leniency application seeking non-imposition of penalties must contain at least:
a)
the name and address of the applicant undertaking;
b)
the name and address of the other undertakings participating in the cartel;
c)
a description of the cartel in question, including:
—
specific details of the nature of the cartel;
—
an indication of the goods and services covered by the cartel, its geographic extent and its duration;
d)
an indication of the Member States in which the evidence of the infringement may be likely to be obtained;
e)
information concerning other applications for leniency which the undertaking has already submitted or intends submitting to other competition authorities in connection with the same infringement.’
16.
According to Article 18 of that programme, ‘[T]he Autorità shall issue, at the request of the undertaking, an acknowledgement confirming the date and time of receipt of the summary application and shall inform it whether it is in principle still possible to allow non-imposition of penalties in respect of the cartel in question. If the Autorità considers it useful to seek additional information, it shall set a period within which the undertaking must furnish such information. If the Autorità decides to take action in the case, it shall set a period for completion of the application for leniency and allow the undertaking to produce the information and evidence referred to in paragraph 3. If the application is completed within the period set by the Autorità, it shall be regarded as received in its entirety as at the date of submission of the summary application ...’.
III – The facts of the main proceedings and the questions referred to the Court
17.
On 5 June 2007, DHL submitted to the European Commission an application for an immunity marker under its Notice on immunity from fines and reduction of fines in cartel cases, ( ) in this case a cartel infringing Article 101 TFEU in the sector of international sea, air and road freight forwarding. ( )
18.
On 24 September 2007, the Commission granted DHL conditional immunity for the entire international freight forwarding sector, namely the sea, air and road sectors.
19.
On 20 December 2007, DHL brought to the attention of the Commission certain information concerning the conduct of undertakings in the international road freight forwarding sector in Italy.
20.
However, the Commission subsequently decided to pursue only the part of the cartel concerning international air freight forwarding services. By decision of 28 March 2012, it found that certain undertakings had participated for several years in a cartel in the international air freight forwarding services sector, in breach of Article 101 TFEU. ( ) It considered that the Deutsche Post AG group had been the first undertaking to provide information and evidence meeting the conditions of paragraph 8(a) of its Leniency Notice and the amount of the fine to be imposed on it was reduced by 100% for the infringements in question.
21.
Similarly, on 12 July 2007, DHL submitted to the Autorità a summary application for immunity under Article 16 of the Autorità Notice. It provided information concerning conduct in the international freight forwarding sector.
22.
It is apparent from the request for a preliminary ruling that, according to the Autorità and the interveners, namely Agility Logistics Srl (‘Agility’) and Schenker Italiana SpA, a subsidiary of Deutsche Bahn AG (‘Schenker’), the summary application for immunity submitted by DHL did not concern the international road freight forwarding sector.
23.
In contrast, according to DHL, its summary application of 12 July 2007 concerned illegal conduct observed throughout the international freight forwarding and transport market. DHL considered, in particular, that, whilst it was true that its summary application did not give actual and specific examples of conduct observed in relation to road freight forwarding, that was merely due to the fact that such conduct had not yet been discovered.
24.
On 23 June 2008, DHL submitted to the Autorità an additional summary application for non-imposition of a fine, supplementing the application initially submitted on 12 July 2007. According to DHL, ‘the present declaration merely constitutes, for all purposes and effects, a supplement to the application submitted on 12 July 2007, in so far as the additional conduct to which it relates does not amount to a separate infringement not covered by the original declaration and is nothing more than a new manifestation of infringements already reported and, as such, the Commission took account of them for the purposes of the leniency granted to the undertaking’.
25.
On 5 November 2007, Deutsche Bahn AG submitted to the Commission a leniency application, in its own name and in that, in particular, of Schenker, concerning conduct relating to international sea freight forwarding. That statement was supplemented on 19 November 2007 when Deutsche Bahn AG/Schenker provided the Commission with information on the Italian road freight forwarders’ cartel.
26.
On 12 December 2007, Schenker submitted to the Autorità a summary application for leniency, providing information on the Italian road freight forwarders’ cartel.
27.
On 20 November 2007, Agility submitted to the Commission a summary application for reduction of a fine on behalf of the group to which it belongs.
28.
On 12 May 2008, Agility Logistics International BV, the parent company of the group to which Agility belongs, submitted orally to the Autorità, on behalf also of the companies controlled by it, which include Agility, a summary application for leniency.
29.
By decision of 15 June 2011, in Case 1722 — International logistics (Procedure No 22521), (‘the contested decision’), the Autorità decided that several undertakings, including DHL, Schenker and Agility Logistics International BV had, in breach of Article 101 TFEU, taken part in a cartel in the international road freight forwarding sector affecting operations to and from Italy.
30.
In the contested decision, the Autorità recognised that Schenker was the first company to have applied for immunity from fines in Italy for road freight forwarding. Under the national leniency programme, that company had no fine imposed on it. On the other hand, DHL and Agility were ordered to pay a fine, reduced respectively to 49% and 50% of the initial amount.
31.
The Autorità considered that, in its application of 12 July 2007, DHL had requested immunity from fines only for air freight and sea freight forwarding, the application in respect of road forwarding having been filed by DHL only on 23 June 2008.
32.
DHL brought a claim for partial annulment of the contested decision before the Tribunale amministrativo regionale per il Lazio (Regional Administrative Court for Lazio, Italy; ‘the TAR’) on the ground that it had not been accorded the first place in the queue for the national leniency programme and therefore immunity from fines. DHL also sought, in the alternative, reduction of the fines imposed by that decision.
33.
According to DHL, an application submitted to the Commission and a summary application submitted to the Autorità must be regarded jointly as a single application, by virtue of the link existing between the procedures, which has an impact on the order of priority of leniency applications, based on priority in time in relation to each infringement. By cross-appeals lodged on 18 and 23 June 2011 respectively, Schenker and Agility alleged that it was illegal for DHL to be admitted to the leniency programme. According to Schenker and Agility, DHL should have been excluded from the leniency programme for infringing its obligation to cooperate with the Autorità.
34.
The TAR rejected the application brought by DHL, stating that, as a matter of principle, the leniency programmes of the Commission and the Autorità were autonomous and independent. DHL appealed against the TAR judgment to the Consiglio di Stato.
35.
The Consiglio di Stato considers it necessary to seek a ruling from the Court as to the binding nature — or otherwise — for the national competition authorities (‘NCAs’) of the 2006 and 2012 ECN Leniency Model Programmes and in particular clarification as to whether the principle whereby that programme has no binding legal effects on national courts, established by the Court in the judgment in Pfleiderer (C‑360/09, EU:C:2011:389), also applies to NCAs. It also queries the possible existence of a legally relevant link between an application for immunity submitted to the Commission and a summary application submitted to an NCA. The referring court, finally, raises a question as to the legality of the Autorità’s conduct, before publication of the 2012 ECN Model Leniency Programme, in so far as it allowed undertakings that had submitted an application to the Commission for reduction of the fine to file summary applications for immunity.
36.
In those circumstances, the Consiglio di Stato decided to stay its proceedings and to submit the following questions to the Court for a Preliminary ruling:
IV – Procedure before the Court
37.
Written observations were submitted by DHL, Schenker, Agility, the Italian, German, French, Austrian and United Kingdom Governments and the Commission. With the exception of the German and Austrian Governments, they all presented oral argument at the hearing on 9 July 2015.
A – The first question
38.
By its first question, the national court, referring to paragraphs 21 and 22 of the judgment in Pfleiderer (C‑360/09, EU:C:2011:389), asks essentially whether acts of the ECN, in particular its 2006 Model Leniency Programme, are binding on NCAs or whether, on the contrary, they may choose not to apply the instruments defined and adopted by the ECN. ( )
39.
All the parties, with the exception of DHL, consider that the 2006 ECN Model Leniency Programme is not binding on NCAs.
40.
It must be borne in mind that, in paragraph 22 of the judgment in Pfleiderer (C‑360/09, EU:C:2011:389), the Court held that the 2006 ECN Model Leniency Programme had no binding effect on the courts and tribunals of the Member States. ( ) The Court also confirmed that whilst Commission communications concerning, first, cooperation within the ECN ( ) and, second, immunity from fines and the reduction of fines in cartel cases ( ) were liable to have an impact on the practice of the NCA, ( ) neither the provisions of the TFEU regarding competition law nor Regulation No 1/2003 provided for common leniency rules. ( )
41.
I consider that the acts of the ECN, including its 2006 Model Leniency Programme, are likewise not binding on the NCAs.
42.
It is appropriate to emphasise in the first place that, pursuant to Article 35(1) of Regulation No 1/2003, ‘[t]he ‘[NCAs] designated’ by the Member States to apply Articles 101 TFEU and 102 TFEU ‘may include courts.’ It follows that, pursuant to the judgment in Pfleiderer (C 360/09, EU:C:2011:389), acts of the ECN, including its 2006 Model Leniency Programme, are not binding upon NCAs that are courts of the Member States. Article 5 of Regulation No 1/2003, which concerns the powers of the competition authorities, provides that they are to have powers to apply Articles 101 TFEU and 102 TFEU and lists the decisions which they can take. Given that that provision draws no distinction between NCAs according to their administrative or judicial nature, I consider that it would be inconsistent for the acts of the ECN to be binding on NCAs that are of an administrative nature and not on NCAs that are of a judicial nature.
43.
Moreover, it is clear from paragraph 1 of the Notice on Cooperation within the ECN that that network constitutes a forum for discussion and cooperation for the application of Union competition policy and is intended in particular to provide a framework for the cooperation of the European competition authorities in cases where Articles 101 TFEU and 102 TFEU are applied. It follows that the ECN, which is not vested with legislative power, cannot adopt acts which are binding on the NCAs. The latter may therefore decline to apply the instruments defined and adopted by the ECN. ( )
44.
In that regard, the fact that certain NCAs gave a formal commitment ( ) to observe the principles set out in the Notice on Cooperation within the ECN does not change either its status as a forum for discussion and cooperation or the non-binding nature of its acts. Moreover, as regards more particularly the ECN Model Leniency Programme, it is apparent even from its name — a ‘model’ programme — and from its content that it is of a purely programmatic nature. ( ) Indeed, the declared objective of the ECN Model Leniency Programme is to encourage the NCAs to take it into account if and when they adopt and implement a national leniency programme ( ) without thereby being obliged to comply with it. ( ) In other words, the 2006 ECN Model Leniency Programme is intended to promote, by ’soft-law’ means, the voluntary alignment of any Member States’ leniency programmes ( ) relating to competition.
45.
Furthermore, the NCA are not obliged to put in place leniency programmes pursuant to Article 101 TFEU or by virtue of Regulation No 1/2003 or of their obligation of sincere cooperation under Article 4( ) TEU. However, where a Member State establishes a leniency programme, ( ) whether or not based on the ECN Model Leniency Programme, it must comply with EU law and ensure that the rules which it lays down or applies do not undermine the effective application of Articles 101 TFEU and 102 TFEU. ( )
46.
Finally, pursuant to Article 51(1) thereof, the provisions of the Charter of Fundamental Rights of the European Union (‘the Charter’) are addressed to the Member States when they implement EU law. It follows that the Member States, including their NCAs, are bound by the provisions of the Charter and general Union principles when they implement Articles 101 TFEU and 102 TFEU. Consequently, when an NCA adopts a leniency programme, which is in principle likely to have legal effects, it must comply with the general principles of EU law, including those of non-discrimination, proportionality, legal certainty, protection of legitimate expectations ( ) and entitlement to sound administration. ( )
47.
It is apparent from the foregoing that the 2006 ECN Model Leniency Programme is not in any way binding upon NCAs. However, when a Member State adopts a leniency programme, whether or not based on the 2006 ECN Model Leniency Programme, it must comply with EU law and, specifically in the field of competition law, ensure that the rules that it establishes or applies do not undermine the effective application of Articles 101 TFEU and 102 TFEU. Moreover, the Member States, including their NCAs, are governed by the provisions of the Charter and general Union principles when they implement Articles 101 TFEU and 102 TFEU. Consequently, when an NCA adopts a leniency programme, which is in principle likely to have legal effects, that programme must comply with the Charter and the general principles of EU law, including those of non-discrimination, proportionality, legal certainty, protection of legitimate expectations and entitlement to sound administration.
B – The second question
48.
The second question from the referring court concerns the existence or otherwise of a legal link ‘between the main application for immunity that an undertaking has submitted or is about to submit to the Commission and the summary application for immunity submitted by that undertaking to an NCA in respect of the same cartel’. ( )
1. The admissibility of question 2(a)
49.
In question 2(a), the referring court is more particularly interested in whether a summary application for immunity submitted to an NCA must be assessed in the light of an application submitted to the Commission, provided that ‘the summary application accurately reflects the content of the main application’ ( ) submitted to the Commission.
50.
The French Government considers that question 2(a) is hypothetical and therefore inadmissible. It is said to be apparent from the request for a ruling and from the file before the Court that, in the main proceedings, the summary application for immunity submitted to the Autorità by DHL did not faithfully reflect the content of the application for immunity it had submitted to the Commission.
51.
Questions on the interpretation of EU law referred by a national court in the factual and legislative context which that court is responsible for defining and the accuracy of which is not a matter for the Court to determine enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ( )
52.
It is apparent from the documents before the Court that on 5 June 2007 DHL submitted to the Commission a request for an immunity marker in respect of infringements of Union competition law in the international sea, air and road freight forwarding sectors whereas, according to the contested decision, the summary application submitted by DHL on 12 July 2007 to the Autorità related only to international air and sea freight forwarding and did not concern the sector of international road freight forwarding.
53.
According to the request for a preliminary ruling, DHL contended that its summary application for immunity submitted to the Autorità on 12 July 2007 did not contain actual and specific examples of illicit behaviour in the road sector in Italy solely because, as at that date, they had not yet been discovered. Nevertheless, according to DHL, the Autorità was required, in interpreting the content of its summary application, to take account of its link with the application for immunity submitted to the Commission.
54.
The main proceedings arose, at least in part, from that divergence between the scope of the application for immunity submitted by DHL to the Commission and the scope, according to the contested decision, of the summary application submitted by DHL to the Autorità, and from the Commission’s decision to pursue only the part of the cartel relating to international air freight forwarding services.
55.
In my opinion, it is not clear from the request for a preliminary ruling that that divergence in the assessment of the facts has been definitively settled by the Italian courts. At the hearing on 9 July 2015, the Italian Government also confirmed that, in the appeal procedure, the referring court enjoyed unlimited jurisdiction. Consequently, I consider that the requested interpretation of EU law referred to in question 2(a) is not lacking in utility for the referring court.
2. The substance
56.
In my opinion, it is appropriate to answer questions 2(a) and (b) together.
57.
DHL contends that a summary application essentially constitutes an ‘appendix’ to and an anchoring point, at national level, for the main application submitted to the Commission. In its view, to consider the summary application separately from the general context in which it came into being, as the Autorità did in the contested decision, distorts its function. Since the summary application for immunity does not have to give anything more than a brief description of the cartel reported to the Commission, DHL submits that it must be assessed in the light of the main application, provided that it faithfully reflects the content thereof. DHL does not claim that, either formally or substantively, its summary application at national level and its main application at Union level are identical; they are clearly two distinct applications, but they are very closely linked by their nature, given that the summary application for immunity can exist only where there is a main application for immunity.
58.
Like all the other parties which have submitted observations, I do not share DHL’s position.
a) National law
59.
It should be emphasised once more that the 2006 ECN Model Leniency Programme, including paragraph 22 thereof, is not binding on the NCAs and that the Member States are not obliged, under EU law, to put in place a system of summary applications for leniency. However, where an NCA does put in place a system of summary applications, it must, in accordance with my answer to the first question, comply with EU law, in particular Article 101 TFEU, the provisions of the Charter and the general principles of EU law.
60.
It is apparent from the documents before the Court that the Autorità has established a system of summary leniency applications which is largely based on the 2006 ECN Model Leniency Programme, in particular paragraph 22 thereof. ( ) Moreover, it seems, subject to verification by the referring court, that Article 17 of the Autorità Notice imposes on the applicant for leniency among other things the requirement to ‘indicate the goods and services covered by the cartel, its geographic extent and its duration’.
61.
Again, subject to verification by the referring court, it appears that the Autorità Notice does not place any obligation on the Autorità ‘to contact the Commission, or that undertaking, in order to ascertain whether, following the submission of the summary application, that undertaking has identified, through its internal investigations, actual and specific examples of conduct in the sector purportedly covered by the main application for immunity but not by the summary one’. ( )
62.
However, the national court raises more particularly the question whether EU law imposes on an NCA an obligation to assess a summary application for leniency addressed to it in the light of the application for leniency submitted to the Commission ‘for the same cartel’ and in certain circumstances to contact the Commission or the undertaking itself.
b) Paragraph 38 of the Notice on Cooperation within the ECN
63.
In accordance with my answer to the first question, I consider that in addition to the fact that the 2006 ECN Model Leniency Programme is not legally binding on NCAs, it is clear from paragraph 38 of the Notice on Cooperation within the ECN that, in the absence of a centralised and unified leniency system within the Union, an application for leniency addressed to the Commission cannot be regarded as being an application addressed to an NCA. ( )
64.
It follows that in Union competition law there is no ‘one-stop shop’ for the processing of leniency applications or even, as the Commission observed at the hearing on 9 July 2015, automatic exchange of such applications between the NCAs and the Commission under Article 11 of Regulation No 1/2003.
65.
To defend its position in the context of a possible procedure initiated by those authorities, the applicant must request leniency from all the competition authorities which are competent to apply Article 101 TFEU in the territory affected by the infringement and which may be considered as well placed to take action against such an infringement. In fact, ‘it is for the applicant to take the steps which it considers appropriate to protect its position with respect to possible proceedings by these authorities.’ ( )
66.
Consequently, paragraph 38 of the Notice on Cooperation within the ECN lays down the principle that the various Commission leniency programmes and those of the NCAs and the applications relating thereto are autonomous and independent.
c) Paragraphs 1 and 22 of the 2006 ECN Model Leniency Programme and paragraph 45 of the Explanatory Notes annexed to it
67.
I would observe first of all that paragraph 1 of the 2006 ECN Model Leniency Programme provides that ‘in a system of parallel competences between the Commission and national competition authorities, an application for leniency to one authority is not to be considered as an application for leniency to another authority. It is therefore in the interest of the applicant to apply for leniency to all competition authorities which have competence to apply Article [101 TFEU] … in the territory which is affected by the infringement and which may be considered well placed to act against the infringement in question.’ ( )
68.
Given that the applicant’s obligation to request leniency from all the competent authorities may give rise to multiple leniency applications made at the same time, paragraph 22 of the 2006 ECN Model Leniency Programme advocates a uniform model for summary applications in order to lighten the burden that such multiple applications represent for undertakings and for the NCAs. ( )
69.
Paragraph 22 of the 2006 ECN Model Leniency Programme also provides that, where an undertaking has filed or is in the process of filing an application for immunity with the Commission, it may file a summary application briefly setting out specified information with any NCA which the applicant considers might be ‘well placed’ to act. ‘By filing a summary application, the applicant protects its position as the first in the queue with the CA concerned for the alleged cartel.’ ( )
70.
Moreover, paragraph 22 of the 2006 ECN Model Leniency Programme gives a list of the information which ‘should’ ( ) appear in the summary application. I would observe that that list includes information concerning the scope of the cartel in question and ‘[i]nformation on its other past or possible future leniency applications in relation to the alleged cartel.’
71.
It is apparent from paragraph 45 of the Explanatory notes annexed to the 2006 ECN Model Leniency Programme that the aim of such information is to enable the NCA to decide, first, whether it wishes to take action in the case in question and, second, whether the information furnished enables the competition authority to determine whether the undertaking is in a ‘Type 1A’ situation ( ) as provided for by paragraph 5 of the 2006 ECN Model Leniency Programme.
72.
Whilst the submission of a summary application to an NCA presupposes the prior or subsequent filing of an application for immunity with the Commission ( ) and whilst the 2006 ECN Model Leniency Programme provides for ‘temporary’ moderation of the information and evidence to be furnished by an undertaking to an NCA, that programme does not, however, envisage any legal link between the application for immunity submitted to the Commission and the summary application submitted to an NCA. ( )
73.
The application filed with the Commission and the summary application submitted to an NCA are in fact autonomous applications since it is clear from paragraph 22 of the 2006 ECN Model Leniency Programme and from the applicant’s obligation to provide information, in particular concerning the product or products and territory or territories affected, that it is the responsibility of the applicant alone to correctly define the scope of its summary application.
74.
Consequently, if the information to be provided in the summary application in particular concerning the scope of the infringement in question is admittedly reduced, it must be sufficiently precise to ensure protection of the applicant and its place in the order of arrival of immunity applications in circumstances where, as in the main proceedings, the Commission decides not to take action on the basis of the application for immunity submitted to it. In that regard, it should be emphasised that if the scope of the cartel covered by the summary application is not precise enough, the applicant risks losing its place in the order of arrival of leniency applications to the ANC — which seems to be DHL’s case according to the contested decision. ( )
75.
It follows that, regardless of whether or not the summary application submitted to an NCA faithfully reflects the application for immunity submitted to the Commission, an NCA is not obliged to assess the summary application in the light of the application for immunity submitted to the Commission and that applies even if the NCA has information concerning other leniency applications concerning the same cartel, in accordance with paragraph 22 of the 2006 ECN Model Leniency Programme.
76.
Indeed, whilst the Commission and the NCAs may, within the ECN, exchange information gathered, ( ) including in the context of leniency applications ( ), it is not incumbent upon the NCA ( ) in cases where it considers that the material scope of a summary application is narrower than that of the application submitted by the same undertaking to the Commission, ‘to contact the Commission, or that undertaking, in order to ascertain whether, following the submission of the summary application, that undertaking has identified, through its internal investigations, actual and specific examples of conduct in the sector purportedly covered by the main application for immunity but not by the summary one’. ( )
77.
I consider, like the Austrian Government, that an obligation on the NCAs to verify a summary application with the Commission ‘would contradict the declared intention of the authorities meeting in the ECN not to establish a ‘one-stop shop’ for leniency applications within the European Union and to obtain autonomy for each leniency programme.’ In my opinion, the fact that, pursuant to paragraph 22 of the 2006 ECN Model Leniency Programme, the applicant must provide, when submitting its summary application, ‘information on its other past or possible future leniency applications in relation to the alleged cartel’ does not impose on the NCAs any obligation to verify the summary application with the Commission.
78.
Moreover, the imposition on the NCAs of an obligation to contact the Commission or the undertaking in question in the circumstances described in the second question would run counter not only to the principle of the autonomy and independence of leniency programmes within the Union, but would also be liable to unduly attenuate the duty of cooperation of those seeking leniency, which is one of the pillars of the leniency system. I also consider that any failure in that duty of cooperation is liable to affect the order of arrival recorded for leniency applications and consequently to cause damage to other applicants for leniency in respect of the same cartel — which would amount to a breach of the general principles of EU law, including the principles of non-discrimination, proportionality, legal certainty, protection of legitimate expectations and entitlement to sound administration.
d) Paragraphs 13 and 24 of the 2006 ECN Model Leniency Programme
79.
It is clear that the effectiveness of the Commission’s and the NCAs’ leniency programmes is based in particular on the obligation of a leniency applicant to cooperate with the authorities, pursuant to paragraph 13(2) of the 2006 ECN Model Leniency Programme, ‘genuinely, fully and on a continuous basis from the time of its application with the CA until the conclusion of the case’. ( )
80.
Indeed, according to paragraph 24 of that model programme, an undertaking that has lodged a summary application must, at the request of the NCA, provide supplementary information and, ‘should an NCA decide to act upon the case ... the applicant must make a full submission of all relevant evidence and information required to meet the threshold.’
81.
I therefore endorse the observations of the French Government, at the hearing, to the effect that it falls solely to the undertaking which has filed a summary application to disclose to the NCA all information relevant to its application. Information provided after filing of the summary application cannot, however, alter the material scope of that application, for example by adding another sector to it, ( ) for which it will not then benefit from the same ranking in the order of arrival of leniency applications as for the sectors covered by the summary application.
82.
It is clear from the foregoing that EU law does not establish any legal link between an application for immunity submitted by an undertaking or about to be submitted by an undertaking to the Commission and a summary application for immunity submitted by it to an NCA for the same cartel such as to require an NCA, under paragraph 22 of the 2006 ECN Model Leniency Programme and paragraph 45 of the Explanatory notes annexed to the 2006 ECN Model Leniency Programme, to assess the summary immunity application submitted to it in the light of the application submitted or to be submitted to the Commission or to contact the Commission or the undertaking itself, in order to establish whether the latter, after submission of the summary application, has ascertained the existence of actual and specific examples of behaviour in the sector allegedly covered by the application for immunity submitted to the Commission but not covered by the summary application for immunity.
C – The third question
83.
By its third question, the referring court asks whether, under the 2006 ECN Model Leniency Programme, an NCA may, under its national leniency programme and in respect of a cartel for which a first undertaking has filed or is about to file with the Commission an application for immunity, accept a summary leniency application only from that undertaking or whether it may also accept applications from other undertakings.
1. Admissibility
84.
The Italian and the Austrian Governments consider that the third question from the national court is inadmissible because it is concerned not with an interpretation of EU law but with an interpretation of national law, namely the scope of the leniency programme established by the Autorità Notice. Schenker, for its part, considers that the third question would be inadmissible if the Court were to consider that the 2006 ECN Model Leniency Programme is not binding.
85.
I consider that the third question is admissible. It should be borne in mind that it is not the responsibility of the Court to rule on the interpretation of national law or assess its effects in the context of proceedings under Article 267 TFEU, that being a task exclusively for the referring court or, where appropriate, the competent national courts. I consider that it is clear from the actual wording of the third question, from the documents before the Court and from the oral argument presented to the Court that the third question is concerned with interpretation of EU law, even if that question also refers to national law, namely the national leniency programme. It is therefore incumbent on the Court, in the present case, to limit its examination to EU law in providing an interpretation which is helpful to the referring court. Moreover, the fact that the 2006 ECN Model Leniency Programme is not, in my opinion, binding does not rule out the applicability of other EU law provisions in the context of the main proceedings.
2. The substance
86.
I consider that the third question has arisen because paragraphs 22 to 25 of the 2006 ECN Model Leniency Programme are concerned with the filing of summary applications for immunity with NCAs only in ‘Type IA’ cases and where the undertaking has submitted or is about to submit an application for immunity to the Commission. ( ) It follows that that programme does not provide for summary applications in particular when an undertaking applies only for a reduction of a fine to the Commission and/or to an NCA. The 2012 ECN Model Leniency Programme has considerably widened on this point the circumstances in which a summary application may be filed with an NCA. ( )
87.
In that connection, according to DHL, Article 16 of the Autorità Notice allows filing of a summary application only by the undertaking which has already submitted or is about to submit to the Commission an application for non-imposition of penalties. It considers that it follows from that provision that the only permitted summary application is an application for immunity and that, in the circumstances of the main proceedings, the summary applications from Schenker and Agility did not meet that condition and they could not therefore protect their position at national level by submitting summary applications to the Autorità. DHL adds that, given that it filed an application for immunity with the Commission, ‘the other undertakings which subsequently offered their cooperation to the Commission — such as Schenker and Agility, in this case — might possibly protect their position at national level only by submitting to the NCA concerned main applications for reduction of fines, given that ... that reduction could not be lodged in summary form at that time. It follows, therefore, that the submission of proper leniency applications to the [Autorità] by Schenker and Agility must be correctly dated with the date of perfection of the respective summary applications — that is to say 11 June 2009 in the case of Schenker and 11 January 2010 in the case of Agility. In both cases, that date is later than 23 June 2008, the date of DHL’s submission of the supplementary summary applications which, according to the [Autorità], contained the first and only application for favourable treatment for the appellant companies in the main proceedings regarding the international road freight forwarding sector’. ( )
88.
It must be borne in mind that neither the 2006 ECN Model Leniency Programme nor indeed the 2012 ECN Model Leniency Programme is binding on NCAs. Moreover, whilst it is true that the 2006 ECN Model Leniency Programme provides for the filing of summary immunity applications to NCAs only in ‘Type IA’ cases, it is clear from paragraph 3 of the 2006 ECN Model Leniency Programme that this ‘does not prevent’ an ANC from adopting a more favourable approach towards undertakings which seek leniency under its programme.
89.
I consider therefore that an NCA may make provision in its leniency programme for a system of summary applications that is not based on the 2006 ECN Model Leniency Programme or on the 2012 ECN Model Leniency Programme, provided, however, that that system complies with the general principles of EU law, including the principles of non-discrimination, proportionality, legal certainty, protection of legitimate expectations and entitlement to sound administration.
90.
The Italian Government indicated in its written observations ( ) that the Autorità’s leniency programme did not at the time material to the main proceedings expressly provide for the possibility of the Autorità ‘accepting a summary application submitted following a main application simply for reduction of a penalty’. It considers, however, that that did not infringe any provision or any principle of EU law, given that the 2006 ECN Model Leniency Programme is not a legally binding document for NCAs and that, in any event, it is that programme itself which considers the widest participation of undertakings in the leniency system to be desirable. ( )
91.
According to DHL, paragraph 16 of the Autorità Notice at the material time was clear and allowed the filing of a summary application by an undertaking which had already submitted or was preparing to submit to the Commission an application for non-imposition of penalties’. It considers that ‘the acceptance, by the [Autorità] of applications for immunity submitted in summary form by Schenker and Agility without fulfilment of the conditions referred to [in paragraph 16 of the Autorità Notice] constituted… a veritable misuse of procedure .... In December 2007, when Schenker submitted its summary application, the Commission had already granted DHL conditional immunity three months earlier (for the three market sectors at issue). … Without fulfilment of the fundamental condition allowing summary applications, there could not be any interpretative doubt whatsoever and the applications for immunity from Schenker and Agility were inadmissible’. ( )
92.
Schenker also considers that, by virtue of its notice, the Autorità could accept summary applications from undertakings which had submitted to the Commission an application for the reduction of fines. It considers that the only condition referred to in paragraph 16 of the Autorità Notice applicable ratione temporis in the main proceedings was that an undertaking which intended submitting a ‘summary’ leniency application should have ‘already submitted or be about to submit an application for immunity to the Commission ...’. ‘Since any undertaking which had not yet submitted an immunity application to the Commission cannot by definition know whether it will be ‘the first in chronological order’ in relation to the infringement which it seeks to report (that is to say, whether its immunity application will be ‘accepted’), the fact that another undertaking has already sought immunity from the Commission for the same infringement and/or that it has already obtained the relevant conditional immunity is of no importance and cannot undermine the right of the undertaking in question also to submit to the [Autorità] (or to another NCA) an application for leniency in ‘summary’ form’. ( )
93.
Agility adds that ‘it can easily be inferred from the wording of the national leniency programme that it is possible for [the Autorità] to receive more than one summary application. Article 16 of the national rules and [paragraph 22 of the 2006 ECN Model Leniency Programme] provide for the possibility of submitting a summary application for an undertaking ‘that has [filed] or is in the process of filing an application for immunity with the Commission’. Since it is the mere intention to submit a leniency application (and not actual submission) which is important and it precedes knowledge by the undertaking of its order of arrival (and a possible grant of conditional immunity), the wording of [paragraph 22 of the 2006 ECN Model Leniency Programme and Article 16 of the Autorità Notice] manifestly accepts that several undertakings find themselves in the same situation, so that their summary applications are each admissible’. ( )
94.
Whilst it is beyond doubt that the possible adoption of national leniency rules and the application thereof are matters for the Member States and that they may adopt a more favourable approach towards undertakings which seek leniency under their own leniency programmes than the approach provided for by the 2006 ECN Model Leniency Programme, subject to due compliance with EU law, in particular Article 101 TFEU, the provisions of the Charter and the general principles of EU law, ( ) it is nevertheless apparent from the observations submitted to the Court that there is real uncertainty as to the meaning and/or scope of the Autorità Notice.
95.
It is consequently a matter for the referring court to determine the meaning and scope of that notice in order to ascertain whether the Autorità actually departed from it and, if so, whether by so doing it infringed EU law, in particular the general principles of law. In that regard, the referring court must in particular verify in the main proceedings whether equal treatment for all leniency applicants and entitlement to sound administration have been respected and whether legitimate expectations have been protected.
V – Conclusion
96.
In the light of the foregoing considerations, I propose that the Court should reply as follows to the questions referred to it for a preliminary ruling by the Consiglio di Stato:
(1)
The 2006 ECN Model Leniency Programme has no binding effect on the competition authorities (NCAs) in the Member States. However, when a Member State adopts a leniency programme, whether or not based on the 2006 ECN Model Leniency Programme, it must comply with EU law and, specifically in the field of competition law, ensure that the rules that it establishes or applies do not undermine the effective application of Articles 101 TFEU and 102 TFEU. Moreover, the Member States, including their NCAs, are bound by the provisions of the Charter of Fundamental Rights of the European Union and the general principles of EU law when they implement Articles 101 TFEU and 102 TFEU. Consequently, when an NCA adopts a leniency programme, which is in principle capable of having legal effects, that programme must comply with the Charter and the general principles of EU law, including the principles of non-discrimination, proportionality, legal certainty, protection of legitimate expectations and entitlement to sound administration.
(2)
EU law does not establish, between an application for immunity submitted or about to be submitted by an undertaking to the European Commission and a summary application for immunity which it submitted to an NCA in respect of the same cartel, any legal link whereby an NCA would be bound, under paragraph 22 of the 2006 ECN Model Leniency Programme and paragraph 45 of the Explanatory Notes annexed to the 2006 ECN Model Leniency Programme, to appraise the summary application for immunity submitted to it in the light of the application submitted or to be submitted to the Commission or to contact the Commission or the undertaking itself in order to establish whether the latter, after filing the summary application, has ascertained the existence of actual and specific examples of conduct in the sector allegedly covered by the application for immunity submitted to the Commission but not covered by the summary application.
(3)
The Member States may adopt a more favourable approach towards undertakings which seek leniency under their own leniency programmes than the approach provided for in the 2006 ECN Model Leniency Programme, subject to due compliance with EU law, in particular Article 101 TFEU, the provisions of the Charter and the general principles of EU law.
( ) Original language: French.
( ) OJ 2003 L 1, p. 1.
( ) OJ 2004 C 101, p. 43 (‘the ECN Notice on Cooperation’).
( ) http://ec.europa.eu/competition/ecn/model_leniency_en.pdf.
( ) http://ec.europa.eu/competition/ecn/mlp_revised_2012 _en.pdf.
( ) OJ 2006, C 298, p. 17, ‘the Commission Leniency Notice’.
( ) The function of a marker is to enable an applicant for immunity to ‘reserve’ the first place in the order of arrival of leniency applications and to supplement that application subsequently. Paragraph 14 of the Commission Leniency Notice provides that ‘[a]n undertaking wishing to apply for immunity from fines should contact the Commission’s Directorate-General for Competition. The undertaking may either initially apply for a marker or immediately proceed to make a formal application to the Commission for immunity from fines …’ According to paragraph 15 of the same notice, ‘the Commission services may grant a marker protecting an immunity applicant’s place in the queue for a period to be specified on a case-by-case basis in order to allow for the gathering of the necessary information and evidence. To be eligible to secure a marker, the applicant must provide the Commission with information concerning its name and address, the parties to the alleged cartel, the affected product(s) and territory(-ies), the estimated duration of the alleged cartel and the nature of the alleged cartel conduct. The applicant should also inform the Commission on other past or possible future leniency applications to other authorities in relation to the alleged cartel and justify its request for a marker. Where a marker is granted, the Commission services determine the period within which the applicant has to perfect the marker by submitting the information and evidence required to meet the relevant threshold for immunity. … If the applicant perfects the marker within the period set by the Commission services, the information and evidence provided will be deemed to have been submitted on the date when the marker was granted’.
( ) Commission Decision of 28 March 2012 relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement (Case COMP/39.462 — Freight forwarding) (notified under document C(2012) 1959).
( ) My answer to the first question concerning the 2006 ECM Model Leniency Programme applies mutatis mutandis to the 2012 ECM Model Leniency Programme, even if the latter is not applicable ratione temporis to the facts of the main proceedings.
( ) Emphasis added. ‘The ECN Model leniency Programme is a non-binding instrument which seeks to bring about de facto or “soft” harmonisation of the leniency programmes of the national competition authorities to ensure that potential applicants are not discouraged from applying for leniency as a result of the discrepancies between the leniency programmes within the ECN. … Despite the non-legislative nature of this instrument and indeed other instruments such as the Cooperation Notice and the Joint Statement, their practical effects in relation in particular to the operations of national competition authorities and the Commission cannot be ignored.’ Emphasis added. See the Opinion of Advocate General Mazák in Pfleiderer (C‑360/09, EU:C:2011:389, paragraph 26). See also paragraph 7 of the Explanatory Notes annexed to the 2006 ECN Model Leniency Programme which provides in particular that the programme ‘is meant to trigger soft harmonisation of the existing leniency programmes and to facilitate the adoption of such programmes by the few CAs who do not currently operate one.’
( ) See, to that effect, paragraph 38 of the Notice on Cooperation within the ECN. See also paragraph 4 of the Report on the State of Convergence of the 2009 leniency programmes, which provides that the 2006 ENC Model Leniency Programme is not a legally binding document. The authorities, however, gave a political commitment to deploy all efforts to align their respective leniency programmes, failing which to introduce aligned programs. The document is available only in English on the Internet site http://ec.europa.eu/competition/ecn/model_leniency_programme.pdf.
( ) OJ 2006 C 298, p. 17.
( ) Judgment in Pfleiderer (C‑360/09, EU:C:2011:389, paragraphs 21 and 23).
( ) Pfleiderer, paragraph 20. As the Commission emphasised, ‘each Member State is free to adopt, or not adopt, a leniency programme in the field of competition law. If a competition authority decides to adopt a national leniency programme, it is autonomous from the leniency programmes of the other Member States and the European Commission leniency Programme, provided of course that it is in conformity with European law, in particular Article 4(3) TEU, Regulation No 1/2003 and the general principles of European law’.
( ) Including the 2006 ECN Model Leniency Programme.
( ) See paragraph 72 of the Notice on Cooperation within the ECN, which states that ‘[t]he principles set out in this notice will also be abided by those Member States' competition authorities which have signed a statement in the form of the Annex to this Notice. In this statement they acknowledge the principles of this notice, including the principles relating to the protection of applicants claiming the benefit of a leniency programme and declare that they will abide by them. A list of these authorities is published on the website of the European Commission.’ The Autorità is one of the NCAs that signed the statement in question.
( ) I would also observe that the 2006 ECN Model Leniency Programme was not published in series L of the Official Journal of the European Union, the purpose of which is to publish legally binding acts, or even in series C of the Official Journal of the European Union, which contains non-binding acts such as information, recommendations and opinions concerning the Union. See, by analogy, the judgment in Expedia (C‑226/11, EU:C:2012:795, paragraph 30). The 2006 ECN Model Leniency Programme can be consulted on the Commission Internet site at http://ec.europa.eu/competition/ecn/model_leniency_en.pdf.
( ) See paragraph 3 of the 2006 ECN leniency programme, which provides that ‘[t]he ECN members commit to using their best efforts, within the limits of their competence, to align their respective programmes with the ECN Model Programme. The ECN Model Programme does not prevent a CA from adopting a more favourable approach towards applicants within its programme. Paragraph 11 states that ‘[t]he ECN Model Programme does not give rise to any legal or other legitimate expectations on the part of any undertaking.’ Emphasis added. See paragraph 4 of the 2009 ECN Report on assessment of the state of convergence, which confirms that ‘[t]he Model Programme is not a legally binding document. Document available only in English on the Internet site http://ec.europa.eu/competition/ecn/model_leniency_programme.pdf.
( ) See, by analogy, the judgment in Expedia (C‑226/11, EU:C:2012:795, paragraph 31).
( ) In my opinion, the 2006 ECN Model Leniency Programme constitutes a sort of ‘route map’ for such leniency programmes as the Member States might adopt in the field of competition. Moreover, if a national programme is based on the 2006 ECN Model Leniency Programme, the model programme may possibly serve as a source of interpretation in accordance with national law.
( ) In paragraph 25 of the judgment in Pfleiderer (C‑360/09, EU:C:2011:389), the Court held that ‘leniency programmes are useful tools if efforts to uncover and bring to an end infringements of competition rules are to be effective and serve, therefore, the objective of effective application of Articles 101 TFEU and 102 TFEU’. See also the judgment in Donau Chemie and Others (C‑536/11, EU:C:2013:366, paragraph 42).
( ) See the judgments in Pfleiderer (C‑360/09, EU:C:2011:389, paragraph 24) and Donau Chemie and Others (C‑536/11, EU:C:2013:366, paragraph 27 and the case-law cited).
( ) See, by analogy, the judgment in Expedia (C‑226/11, EU:C:2012:795, paragraph 28).
( ) The right to sound administration is enshrined in Article 41 of the Charter. According to the case-law of the Court, it is apparent from the wording of Article 41 of the Charter that that article does not apply to the Member States but only to the Union institutions and bodies (see, to that effect, the judgments in Cicala (C‑482/10, EU:C:2011:868, paragraph 28); YS and Others (C‑141/12 and C‑372/12, EU:C:2014:2081, paragraph 67), and also Mukarubega (C‑166/13, EU:C:2014:2336, paragraph 44). That said, entitlement to sound administration is a general principle of Union law. Given that, in the main proceedings, the Autorità is implementing Article 101 TFEU, the requirements deriving from the general principle of entitlement to sound administration are applicable. See, to that effect, the judgment in N. (C‑604/12, EU:C:2014:302, paragraphs 49 and 50).
( ) See the terms of the second question submitted by the referring court.
( ) Idem.
( ) Judgment in Ioannis Katsivardas — Nikolaos Tsitsikas (C‑160/09, EU:C:2010:293, paragraph 27 and the case-law cited).
( ) See Articles 16 to 18 of the Autorità Notice. I would also observe that the Autorità appears on the ‘[l]ist of authorities accepting summary applications as provided by the ECN Model Leniency Programme in Type 1A cases’. The term ‘Type 1A’ refers to situations which allow an exemption from any fine. Document available only in English on the Commission Internet site http://ec.europa.eu/competition/ecn/list_of_authorities.pdf.
( ) See the terms of the second question submitted by the national court.
( ) It is apparent from the wording of the second question and the terms it uses: ‘notwithstanding the provision made under paragraph 38 of the Commission Notice on Cooperation within the Network of Competition Authorities’ that the referring court itself considers that that provision in principle excludes any legal link between an application for immunity submitted by an undertaking or about to be submitted by an undertaking to the Commission and the ‘summary application for immunity submitted by that undertaking to an NCA in respect of the same cartel’. Since the 2006 ECN Model Leniency Programme was adopted after the adoption of the Notice on Cooperation within the ECN (2004), I consider that the second question amounts in reality to ascertaining whether the programme in question made any change to paragraph 38 of the Notice on Cooperation within the ECN.
( ) Emphasis added. See paragraph 38 of the Notice on Cooperation within the ECN.
( ) Emphasis added.
( ) See paragraphs 39 and 40 of the Explanatory Notes annexed to the 2006 ECN Model Leniency Programme. It follows that paragraph 22 of the 2006 ECN Model Leniency Programme confirms the terms of paragraph 38 of the Notice on Cooperation within the ECN.
( ) See paragraph 40 of the Explanatory Notes annexed to the 2006 ECN Model Leniency Programme.
( ) It should be borne in mind that that model programme, including the list in question, is not in my opinion binding on NCAs.
( ) Paragraphs 22 to 25 of the 2006 ECN Model Leniency Programme provide for the submission of summary applications for immunity to NCAs only in ‘Type 1A’ cases which, according to paragraph 5 of the 2006 ECN Model Leniency Programme, are concerned with the level of assistance given to the NCA by the company submitting the application for leniency.
( ) See paragraph 22 of the 2006 ECN Model Leniency Programme.
( ) As regards the wording of the second preliminary question, it should be noted that the 2006 ECN Model Leniency Programme does not use the term ‘main application’. In that regard, I endorse the observation made by the German Government that such a term is not appropriate since it might be construed as meaning that a summary application submitted to an NCA is a type of annex to the application submitted to the Commission.
( ) A situation strongly disputed by DHL.
( ) The Italian Government annexed to its written observations an email of 9 July 2008 from the Directorate General for Competition (‘DG Comp’) addressed to the Autorità. It appears from the email that the Autorità submitted to the Commission, during an ECN meeting, a question concerning the treatment of various leniency applications submitted at that time by DHL to the Commission and the Autorità. In that email, DG Comp confirmed that ‘[a]pplicants should be aware (and are informed so by the Commission) that any conditional immunity granted by the Commission does not extend to Member States/NCA and a separate application is required. If Company A, in making its application in Italy, has not covered itself fully by omitting road freight forwarding it is quite simply an error on its part’. Contrary to DHL’s observations at the hearing, the actual content of that email confirms that despite the power of the Commission and of the NCAs to exchange information within the ECN, it is not incumbent upon an NCA to contact the Commission with regard to various leniency applications. It also confirms, first, the principle of the autonomy and independence of leniency applications submitted to the Commission and leniency applications submitted to NCAs and, second, the fact that it is the responsibility of the applicant alone to correctly define the scope of its (summary) leniency application submitted to an NCA.
( ) See paragraph 25 of the 2006 ECN Model Leniency Programme, paragraph 41(1) of the Notice on Cooperation within the ECN and Articles 11 and 12 of Regulation No 1/2003.
( ) Under the 2006 ECN Model Leniency Programme.
( ) See the terms of the second question.
( ) Emphasis added. See paragraph 13(2) of the 2006 ECN Model Leniency Programme.
( ) I would also observe that the principle of the autonomy and independence of leniency applications submitted to the Commission and summary applications submitted to NCAs is emphasised in paragraph 46 of the Explanatory Notes annexed to the 2012 ECN Model Leniency Programme, which provides that ‘a summary application should be a proper summary of the leniency application submitted at the Commission. Therefore, if a leniency applicant has received a summary application marker from an NCA, and it subsequently provides information and evidence to the Commission which indicates that the alleged cartel is significantly different in scope than reported to the NCAs in its summary applications (for example, it covers an additional product), the applicant should consider updating the NCAs where it has filed summary applications in order to keep the scope of its protection at the NCAs identical to the scope of protection at the Commission.’ Emphasis added.
( ) Indeed, according to paragraph 46 of the Explanatory Notes annexed to the 2006 ECN Model Leniency Programme, ‘the ECN Model Programme only provides for the filing of summary applications in Type 1A cases’. Also, according to that paragraph, ‘summary applications in Type 1B and Type 2 cases are neither necessary nor always practicable’.
( ) According to paragraph 42 of the Explanatory Notes annexed to the 2012 ECN Model Leniency Programme, ‘[s]ummary applications will be possible irrespective of the applicant’s position(s) in the leniency queue at the Commission and the NCA, i.e. in Type 1A, Type 1B and Type 2 applications’.
( ) See paragraph 26 of DHL’s observations.
( ) See paragraph 77.
( ) It observes that paragraph 8 of the Explanatory Notes annexed to the 2006 ECN Model Leniency Programme expressly provides for ‘the possibility for a CA to add further detailed provisions which suit its own enforcement system or to provide for a more favourable treatment of its applicants if it considers it to be necessary in order to ensure effective enforcement’.
( ) DHL adds that ‘Schenker and Agility asked the Commission for favourable treatment on 5 and 20 November 2007 — that is to say not less than five months after the application from DHL to the Commission and even after the inspections conducted by the latter, in particular in Italy — and, at the time of their application to the Commission, they had already been informed that conditional immunity had already been granted to another undertaking. Therefore, since the ‘summary’ applications from Schenker and Agility to the [Autorità] were linked to ordinary applications for reduction of fines to the Commission, they could only have given rise to a reduction at national level as well. However, as they had been formulated as applications for immunity, they should not even have been placed in the [Autorità]’s investigative file.’
( ) See paragraphs 58 to 60 of Schenker’s observations.
( ) See paragraph 63 of Agility’s observations.
( ) See, by analogy, the judgments in Pfleiderer (C‑360/09, EU:C:2011:389, paragraph 24) and Donau Chemie and Others (C‑536/11, EU:C:2013:366, paragraph 27 and the case-law cited). |
JUDGMENT OF THE COURT (Fourth Chamber)
7 April 2016 ( *1 )
‛Reference for a preliminary ruling — Customs Union and Common Customs Tariff — Community Customs Code — Tariff Preferences — Regulation (EEC) No 2454/93 — Article 74(1) — Products originating from a beneficiary country — Transport — Consignments composed of a mixture of crude palm kernel oil originating in several countries benefiting from the same preferential treatment’
In Case C‑294/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Finanzgericht Hamburg (Finance Court, Hamburg, Germany), made by decision of 8 May 2014, received at the Court on 16 June 2014, in the proceedings
ADM Hamburg AG
v
Hauptzollamt Hamburg-Stadt,
THE COURT (Fourth Chamber),
composed of L. Bay Larsen (Rapporteur), President of the Third Chamber, acting as President of the Fourth Chamber, J. Malenovský, M. Safjan, A. Prechal and K. Jürimäe, Judges,
Advocate General: N. Wahl,
Registrar: V. Tourrès, Administrator,
having regard to the written procedure and further to the hearing on 11 June 2015,
after considering the observations submitted on behalf of:
—
ADM Hamburg AG, by H.-J. Prieß and R. Stein, Rechtsanwälte,
—
the Hauptzollamt Hamburg-Stadt, by J. Thaler, acting as Agent,
—
the European Commission, by L. Groenfeldt and B.-R. Killmann, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 10 September 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 74 of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code (OJ 1993 L 253, p. 1), as amended by Commission Regulation (EU) No 1063/2010 of 18 November 2010 (OJ 2010 L 307, p. 1) (‘Regulation No 2454/93’).
The request has been made in proceedings between ADM Hamburg AG (‘ADM Hamburg’) and Hauptzollamt Hamburg-Stadt (Principal Customs Office of the City of Hamburg) (‘the Customs Office’) regarding the legality of an import duty notice concerning consignments of crude palm kernel oil.
Legal context
Regulation No 2454/93
Article 72 of Regulation No 2454/93 provides:
‘The following products shall be considered as originating in a beneficiary country:
(a)
products wholly obtained in that country within the meaning of Article 75;
(b)
products obtained in that country incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing within the meaning of Article 76.’
Article 74(1) and (2) of that regulation provides:
‘1. The products declared for release for free circulation in the European Union shall be the same products as exported from the beneficiary country in which they are considered to originate. They shall not have been altered, transformed in any way or subjected to operations other than operations to preserve them in good condition, prior to being declared for release for free circulation. Storage of products or consignments and splitting of consignments may take place when carried out under the responsibility of the exporter or of a subsequent holder of the goods and the products remain under customs supervision in the country or countries of transit.
2. Compliance with paragraph 1 shall be considered as satisfied unless the customs authorities have reason to believe the contrary; in such cases, the customs authorities may request the declarant to provide evidence of compliance, which may be given by any means, including contractual transport documents such as bills of lading or factual or concrete evidence based on marking or numbering of packages or any evidence related to the goods themselves.’
Article 97l(1) and (2) of that regulation is worded as follows:
‘1. Certificates of origin Form A, a model of which is set out in Annex 17, shall be issued on written application from the exporter or its authorised representative, together with any other appropriate supporting documents proving that the products to be exported qualify for the issue of a certificate of origin Form A.
2. The certificate shall be made available to the exporter as soon as the export has taken place or is ensured. However, a certificate of origin Form A may exceptionally be issued after exportation of the products to which it relates, if:
(a)
it was not issued at the time of exportation because of errors or involuntary omissions or special circumstances; or
(b)
it is demonstrated to the satisfaction of the competent governmental authorities that a certificate of origin Form A was issued but was not accepted at importation for technical reasons.’
Article 97n (1) of that same regulation states:
‘Certificates of origin Form A or invoice declarations shall be submitted to the customs authorities of the Member States of importation in accordance with the procedures concerning the customs declaration.’
Regulation (EC) No 732/2008
Recitals 6 and 9 of Council Regulation (EC) No 732/2008 of 22 July 2008 applying a scheme of generalised tariff preferences for the period from 1 January 2009 to 31 December 2011 and amending Regulations (EC) No 552/97, (EC) No 1933/2006 and Commission Regulations (EC) No 1100/2006 and (EC) No 964/2007 (OJ 2007 L 211, p.1) are worded as follows:
‘(6)
The general arrangement should be granted to all those beneficiary countries which are not classified by the World Bank as high-income countries and which are not sufficiently diversified in their exports.
...
(9)
These preferences should be designed to promote further economic growth and, thereby, to respond positively to the need for sustainable development. Under this arrangement, the ad valorem tariffs should therefore be suspended for the beneficiary countries concerned, as well as the specific duties, unless combined with an ad valorem duty.’
Article 5(1) and (2) of that regulation provides:
‘1. The tariff preferences provided shall apply to imports of products included in the arrangement enjoyed by the beneficiary country in which they originate.
2. For the purposes of the arrangements referred to in Article 1(2), the rules of origin concerning the definition of the concept of originating products, the procedures and the methods of administrative cooperation related thereto, shall be those laid down in Regulation [No 2454/93].’
Regulation No 1063/2010
Regulation No 1063/2010 consolidated the provisions of Regulation No 2454/93 relevant to the dispute in the main proceedings.
Recitals 3 and 16 of Regulation No 1063/2010 are worded as follows:
‘(3)
In the context of the Doha Development Agenda, the need to ensure a better integration of developing countries into the world economy has been recognised, in particular through improved access to the markets of developed countries.
For that purpose, the rules of preferential origin should be simplified and, where appropriate, made less stringent, so that products originating in beneficiary countries can actually benefit from the preferences granted.
...
(16)
...
The current rules require evidence of direct transport to the European Union which is frequently difficult to obtain. Due to that requirement, some goods which are accompanied by a valid proof of origin cannot actually benefit from preference. It is therefore appropriate to introduce a new, simpler and more flexible rule which focuses on the aim that goods presented to customs upon declaration for release for free circulation in the European Union are the same ones that left the beneficiary country of export and have not been altered or transformed in any way en route.’
The dispute in the main proceedings and the question referred for a preliminary ruling
On 11 August 2011, ADM Hamburg imported a number of consignments of crude palm kernel oil from Ecuador, Colombia, Costa Rica and Panama to Germany for release for free circulation in the European Union. Those four countries, which have the status of developing countries benefiting from the generalised system of preferences granted by the EU under its scheme of generalised preferential tariffs introduced by Regulation No 732/2008 (‘the relevant GSP countries’), issued certificates of origin Form A in respect of those various consignments.
During its transport to the European Union, the palm kernel oil was loaded in different tanks on a cargo vessel. In three of those tanks consignments originating respectively from three of the relevant GSP countries were loaded and transported separately. In a fourth tank, ADM Hamburg mixed the oil from different consignments coming from each of the four relevant GSP countries.
On arrival of the goods in Germany, ADM Hamburg presented the certificates of origin Form A, requesting in respect of the whole palm kernel oil shipment the application of a preferential customs treatment under the scheme of generalised tariff preferences.
By notice of 8 December 2011, the Customs Office fixed the import duties without granting preferential treatment for the part of the consignment consisting of a mix of oils stored in the fourth tank and decided to impose, on that part of the consignment, import duties calculated at the full rate.
Following the rejection of its administrative complaint, ADM Hamburg brought an action before the Finanzgericht Hamburg (Finance Court, Hamburg) in which it requested the annulment of the import duty notice of 8 December 2011.
In support of its action, ADM Hamburg contends, inter alia, that the common storage of oils for transport purposes is origin-neutral, whereas the Customs Office takes the view that preferential customs treatment can be granted only to products in respect of which an absence of alteration is established; that has not been established in the present case.
In those circumstances, the Finanzgericht Hamburg (Finance Court, Hamburg) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Is the factual condition laid down in the first sentence of Article 74(1) of [Regulation No 2454/93], whereby the products declared for release for free circulation in the European Union must be the same products as exported from the beneficiary country in which they are considered to originate, fulfilled in a case such as the present case, where several consignments of crude palm kernel oil are exported from different GSP exporting countries, in which they are considered to originate, and imported into the European Union not as physically separate consignments, but are all exported after being poured into the same tank of the cargo vessel and imported as a mixture in that tank into the European Union, such that it can be ruled out that other products (not enjoying preferential treatment) have been put into the tank of the cargo vessel during the time the products were being transported until they were released for free circulation?’
Consideration of the question referred
By its question the referring court asks, in essence, whether Article 74(1) of Regulation No 2454/93 must be interpreted as meaning that in a situation, such as that at issue in the main proceedings, where valid certificates of origin have been presented, the preferential origin, within the meaning of the scheme of generalised tariff preferences established by Regulation No 732/2008, of consignments of crude palm kernel oil may be recognised even when those goods have been mixed in the tank of a ship during their transport to the EU, in circumstances where it may be ruled out that other products, in particular products which do not benefit from any preferential scheme, have been added to that tank.
Article 74(1) of Regulation 2454/93 requires, inter alia, first, that the products declared for release for free circulation in the European Union be those that have been exported from the beneficiary country in which they are considered to originate and, secondly, that they have not undergone any alteration or transformation nor been subjected to operations other than those necessary to preserve them in good condition, prior to being declared for release for free circulation.
In that regard, it must be observed that, according to the order for reference, the products at issue in the main proceedings are completely interchangeable and present the same characteristics. Therefore, the mixing of those products during transport does not alter their substance.
Furthermore, it is not disputed that the consignments of crude palm kernel oil at issue in the main proceedings each benefit from a valid certificate of preferential origin. Therefore, those consignments fall, in principle, within the same tariff arrangement.
Moreover, it follows from the findings made by the referring court that it can be ruled out that other products subject to a different tariff arrangement might have been added, in the fourth tank of the cargo vessel, to the mixture of oils originating from the various consignments from each of the four relevant GSP countries.
Therefore, the mixing of products with characteristics such as those of the consignments of crude palm kernel oil at issue in a tank of a vessel at the time of transport to the European Union cannot, in itself, result in those products not being those which have been exported from the beneficiary country from which they are considered to originate.
For that reason, in order to determine whether the requirements laid down in Article 74(1) of Regulation No 2454/93 are satisfied, it is necessary to ascertain whether the mixing of products with characteristics such as those of the consignments of crude palm oil at issue in the main proceedings constitutes an alteration, a transformation or an operation within the meaning of that provision.
In that regard, it must be held that the reading alone of the second sentence of that provision does not allow the meaning of the terms ‘alteration’, ‘transformation’ and ‘operation’ to be determined with certainty.
Furthermore, it must be stated that Regulation No 2454/93 does not define those terms.
It should be noted that, where the wording of a provision of EU law is unclear, account should be taken of the context of that provision and of its objectives (judgment in PPG and SNF v ECHA, C‑625/11 P, EU:C:2013:594, paragraph 34 and the case-law cited).
As noted by the Advocate General in points 24 to 25 of his Opinion, Article 74 of Regulation No 2454/93 appears in Chapter 2, Title IV, Part I of that regulation which concerns preferential origin. More specifically, that provision constitutes a part of sub-section 2 of Section 1 which deals with the definition of the concept of ‘originating products’, namely products originating in a GSP country.
Therefore, in the light of the wording and the context of that provision, it must be held that its main purpose is to help to ensure that products which are declared for release for free circulation are indeed products originating in a GSP country and not a third country.
In those circumstances, the creation of a mixture of several products originating in GSP countries, at the time of transport, which does not alter the substance of those products and which does not create uncertainty as to the origin of those products, cannot be classified as an alteration, transformation or operation precluding the origin of those products from being recognised in the framework established, inter alia, by Article 74(1) of Regulation No 2454/93.
Furthermore, it is apparent from recitals 3 and 16 of Regulation No 1063/2010 that the reform of the generalised system of preferences provided for in that regulation is intended to simplify the rules of preferential origin and, if necessary, to relax them so that products originating in beneficiary countries may indeed benefit from the preferences granted.
As regards, more specifically, Article 74 of Regulation No 2454/93, it follows from recital 16 of Regulation No 1063/2010 that the latter regulation seeks to establish, in Regulation No 2454/93, a new rule which is simpler and more flexible replacing the earlier rule the application of which had the consequence that certain products accompanied by proof of origin in the prescribed form were excluded from the preferential tariff arrangements.
Moreover, as recital 9 of Regulation No 732/2008 states, the purpose of preferential arrangements, such as the generalised system of preferences laid down in that regulation, is to encourage economic growth and to respond positively to the need for sustainable development.
In those circumstances, Article 74(1) of Regulation No 2454/93 cannot be interpreted as precluding the recognition of the origin of products, such as those at issue in the main proceedings, on the sole basis that they have been mixed together, where that mixing has not prevented the competent authorities from ensuring that the exported products were indeed all from a GSP country of origin.
Having regard to all the foregoing considerations, the answer to the question referred is that Article 74(1) of Regulation No 2454/93 must be interpreted as meaning that in a situation, such as that at issue in the main proceedings, where valid certificates of origin have been presented, the preferential origin, within the meaning of the generalised system of preferences established by Regulation No 732/2008, of consignments of crude palm kernel oil may be recognised even where those products have been mixed in the tank of a vessel at the time of transport to the European Union in circumstances where it is possible to rule out that other products, in particular products not benefiting from any preferential treatment, have been added to that tank.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fourth Chamber) hereby rules:
Article 74(1) of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code, as amended by Commission Regulation (EC) No 1063/2010 of 18 November 2010, must be interpreted as meaning that in a situation, such as that at issue in the main proceedings, where valid certificates of origin have been presented, the preferential origin, within the meaning of the generalised system of preferences established by Regulation (EC) No 732/2008 of 22 July 2008 applying a scheme of generalised tariff preferences for the period from 1 January 2009 to 31 December 2011 and amending Regulations (EC) No 552/97, (EC) No 1933/2006 and Commission Regulations (EC) No 1100/2006 and (EC) No 964/2007, of consignments of crude palm kernel oil may be recognised even where those products have been mixed in the tank of a vessel at the time of their transport to the European Union in circumstances where it is possible to rule out that other products, in particular products not benefiting from any preferential treatment, have been added to that tank.
[Signatures]
( *1 ) Language of the case: German. |
ORDER OF THE COURT (First Chamber)
16 July 2015 ( *1 )
‛Reference for a preliminary ruling — Article 99 of the Rules of Procedure of the Court of Justice — Directive 93/13/EEC — Article 7 — Charter of Fundamental Rights of the European Union — Articles 7 and 47 — Consumer contracts — Mortgage loan contract — Unfair terms — Mortgage enforcement proceedings — Right of appeal’
In Case C‑539/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Audiencia Provincial de Castellón (Spain), made by decision of 21 November 2014, received at the Court on 27 November 2014, in the proceedings
Juan Carlos Sánchez Morcillo,
María del Carmen Abril García
v
Banco Bilbao Vizcaya Argentaria SA,
THE COURT (First Chamber),
composed of A. Tizzano (Rapporteur), President of the Chamber, S. Rodin, A. Borg Barthet, E. Levits and F. Biltgen, Judges,
Advocate General: N. Wahl,
Registrar: A. Calot Escobar,
having decided, after hearing the Advocate General, to give a decision by reasoned order, pursuant to Article 99 of the Rules of Procedure of the Court of Justice,
makes the following
Order
This reference for a preliminary ruling concerns the interpretation of Article 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29), read in conjunction with Articles 47, 34(3) and 7 of the Charter of Fundamental Rights of the European Union (‘the Charter’).
The request has been made in proceedings between Mr Sánchez Morcillo and Ms Abril García, on the one hand, and Banco Bilbao Vizcaya Argentaria SA (‘Banco Bilbao’), on the other hand, concerning their objection to the mortgage enforcement in respect of their property.
Legal context
European Union Law
Article 1(1) of Directive 93/13 reads as follows:
‘The purpose of this Directive is to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer’.
Article 3 of that directive provides:
‘1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.
2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract.
...
3. The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair.’
Under Article 7(1) of the directive:
‘Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.’
Spanish law
Following the Judgment in Aziz (C‑415/11, EU:C:2013:164), chapter III of Law 1/2013 on strengthening the protection of mortgage debtors, on debt restructuring and on social housing (Ley 1/2013, de medidas para reforzar la protección a los deudores hipotecarios, reestructuración de deuda y alquiler social), of 14 May 2013, (BOE No 116, of 15 May 2013, p. 36373), amended the Civil Procedure Code (Ley de enjuiciamiento civil), of 7 January 2000 (BOE No 7, of 8 January 2000, p. 575, ‘the LEC’).
The third final provision of the Decree Law 11/2014 on urgent measures in the area of insolvency (decreto-ley 11/2014 de medidas urgentes en materia concursal), of 5 September 2014 (BOE No 217, of 6 September 2014, p. 69767), subsequently amended the LEC (‘the amended LEC’) in order to ‘to bring it into line with the recent judgment of the Court of Justice of the European Union of 17 July 2014’.
Article 695 of the amended LEC, concerning the objection procedure against the enforcement of mortgages, provides:
‘1. In proceedings under this chapter, an objection to enforcement by the party against whom enforcement is sought may be admitted only if it is based on the following grounds:
(1)
extinction of the security or the secured obligation …
(2)
an error in determining the amount due …
(3)
in the case of enforcement against movable mortgaged property or property subject to a non-possessory pledge, the existence of another pledge, movable-property or immovable-property mortgage on, or seizure of, that property registered before the charge giving rise to the procedure, which must be proved by means of the corresponding certificate from the Registry.
(4)
the unfairness of a contractual term constituting the grounds for enforcement or that has determined the amount due.
2. If an objection is lodged under the preceding paragraph, the registrar shall stay enforcement and summon the parties to appear before the court which ordered the enforcement. There shall be at least fifteen days between the summons and the date of the hearing in question. At that hearing, the court shall hear the parties, admit the documents that are submitted and issue the decision that it considers reasonable within two days in the form of an order.
3. An order upholding the objection to enforcement on grounds 1 and 3 of paragraph 1 of the present article shall stay enforcement; an order upholding the objection to the enforcement on ground 2 shall determine the sum in respect of which enforcement is to continue.
If ground 4 of paragraph 1 of the present article is upheld, enforcement shall be discontinued where it is based on the contractual term. In other cases, enforcement shall be continued without the application of the unfair term.
4. An appeal may lie against the order discontinuing enforcement or disapplying an unfair term or rejecting the opposition on the ground laid down in paragraph 1(4) of the present article.
Save in those circumstances, no appeal shall lie against orders adjudicating upon the objection to enforcement referred to in the present article and the effects of those orders shall be confined exclusively to the enforcement proceedings in which they are made.’
Article 698 of the amended LEC provides:
‘1. Any application made by a debtor, third-party holder or other interested party, which is not covered by the preceding articles, including applications concerning nullity of title, maturity, certainty, extinguishment or the amount of the debt, shall be settled by an appropriate judgment, without ever having the effect of staying or terminating the judicial enforcement proceedings provided for in the present chapter.
…’
Article 552 of the LEC, which relates to the availability of an appeal if the court refuses to make an enforcement order, provides:
‘1. If the court considers that the rules and requirements laid down by law for issuing an enforcement order have not been observed, it shall make an order refusing enforcement.
If the court finds that any of the terms that appear in one of the enforceable instruments referred to in Article 557(1) may be considered to be unfair, it shall hear the parties within 15 days. After hearing the parties, it shall give a ruling within 5 working days, in accordance with the provisions of Article 561(1)(3).
2. An appeal may lie directly against an order refusing enforcement; only the creditor shall take part in this procedure. The creditor may also, if it chooses, apply for review by the same court before bringing the appeal.
3. Once the order refusing enforcement has become final, the creditor may assert its rights only in the relevant ordinary procedure, if this is not precluded by the principle of res judicata of the judgment or the final decision on which the request for enforcement was based.’
According to Article 557 of the amended LEC, relating to the procedure for objecting to enforcement based on instruments that are neither judicial nor arbitral:
‘1. When enforcement is ordered on the basis of instruments referred to in Article 517(2)(4), (5), (6) and (7) and of other enforceable documents referred to in Article 517(2)(9), the party against whom enforcement is sought may lodge an objection, within the period and in the form provided for in the preceding article, only if he relies on one of the following grounds:
…
7°
the instrument contains unfair terms.
2. If an objection referred to in the previous paragraph is made, the registrar shall suspend the enforcement by a measure of organisation of the procedure.’
Article 561(1) of the amended LEC concerns orders ruling on the objection on substantive grounds and is worded as follows:
‘1. After hearing the parties on an objection to enforcement not based on procedural defects and after any hearing that may be held, the court shall adopt, by order, for the purposes of enforcement only, one of the following decisions:
(1)
to order the enforcement to proceed in respect of the amount ordered, if the objection is rejected in its entirety. If the objection was based on an excessive claim and was dismissed in part, enforcement shall be ordered only for the corresponding sum.
…
(2)
to declare that the enforcement shall not proceed if one of the grounds of objection set out in Articles 556 and 557 is upheld or if the objection that the claim is excessive is upheld in accordance with Article 558 and held to be well founded in its entirety.
(3)
if one or more clauses are held to be unfair, the order to be made shall determine the consequences of such unfairness, directing either that enforcement is unavailable or ordering enforcement without application of the clauses considered unfair.
2. If the objection to enforcement is upheld, the enforcement shall be deprived of effect and the attachments and the measures adopted to secure the charge shall be lifted, and the defendant to the enforcement shall be restored to his situation before the enforcement order, in accordance with the provisions of Articles 533 and 534. The party seeking enforcement shall be ordered to pay the costs of the objection.
3. The order giving a ruling on the objection may be subject to an appeal, which shall not suspend enforcement if the decision under appeal rejected the objection.
…’
The dispute in the main proceedings and the question referred for a preliminary ruling
In its judgment in Sánchez Morcillo and Abril García (C‑169/14, EU:C:2014:2099), the Court has already interpreted Article 7(1) of Council Directive 93/13, read in conjunction with Article 47 of the Charter, in the same dispute as that at issue in the main proceedings. The facts of the dispute in the main proceedings were stated as follows in paragraphs 13 to 18 of that judgment:
‘13
According to the order for reference, on 9 June 2003 the applicants in the main proceedings signed a notarial act with Banco Bilbao for the loan of EUR 300500 secured by a mortgage on their property.
The repayment of that sum was due by 30 June 2028 spread over 360 monthly payments. If the debtors failed to meet their payment obligations, Banco Bilbao was authorised to claim the accelerated repayment of the loan granted to the debtors. Under clause 6 bis of the loan agreement, default interest was to be charged at 19% per annum, the statutory interest rate in Spain being, at the material time, 4% per annum.
Owing to failure by the applicants in the main proceedings to meet their obligation to make monthly repayments of the loan, on 15 April 2011 Banco Bilbao demanded payment of the entire loan together with ordinary interest and default interest and the enforced sale of the property mortgaged in its favour.
Following the bringing of enforcement proceedings, the applicants in the main proceedings lodged an objection thereto, which was rejected by a decision dated 19 June 2013 of the Juzgado de Primera Instancia No 3 de Castellón (Court of First Instance No 3, Castellón). The applicants in the main proceedings then brought an appeal against that decision which, being declared admissible, was sent before the Audiencia Provincial de Castellón (Provincial Court, Castellón).
The referring court explains that while Spanish civil procedure allows an appeal to be brought against a decision which, upholding the objection raised by a debtor, terminates the enforcement proceedings, it does not, by contrast, allow the debtor whose objection has been dismissed to bring an appeal against the judgment at first instance ordering the enforcement procedure to be carried out.
The referring court entertains doubts as to whether this national legislation is compatible with the objective of consumer protection pursued by Directive 93/13 or with the right to an effective remedy guaranteed by Article 47 of the Charter. That court specifies that the availability of an appeal to debtors could prove even more critical given that certain clauses in the loan agreement at issue could be considered to be ‘unfair’, within the meaning of Article 3(1) of Directive 93/13.’
The Audiencia Provincial de Castellón therefore decided to refer questions concerning precisely those issues to the Court for a preliminary ruling.
By judgment in Sánchez Morcillo and Abril García (C‑169/14, EU:C:2014:2099), the Court replied that Article 7(1) of Directive 93/13, read in conjunction with Article 47 of the Charter, must be interpreted as precluding a system of enforcement, such as that at issue in the main proceedings, which provides that mortgage enforcement proceedings may not be stayed by the first instance court, which, in its final decision, may at most award compensation in respect of the damage suffered by the consumer, in so far as the latter, as the debtor against whom mortgage enforcement proceedings are brought, may not appeal against a decision dismissing his objection to that enforcement, whereas the seller or supplier, the creditor seeking enforcement, may bring an appeal against a decision terminating the proceedings or declaring an unfair term inapplicable.
After that judgment was delivered, the Spanish legislature amended Article 695(4) of the LEC by Decree Law 11/2014.
None the less, the referring court before which the appeal proceedings were brought states that that amendment allows consumers to bring an appeal against the order dismissing the objection to enforcement only when the court of first instance did not uphold a ground of objection based on the unfairness of a contractual term upon which the enforcement is based, while it allows sellers or suppliers to appeal against any decision terminating proceedings regardless of the ground of objection on which that decision is based.
Consequently that court continues to have doubts regarding the compatibility of such a national provision — that should lead to the rejection of the appeal brought by the applicants in the main proceedings — with the objective of consumer protection sought by Directive 93/13, read in conjunction with the principle of equality of arms guaranteed by Article 47 of the Charter, and the rights to housing and to a private and family life enshrined in Articles 34(3) and 7 of the Charter respectively.
In those circumstances, the Audiencia Provincial de Castellón decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Must Article 7(1) of [Directive 93/13], read in conjunction with Articles 47, 34(3) and 7 of the [Charter] be interpreted as precluding a procedural provision of the kind laid down in Article 695(4) of [the amended LEC], applicable to appeals against a decision determining the outcome of an objection to enforcement proceedings in relation to mortgaged or pledged goods, which allows an appeal to be brought only against an order terminating the proceedings, disapplying an unfair term or rejecting an objection based on an unfair term, the immediate consequence of which is that more legal remedies on appeal are available to the seller or supplier seeking enforcement than to the consumer against whom enforcement is sought?’
On 27 November 2014, the Audencia Provincial de Castellón requested the case be determined pursuant to the expedited procedure provided for in Article 23a of the Statute of the Court of Justice of the European Union and in Article 105(1) of the Rules of Procedure of the Court. According to the national court, the exceptional urgency is due to the fact that the permanent residence of the consumers, in their capacity as debtors subject to mortgage enforcement proceedings, is the subject-matter of the mortgage enforcement at issue in the main proceedings, which carries the risk that the residence may be lost and of putting them and their family in a particularly difficult position.
The question referred for a preliminary ruling
Under Article 99 of the Rules of Procedure, where a question referred to the Court for a preliminary ruling is identical to a question on which the Court has already ruled, where the reply to such a question may be clearly deduced from existing case-law or where the answer to the question referred for a preliminary ruling admits of no reasonable doubt, the Court may at any time, on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide to rule by reasoned order.
That article must be applied in the present case.
In its request for a preliminary ruling, the referring court asks, in essence, if Article 7(1) of Directive 93/13, read in conjunction with Articles 47, 34(3) and 7 of the Charter, must be interpreted as precluding a national provision of the kind at issue in the main proceedings, by which the consumer, as a mortgage debtor against whom enforcement proceedings are brought, may bring an appeal against the decision rejecting his objection to the enforcement only when the court of first instance has not upheld an objection based on the unfairness of the contractual term upon which the enforcement is based, while the seller or supplier, may, by contrast, appeal against any decision terminating the proceedings regardless of the ground of objection on which that decision is based.
In that regard, it should be observed, first, that according to settled case-law, the system of protection introduced by Directive 93/13 is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge (judgments in Aziz, C‑415/11, EU:C:2013:164, paragraph 44, and Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 22).
As regards that weaker position, Article 6(1) of the directive provides that unfair terms are not binding on the consumer. That is a mandatory provision which aims to replace the formal balance which the contract establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 23 and the case-law cited).
For those purposes, Article 7(1) of Directive 93/13 imposes the obligation on Member States to ensure that, in their legal orders, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded between consumers and sellers or suppliers (judgment in Baczó and Vizsnyiczai, C‑567/13, EU:C:2015:88, paragraph 39).
In that context, the Court has already stated on several occasions that the national court is required to assess of its own motion whether a contractual term falling within the scope of the directive is unfair, compensating in this way for the imbalance which exists between the consumer and the seller or supplier, where it has available to it the legal and factual elements necessary to that end (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 24).
National enforcement proceedings, such as mortgage enforcement proceedings, are subject to the requirements arising out of that case-law of the Court which seeks to ensure the effective protection of consumers (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 25).
In particular, the Court has already ruled that Directive 93/13 requires to be interpreted as precluding legislation of a Member State which, while not providing in mortgage enforcement proceedings for grounds of objection based on the unfairness of a contractual term on which the right to seek enforcement is based, does not permit the court before which proceedings on the substance of the case have been brought, which has jurisdiction to assess the unfairness of such a term, to grant interim relief, including, in particular, the staying of those enforcement proceedings, where the grant of such relief is necessary to guarantee the full effectiveness of its final decision (judgment in Aziz, C‑415/11, EU:C:2013:164, paragraph 64).
The Court has also interpreted Directive 93/13 as precluding national legislation, which does not allow the court responsible for the enforcement, in mortgage enforcement proceedings, either to assess of its own motion or at the consumer’s request, the unfairness of a term contained in the contract which gives rise to the debt claimed and which constitutes the basis of the right to enforcement, or to grant interim relief capable of staying or terminating the mortgage enforcement proceedings, where such relief is necessary to ensure the full effectiveness of the final decision of the court hearing the proceedings on the substance of the case before which the consumer argues that that term is unfair (order in Banco Popular Español and Banco de Valencia, C‑537/12 and C‑116/13, EU:C:2013:759, paragraph 60).
In this connection, the Court has stated that Article 7(1) of Directive 93/13, read in conjunction with Article 47 of the Charter, must be interpreted as precluding a system of enforcement which provides that mortgage enforcement proceedings may not be stayed by the court hearing the proceedings on the substance of the case, which, in its final decision, may at most award compensation in respect of the damage suffered by the consumer, inasmuch as the latter, the debtor against whom mortgage enforcement proceedings are brought, may not appeal against a decision dismissing his objection to that enforcement, whereas the seller or supplier, the creditor seeking enforcement, may bring an appeal against a decision terminating the proceedings or ordering an unfair term to be disapplied (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 51).
Therefore, the response to be given to the question asked in the present case can be clearly deduced from the guidance given in the Court’s case-law on those different points, in so far as it concerns, in essence, the question whether the legislative amendment of Article 695(4) of the LEC, introduced following the Court’s judgment in Sánchez Morcillo and Abril García, (C‑169/14, EU:C:2014:2099), is not contrary to the interpretation of Directive 93/13 resulting from that judgment.
For those purposes, it must be noted that, in accordance with settled case-law, in the absence of harmonisation of national enforcement procedures, the detailed rules establishing the right of appeal against a decision ruling on the legality of a contractual term, arising in the course of mortgage enforcement proceedings, are matters falling within the domestic legal order of each Member State, in accordance with the principle of the procedural autonomy of the Member States provided, however, that they should be no less favourable than those governing similar domestic situations (principle of equivalence) and that they should not in practice render impossible or excessively difficult the exercise of rights conferred by the European Union legal order (principle of effectiveness) (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 31).
As regards the principle of equivalence, it must be observed that the Court does not have before it any information which might raise doubts as to the compliance with the principle of the legislation at issue in the main proceedings.
As regards the principle of effectiveness, the Court has already held that every case in which the question arises whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary to take into consideration the principles which lie at the basis of the national legal system, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of the proceedings (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 34).
Thus, the obligation for the Member States to ensure the effectiveness of the rights that the parties derive from Directive 93/13 against the use of unfair clauses implies a requirement of judicial protection, also guaranteed by Article 47 of the Charter, that is binding on the national court. That protection must be assured both as regards the designation of courts having jurisdiction to hear and determine actions based on EU law and as regards the definition of detailed procedural rules relating to such actions (judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 35).
In that regard, it should be recalled that, in response to the delivery of the judgment in Aziz (C‑415/11, EU:C:2013:164), Law 1/2013 amended, those articles of the LEC relating to enforcement proceedings against mortgaged or pledged assets by introducing into Article 695(1) the possibility for the party opposing the mortgage enforcement proceedings to object to those proceedings on the ground that the contractual clause upon which the enforcement was based was unfair.
In that context, Decree Law 11/2014 also amended Article 695(4) of the LEC in order to comply with the judgment in Sánchez Morcillo and Abril García (C‑169/14, EU:C:2014:2099).
It is undisputed that the provision as so amended does indeed give consumers the right to bring an appeal against the decision of the court responsible for enforcement rejecting their objection to the mortgage enforcement proceedings, if that objection is based on the unfairness of a term, within the meaning of Article 3 Directive 93/13, contained in the contract from which the debt arises and which is the basis for the enforcement order.
Accordingly, the procedural rule established by that provision as so amended allows the court responsible for enforcement to assess, before the end of the enforcement proceedings and in a context which allows for a right of review, the unfairness of a contractual term that may provide the basis for setting the amount due or may be the basis of the enforcement order, and, in that last case, allows the court to declare the mortgage enforcement proceedings themselves to be invalid.
Consequently, unlike the procedural rule at issue in the case that led to the judgment in Sánchez Morcillo and Abril García, (C‑169/14, EU:C:2014:2099, paragraph 43), such a national provision no longer exposes the consumer, and possibly his family, to the risk of losing his dwelling in a forced sale, in a context where mortgage enforcement proceedings may not be stayed by the court dealing with the substance of the case and where the court responsible for enforcement may have, at most, undertaken a summary assessment of the validity of the contractual term upon which the seller or supplier bases his application.
It is true, as was stated by the referring court, that Article 695(4) of the amended LEC, while giving the consumer the right to bring an appeal against an order rejecting an objection based on the unfairness of a term contained in the contract which gives rise to the sum sued for and forms the basis of the right of enforcement, excludes the right of appeal as regards decisions rejecting the objection, when that objection is based on the other grounds listed under Article 695(1) of the amended LEC. That court states that such a limitation to the right to bring an appeal is not, by contrast, effective against the seller or supplier, who, as the creditor seeking enforcement, may bring an appeal against any decision terminating the proceedings, regardless of the ground of objection on which that decision is based.
However, it must be borne in mind in that regard that the scope of Directive 93/13 is limited to the protection of consumers against unfair terms in contracts which they enter into with sellers and suppliers.
Therefore, issues arising from the fact that, under the national legislation at issue, consumers do not have the right to bring an appeal against a decision rejecting their objection based on grounds other than the unfairness of the contractual term which forms the basis of the enforcement order does not fall into the scope of that directive, and is therefore not liable to jeopardise the effectiveness of consumer protection which by the directive seeks to provide.
It follows that Article 695(4) of the amended LEC now provides consumers with a full and sufficient means of recourse, which thus constitutes adequate and effective means for the purposes of Article 7(1) of Directive 93/13, for preventing the continued application of unfair terms, in mortgage enforcement proceedings, contained in the instrument establishing the mortgage on the basis of which the seller or supplier brings enforcement proceedings against the property charged by way of security.
In that context, it must be added that the characteristics of the legal proceedings before the Spanish court responsible for enforcement also do not, after the amendment introduced by Decree Law 11/2014, constitute a factor liable to affect the legal protection from which consumers must benefit under Article 7(1) of Directive 93/13, read in conjunction with right to respect for private and family life, and the right to respect for the home, guaranteed under Article 7 of the Charter, and the principle of equality of arms, that is an integral part of the principle of effective judicial protection contained in Article 47 of the Charter (see judgment in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 48 and the case-law cited).
It must first be observed that the Spanish procedural rules regarding mortgage enforcement, seen as a whole and as applying in the main proceedings, no longer expose the consumer to the risk of final and irreversible loss of their dwelling in a forced sale before a court has even been able to assess the unfairness of the contractual term upon which the seller or supplier bases his application for mortgage enforcement. Furthermore, as was stated in paragraphs 40 and 41 of the present order, those procedural rules effectively reinforce review by the courts in that regard, in providing that an appeal court may, at second instance, review the wellfoundedness of the assessment of such a term carried out at first instance by the court responsible for enforcement.
Similarly, as regards, second, compliance with of the principle of equality of arms against the use of unfair terms falling within the scope of Directive 93/13, in national mortgage enforcement proceedings such as those at issue in the main proceedings, it should be stated that, following the amendment of Article 695(4) of the LEC, the Spanish procedural rules do indeed provide the consumer with a reasonable opportunity to take legal action based on rights deriving from that directive in conditions that no longer place him in a clearly less advantageous position than the seller or supplier, the creditor seeking enforcement (see, a contrario, judgement in Sánchez Morcillo and Abril García, C‑169/14, EU:C:2014:2099, paragraph 49 and the case-law cited).
In that context, it is not necessary, lastly, to rule on the interpretation of Article 7(1), of Directive 93/13, read in conjunction with Article 34(3) of the Charter that the referring court seeks. Contrary to what that court has stated, given that that provision of the Charter does not guarantee the right to housing, but rather ‘the right to social and housing assistance’ in social policies based on Article 153 TFEU, such an interpretation is not relevant for the purposes of resolving the dispute in the main proceedings.
In light of those considerations, the answer to the question referred is that Article 7(1), of Directive 93/13, read in conjunction with Articles 7 and 47 of the Charter, must be interpreted as not precluding a national provision of the kind at issue in the main proceedings, by which the consumer, as a mortgage debtor against whom enforcement proceedings are brought, may bring an appeal against the decision rejecting his objection to the enforcement only when the court of first instance has not upheld an objection based on the unfairness of the contractual term upon which the enforcement is based even though sellers or suppliers may, by contrast, appeal against any decision terminating the proceedings regardless of the ground of objection on which that decision is based.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.
On those grounds, the Court (First Chamber) hereby rules:
Article 7(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, read in conjunction with Articles 47, 34(3) and 7 of the Charter of Fundamental Rights of the European Union, must be interpreted as not precluding a national provision of the kind at issue in the main proceedings, by which the consumer, as a mortgage debtor against whom enforcement proceedings are brought, may bring an appeal against the decision rejecting his objection to the enforcement only when the court of first instance has not upheld an objection based on the unfairness of the contractual term upon which the enforcement is based even though the sellers or suppliers may, by contrast, appeal against any decision terminating proceedings regardless of the ground of objection on which that decision is based.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (First Chamber)
14 April 2016 ( *1 )
[Text rectified by order of 29 November 2016]
‛Reference for a preliminary ruling — Directive 93/13/EEC — Contracts concluded between sellers or suppliers and consumers — Mortgage contracts — ‘Floor’ clause — Examination of the clause with a view to its invalidation — Collective proceedings — Action for an injunction — Stay of an individual action with the same subject matter’
In Joined Cases C‑381/14 and C‑385/14,
REQUESTS for a preliminary ruling under Article 267 TFEU from the Juzgado de lo Mercantil No 9 de Barcelona (Commercial Court No 9, Barcelona, Spain), made by decisions of 27 June 2014, received at the Court on 11 and 12 August 2014, in the proceedings
Jorge Sales Sinués
v
Caixabank SA (C‑381/14),
and
Youssouf Drame Ba
v
Catalunya Caixa SA (Catalunya Banc SA) (C‑385/14),
THE COURT (First Chamber),
composed of A. Tizzano, Vice-President of the Court, acting as President of the Chamber, F. Biltgen, A. Borg Barthet, E. Levits (Rapporteur) and S. Rodin, Judges,
Advocate General: M. Szpunar,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 30 September 2015,
after considering the observations submitted on behalf of:
—
Mr Sales Sinués, by D. Cirera Mora and F. Pertínez Vílchez, abogados,
—
Caixabank SA, by J. Fontquerni Bas, counsel, assisted by A. Ferreres Comella, abogado,
—
Catalunya Caixa SA, by J.M. Rodríguez Cárcamo and I. Fernández de Senespleda, abogados,
—
the Spanish Government, by A. Gavela Llopis, acting as Agent,
—
the European Commission, by J. Baquero Cruz and M. van Beek, acting as Agents,
[Text rectified by order of 29 November 2016] after hearing the Opinion of the Advocate General at the sitting on 14 January 2016,
gives the following
Judgment
These requests for a preliminary ruling concern the interpretation of Article 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).
The requests have been made in proceedings between, in one case, Mr Sales Sinués and Caixabank SA and, in the other, Mr Drame Ba and Catalunya Caixa SA, both relating to the annulment of contractual terms in mortgage loan agreements.
Legal context
Directive 93/13
Article 3 of Directive 93/13 is worded as follows:
‘1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.
2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract.
…’
Article 4(1) of Directive 93/13 provides:
‘Without prejudice to Article 7, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.’
Article 6(1) of Directive 93/13 provides:
‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.’
Article 7 of Directive 93/13 states:
‘1. Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.
2. The means referred to in paragraph 1 shall include provisions whereby persons or organisations, having a legitimate interest under national law in protecting consumers, may take action according to the national law concerned before the courts or before competent administrative bodies for a decision as to whether contractual terms drawn up for general use are unfair, so that they can apply appropriate effective means to prevent the continued use of such terms.
…’
Spanish law
Article 43 of the Code of Civil Procedure (Ley de enjuiciamiento civil) of 7 January 2000 (BOE No 7 of 8 January 2000, p. 575) provides:
‘Where, in order to give a ruling on the subject matter of a dispute, it is necessary to decide an issue which itself constitutes the main subject matter of other proceedings pending before the same or a different civil court, and where it is not possible for the two actions to be joined, the court may, on the application of both parties or on the application of one of them and after hearing the other party, order the proceedings to be stayed as they currently stand, until such time as the proceedings concerning the preliminary issue are concluded.’
Article 221 of the Code of Civil Procedure, which deals with the effects of judgments given in proceedings brought by associations of consumers and users, is worded as follows:
‘…
1a. If the claim is for pecuniary damages, or an order laying down an obligation to do or to refrain from doing something or to give a specific or general thing, the judgment upholding the claim shall identify individually which consumers and users are to be regarded as entitled to benefit from the judgment, in accordance with the laws for their protection.
Where it is not possible to identify such consumers and users individually, the judgment shall set out the facts, characteristics and conditions required in order to be able to demand payment and, where appropriate, apply for execution or participate therein in the event that enforcement is sought by the claimant association.
2a. Where, as a preliminary finding or as the court’s principal or sole ruling, a given activity or particular conduct is declared unlawful or inconsistent with the law, the court shall indicate in its judgment whether, in accordance with the laws on the protection of consumers and users, that declaration has procedural consequences that are not limited to the parties to the relevant proceedings.
3a. Where particular consumers or users have participated in the proceedings, the judgment shall include an express ruling on their claims.
…’
Under Article 222 of the Code of Civil Procedure:
‘1. The authority of res judicata attaching to final judgments, either upholding or dismissing a claim, shall exclude, in accordance with the law, any further proceedings having the same subject matter as that in which the first judgment was given.
2. The authority of res judicata shall attach to claims made in the main application and to counterclaims and to the matters referred to in Article 408(1) and (2) of this law.
Facts subsequent to the expiry of the period for the lodging of pleadings in the proceedings in which such claims were made shall be regarded as new and different with respect to the basis on which such claims were made.
3. The authority of res judicata shall be binding on the parties to the proceedings in which it arises, their heirs and those deriving title from them, and on the persons who, not being parties to the proceedings, hold the rights which give them standing to bring proceedings in accordance with the provisions of Article 11 of this law.
…
4. A decision that has acquired the force of res judicata in a final judgment concluding proceedings shall be binding on a court before which subsequent proceedings are brought where the decision having the force of res judicata appears, in the subsequent proceedings, to be a logical antecedent to the subject matter of the subsequent proceedings and where the parties to the two sets of proceedings are the same or where the authority of res judicata applies to them pursuant to provisions of the law.’
The referring court interprets those procedural provisions as imposing on it an obligation to stay the proceedings brought before it, in which an individual action for annulment of an unfair term has been brought by a consumer, pending final judgment in proceedings in which a duly authorised association has brought a collective action seeking cessation of the use of a similar clause.
The disputes in the main proceedings and the questions referred for a preliminary ruling
On 20 October 2005, Mr Sales Sinués concluded an agreement for the novation of a mortgage loan with Caixabank SA. The ‘floor’ clause contained in that agreement consisted of a nominal annual interest rate of 2.85%, the upper ‘ceiling’ of that interest rate being fixed at 12%. On 7 February 2005 Mr Drame Ba concluded a mortgage loan agreement with Catalunya Caixa SA. The ‘floor’ clause in that agreement corresponded to a rate of 3.75%, the upper ‘ceiling’ being fixed at 12%.
Independently of market rate fluctuations, the interest rates of the agreements concluded by the applicants in the main proceedings could not fall below the percentage stipulated by the ‘floor’ clause.
Mr Sales Sinués and Mr Drame Ba, taking the view that the ‘floor’ clauses had been imposed on them by the banking institutions and that they created an imbalance to their detriment, brought individual actions seeking annulment of those clauses before the referring court.
Prior to those actions, a consumer association, the ADICAE (Asociación de Usuarios de Bancos Cajas y Seguros) brought a collective action against 72 banking institutions seeking, inter alia, an injunction prohibiting the continued use of ‘floor’ clauses in loan agreements.
Basing themselves on Article 43 of the Code of Civil Procedure, the defendants in the main proceedings seek to have the proceedings at issue suspended pending final judgment concluding the collective action. Mr Sales Sinués and Mr Drame Ba oppose that request.
The referring court finds that, in the circumstances of the cases in the main proceedings, Article 43 of the Code of Civil Procedure requires it to suspend the individual actions brought before it until such time as a final judgment on the collective action has been delivered, such a suspensory effect leading to a necessary subordination of the individual action to the collective action, as regards both the course of the proceedings and the outcome.
It also notes that participation in the collective action involves various constraints, as the individual concerned may be required to waive the jurisdiction of the court for the place where he is domiciled and the possibility of submitting observations individually in support of the collective action may be subject to time limitations.
In those circumstances, the Juzgado de lo Mercantil No 9, Barcelona (Commercial Court No 9, Barcelona, Spain) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘1.
Can it be considered [that the Spanish legal system provides for] an effective means or mechanism pursuant to Article 7(1) of Directive 93/13?
2.
To what extent does the suspensory effect of a stay of proceedings preclude a consumer from complaining that unfair terms included in a contract concluded with him are void, and, therefore, infringe Article 7(1) of Directive 93/13?
3.
Does the fact that a consumer is unable to dissociate himself from collective proceedings constitute an infringement of Article 7(3) of Directive 93/13?
4.
Or, on the other hand, is the suspensory effect of a stay of proceedings provided for in Article 43 of the Code of Civil Procedure compatible with Article 7 of Directive 93/13 in that the rights of consumers are fully safeguarded by collective actions, the Spanish legal system providing for other equally effective procedural mechanisms for the protection of consumers’ rights, and by the principle of legal certainty?’
By order of the President of the Court of 9 September 2014, Cases C‑381/14 and C‑385/14 were joined for the purposes of the written and oral procedure and the judgment.
Consideration of the questions referred
By its questions, which it is appropriate to consider together, the referring court asks, in essence, whether Article 7 of Directive 93/13 must be interpreted as precluding a provision of national law which requires a court, before which an individual action has been brought by a consumer seeking a declaration that a contractual term binding him to a seller or supplier is unfair, automatically to suspend such an action pending a final judgment concerning an ongoing collective action brought by a consumer association on the basis of Article 7(2) of Directive 93/13, seeking, in particular, to prevent the continued use, in contracts of the same type, of terms similar to those at issue in that individual action.
In order to answer those questions, it should be recalled, first, that, under Article 7(1) of Directive 93/13, Member States are required to ensure that adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded between sellers or suppliers and consumers. In parallel to the subjective right of a consumer to bring an action before a court for examination as to whether a term of a contract to which he is a party is unfair, the mechanism provided for in Article 7(2) of Directive 93/13 allows Member States to introduce a check on unfair terms contained in standard contracts by means of actions for an injunction brought in the public interest by consumer-protection associations.
As regards, first, the individual action brought by a consumer, the system of protection established by Directive 93/13 is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier as regards both his bargaining power and his level of knowledge (see judgment in Pereničová and Perenič, C‑453/10, EU:C:2012:144, paragraph 27 and the case-law cited).
In order to guarantee that protection, the imbalance which exists between the consumer and the seller or supplier may be corrected only by positive action unconnected with the actual parties to the contract (judgment in Asturcom Telecomunicaciones, C‑40/08, EU:C:2009:615, paragraph 31).
In that context, the national court is required to assess of its own motion the unfairness of a contractual term by taking account, as required by Article 4(1) of Directive 93/13, of the nature of the goods or services that form the subject matter of the contract and by reference, on the date on which the contract was concluded, to all the circumstances attending its conclusion, as well as all the other clauses of that contract or of a contract on which it is dependent (see, to that effect, judgment in Asturcom Telecomunicaciones, C‑40/08, EU:C:2009:615, paragraph 32).
However, if the national court were to find that a clause is unfair, the right to effective consumer protection also includes the option not to assert one’s rights, with the effect that the national court must take into account, where appropriate, the intention expressed by the consumer when, conscious of the non-binding nature of an unfair term, that consumer states nevertheless that he is opposed to that term being disregarded, thus giving his free and informed consent to the term in question (see judgment in Banif Plus Bank, C‑472/11, EU:C:2013:88, paragraph 35).
As regards, on the other hand, actions brought by persons or organisations having a legitimate interest in protecting consumers as referred to in Article 7(2) of Directive 93/13, it must be noted that such persons or organisations are not in an inferior position vis-à-vis the seller or supplier (judgment in Asociación de Consumidores Independientes de Castilla y León, C‑413/12, EU:C:2013:800, paragraph 49).
Without denying the importance of the essential role that they must be able to play in order to achieve a high level of consumer protection within the European Union, it must nevertheless be noted that an action for an injunction pitting such an association against a seller or supplier is not characterised by the same imbalance that is present in an individual action brought by a consumer against a seller or supplier (see judgment in Asociación de Consumidores Independientes de Castilla y León, C‑413/12, EU:C:2013:800, paragraph 50).
Such a differentiated approach is, moreover, supported by Article 4(1) of Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers’ interests (OJ 1998 L 166, p. 51) and by Article 4(1) of Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests (OJ 2009 L 110, p. 30) which succeeded it, under which it is the courts of the Member State in which the defendant is established or has its address that have jurisdiction to hear actions for an injunction brought by consumer-protection associations from other Member States in the event of an intra-EU infringement of European Union consumer-protection legislation (judgment in Asociación de Consumidores Independientes de Castilla y León, C‑413/12, EU:C:2013:800, paragraph 51).
It should be added that the deterrent nature and dissuasive purpose of actions for an injunction, together with their independence of any particular dispute, mean that such actions may be brought even though the terms which it is sought to have prohibited have not been used in specific contracts (judgment in Invitel, C‑472/10, EU:C:2012:242, paragraph 37).
Consequently, individual and collective actions have, in the context of Directive 93/13, different purposes and legal effects, with the result that the procedural relationship between the respective conduct of each can correspond only to procedural requirements relating, in particular, to the sound administration of justice and to the need to avoid incompatible judicial decisions, without, however, the interaction of those different actions leading to a weakening of consumer protection, as provided for by Directive 93/13.
Although that directive does not seek to harmonise the penalties applicable in the event of a term being found to be unfair in the context of those actions, Article 7(1) of Directive 93/13 nevertheless requires the Member States to ensure that adequate and effective means exist to bring an end to the use of unfair terms in contracts concluded with consumers (judgment in Invitel, C‑472/10, EU:C:2012:242, paragraph 35).
In that context, it should nevertheless be noted that, in the absence of harmonisation of procedural means governing the relationship between collective and individual actions as provided for under Directive 93/13, it is for the internal legal order of each Member State, under the principle of procedural autonomy, to establish such rules, on condition, however, that they are not less favourable than those governing similar situations subject to domestic law (principle of equivalence) and that they do not make it impossible in practice or excessively difficult to exercise the rights conferred by EU law on consumer protection associations (principle of effectiveness) (see, by way of analogy, judgment in Asociación de Consumidores Independientes de Castilla y León, C‑413/12, EU:C:2013:800, paragraph 30 and the case-law cited).
As regards, first, the principle of equivalence, there is no indication, regard being had to the information provided in the orders for reference, that Article 43 of the Code of Civil Procedure would be subject to a different application in disputes concerning rights arising under national law and in those concerning rights arising under EU law.
As regards, second, the principle of effectiveness, the Court has previously held that every case in which the question arises as to whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its conduct and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary to take into consideration the principles which form the basis of the national legal system, such as the principle of legal certainty and the authority of judicial decisions (see, to that effect, judgment in BBVA, C‑8/14, EU:C:2015:731, paragraph 26 and the case-law cited).
In the present cases, it must be held that, as is clear from the interpretation provided by the referring court, in circumstances such as those in the main proceedings, that court is required, pursuant to Article 43 of the Code of Civil Procedure, to stay the individual action brought before it pending a final judgment concluding the collective action, the outcome of which is likely also to be applied in the individual action and, on that basis, the consumer can no longer individually assert the rights recognised by Directive 93/13 by dissociating himself from that collective action.
Such a situation, however, is liable to undermine the effectiveness of the protection intended by that directive, in view of the differences in the purpose and nature of the consumer-protection mechanisms given specific expression by those actions, as noted in paragraphs 21 to 29 of the present judgment.
First, the consumer will necessarily be linked to the outcome of the collective action, even if he has decided not to participate in it, and the obligation of the national court under Article 43 of the Code of Civil Procedure thus prevents that court from conducting its own analysis of the circumstances in the proceedings brought before it. In particular, the question of individual negotiation of the allegedly unfair term will not be decisive, nor even the nature of the goods or services for which the contract in question was concluded.
Second, the consumer is dependent, pursuant to Article 43 of the Code of Civil Practice, as interpreted by the referring court, on the period within which a judicial decision relating to the collective action is to be taken, without the national court being able to examine in that regard the relevance of the suspension of the individual action pending delivery of a final judgment in the collective action.
Such a national rule therefore appears incomplete and insufficient and does not constitute either an adequate or effective means of bringing to an end the continued use of unfair clauses, contrary to the requirements of Article 7(1) of Directive 93/13.
This applies a fortiori since, under domestic law, if the consumer wishes to take part in the collective action, he is subject, as is clear from the orders for reference, to constraints relating to the determination of the competent court and to the pleas that may be put forward. Furthermore, the consumer will necessarily forfeit the rights which he would be recognised as having in an individual action, namely to have all the circumstances of his situation taken into account, as well as the possibility of waiving the non-application of an unfair clause, a fortiori if he cannot disassociate himself from the collective action.
In this context, it is also important to note that the need to ensure consistency between judicial decisions cannot justify such a lack of effectiveness since, as was stressed by the Advocate General at point 72 of his Opinion, the difference in nature between judicial control exercised in the context of a collective action and that exercised in the context of an individual action should, in principle, prevent the risk of incompatible judicial decisions.
Furthermore, as regard the need to avoid overburdening the courts, the effective exercise of subjective rights conferred by Directive 93/13 on consumers cannot be called into question by considerations connected to the organisation of a Member State’s judicial system.
In light of all the foregoing considerations, the answer to the questions referred is that Article 7 of Directive 93/13 must be interpreted as precluding a provision of national law, such as that at issue in the main proceedings, which requires a court, before which an individual action has been brought by a consumer seeking a declaration that a contractual term binding him to a seller or supplier is unfair, automatically to suspend such an action pending a final judgment concerning an ongoing collective action brought by a consumer association on the basis of Article 7(2) of Directive 93/13 seeking to prevent the continued use, in contracts of the same type, of terms similar to those at issue in that individual action, without the relevance of such a suspension from the point of view of the protection of the consumer who brought the individual action before the court being able to be taken into consideration and without that consumer being able to decide to dissociate himself from the collective action.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (First Chamber) hereby rules:
Article 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as precluding a provision of national law, such as that at issue in the main proceedings, which requires a court, before which an individual action has been brought by a consumer seeking a declaration that a contractual term binding him to a seller or supplier is unfair, automatically to suspend such an action pending a final judgment concerning an ongoing collective action brought by a consumer association on the basis of Article 7(2) of Directive 93/13 seeking to prevent the continued use, in contracts of the same type, of terms similar to those at issue in that individual action, without the relevance of such a suspension from the point of view of the protection of the consumer who brought the individual action before the court being able to be taken into consideration and without that consumer being able to decide to dissociate himself from the collective action.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (Fourth Chamber)
25 June 2015 ( *1 )
‛Reference for a preliminary ruling — Approximation of laws — Direct insurance other than life assurance — Directive 92/49/EEC — Articles 15, 15a and 15b — Prudential assessment of acquisitions and increases in a qualifying holding — Possibility to attach a restriction or requirement to the approval of a proposed acquisition’
In Case C‑18/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the College van Beroep voor het bedrijfsleven (Netherlands), made by decision of 30 December 2013, received at the Court on 16 January 2014, in the proceedings,
CO Sociedad de Gestión y Participación SA,
Depsa 96 SA,
INOC SA,
Corporación Catalana Occidente SA,
La Previsión 96 SA,
Grupo Catalana Occidente SA,
Grupo Compaňía Espaňola de Crédito y Caución SL,
Atradius NV,
Atradius Insurance Holding NV,
J.M. Serra Farré,
M.A. Serra Farré,
J. Serra Farré
v
De Nederlandsche Bank NV,
and
De Nederlandsche Bank NV
v
CO Sociedad de Gestión y Participación SA,
Depsa 96 SA,
INOC SA,
Corporación Catalana Occidente SA,
La Previsión 96 SA,
Grupo Catalana Occidente SA,
Grupo Compaňía Espaňola de Crédito y Caución SL,
Atradius NV,
Atradius Insurance Holding NV,
J.M. Serra Farré,
M.A. Serra Farré,
J. Serra Farré
THE COURT (Fourth Chamber),
composed of L. Bay Larsen, President of the Chamber, K. Jürimäe, J. Malenovský (Rapporteur), M. Safjan and A. Prechal, Judges,
Advocate General: P. Mengozzi,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 26 November 2014,
after considering the observations submitted on behalf of:
—
CO Sociedad de Gestión y Participación SA, Depsa 96 SA, INOC SA, Corporación Catalana Occidente SA, La Previsión 96 SA, Grupo Catalana Occidente SA, Grupo Compaňía Espaňola de Crédito y Caución SL, Atradius NV, Atradius Insurance Holding NV, and Mr J.M. Serra Farré, Ms M.A. Serra Farré and Ms J. Serra Farré by S.M. Kröner-Rosmalen, R. Raas and J. van Angeren, advocaten,
—
De Nederlandsche Bank NV, by A. Boorsma and B. Drijber, advocaten,
—
the Netherlands Government, by M. Bulterman, M. Noort and B. Koopman, acting as Agents,
—
the Belgian Government, by J.-C. Halleux and M. Jacobs, acting as Agents,
—
the Estonian Government, by K. Kraavi-Käerdi, acting as Agent,
—
the French Government, by D. Colas and F. Fize, acting as Agents,
—
the Italian Government, by G. Palmieri, acting as Agent and A. De Stefano, avvocato dello Stato,
—
the Portuguese Government, by L. Inez Fernandes, M. Rebelo, E. Ferreira and I. Palma Ramalho, acting as Agents,
—
the European Commission, by F. Wilman and K.-P. Wojcik, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 12 February 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 15, 15a and 15b of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive) (OJ 1992 L 228, p. 1), as amended by Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007 (OJ 1992 L 247, p. 1) (‘Directive 92/49’).
The request has been made in proceedings between CO Sociedad de Gestión y Participación SA, Depsa 96 SA, INOC SA, Corporación Catalana Occidente SA, La Previsión 96 SA, Grupo Catalana Occidente SA, Grupo Compaňía Espaňola de Crédito y Caución SL, Atradius NV, Atradius Insurance Holding NV, and Mr J.M. Serra Farré, Ms M.A. Serra Farré and Ms J. Serra Farré (‘CO Sociedad de Gestión y Participación and Others’), on the one hand, and De Nederlandsche Bank NV (Netherlands Central Bank, ‘NCB’), on the other hand, concerning the requirements to which the latter subjected the approval of proposed acquisitions of the qualifying holding in the capital of Atradius NV (‘ATNV’).
Legal context
EU law
Directive 92/49
Recital 1 in the preamble to Directive 92/49 states as follows:
‘Whereas it is necessary to complete the internal market in direct insurance other than life assurance from the point of view both of the right of establishment and of the freedom to provide services, to make it easier for insurance undertakings with head offices in the Community to cover risks situated within the Community’.
Article 1(g) of Directive 92/49 defines the concept of ‘qualifying holding’ as a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the undertaking in which a holding subsists.
Article 15(1) of Directive 92/49, whose wording is derived from Directive 2007/44, provides:
‘Member States shall require any natural or legal person or such persons acting in concert (hereinafter referred to as the “proposed acquirer”), who have taken a decision either to acquire, directly or indirectly, a qualifying holding in an insurance undertaking or to further increase, directly or indirectly, such a qualifying holding in an insurance undertaking as a result of which the proportion of the voting rights or of the capital held would reach or exceed 20%, 30% or 50% or so that the assurance undertaking would become its subsidiary (hereinafter referred to as the “proposed acquisition”), first to notify in writing the competent authorities of the insurance undertaking in which they are seeking to acquire or increase a qualifying holding, indicating the size of the intended holding and relevant information …’
Article 15a of Directive 92/49, whose wording is derived from Directive 2007/44, provides:
‘1. …
The competent authorities shall have a maximum of 60 working days as from the date of the written acknowledgement of receipt of the notification and all documents required by the Member State to be attached to the notification on the basis of the list referred to in Article 15b(4) (hereinafter referred to as “the assessment period”), to carry out the assessment provided for in Article 15b(1) (hereinafter referred to as “the assessment”)
…
5. If the competent authorities do not oppose the proposed acquisition within the assessment period in writing, it shall be deemed to be approved.
…
7. Member States may not impose requirements for the notification to and approval by the competent authorities of direct or indirect acquisitions of voting rights or capital that are more stringent than those set out in this Directive.’
Article 15b of Directive 92/49, whose wording is taken from Directive 2007/44, states:
‘1. In assessing the notification provided for in Article 15(1) and the information referred to in Article 15a(2), the competent authorities shall, in order to ensure the sound and prudent management of the insurance undertaking in which an acquisition is proposed, and having regard to the likely influence of the proposed acquirer on the insurance undertaking, appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition against all of the following criteria:
(a)
the reputation of the proposed acquirer;
(b)
the reputation and experience of any person who will direct the business of the insurance undertaking as a result of the proposed acquisition;
(c)
the financial soundness of the proposed acquirer, in particular in relation to the type of business pursued and envisaged in the insurance undertaking in which the acquisition is proposed;
(d)
whether the insurance undertaking will be able to comply and continue to comply with the prudential requirements based on this Directive and, where applicable, other Directives … in particular, whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision [and] effectively exchange information among the competent authorities;
…
2. The competent authorities may oppose the proposed acquisition only if there are reasonable grounds for doing so on the basis of the criteria set out in paragraph 1 or if the information provided by the proposed acquirer is incomplete.
…’
Directive 2007/44
Recitals 2, 3, 6 and 7 in the preamble to Directive 2007/44 state:
‘(2)
The legal framework has so far provided neither detailed criteria for a prudential assessment of a proposed acquisition nor a procedure for their application. A clarification of the criteria and the process of prudential assessment is needed to provide the necessary legal certainty, clarity and predictability with regard to the assessment process, as well as to the result thereof.
(3)
The role of the competent authorities in both domestic and cross-border cases should be to carry out the prudential assessment within a framework of a clear and transparent procedure and a limited set of clear assessment criteria of strictly prudential nature. It is therefore necessary to specify criteria for the supervisory assessment of shareholders and management in relation to a proposed acquisition and a clear procedure for their application. … This Directive should not prevent the competent authorities from taking into account commitments made by the proposed acquirer to meet prudential requirements under the assessment criteria laid down in this Directive, are not affected.
…
(6)
… Maximum harmonisation throughout the Community of the procedure and the prudential assessments, without the Member States laying down stricter rules, is … critical. The thresholds for notifying a proposed acquisition or a disposal of a qualifying holding, the assessment procedure, the list of assessment criteria and other provisions of this Directive to be applied to the prudential assessment of proposed acquisitions should therefore be subject to maximum harmonisation. …
(7)
In order to ensure the clarity and predictability of the assessment procedure there should be a limited maximum period of time for completing the prudential assessment. During the assessment procedure, the competent authorities should be able to interrupt that period only once and only for the purpose of requesting additional information after which the authorities should in any event complete the assessment within the maximum assessment period. … Neither should this prevent the competent authorities from opposing the proposed acquisition, where appropriate, at any time during the maximum assessment period. Cooperation between the proposed acquirer and the competent authorities should thus remain intrinsic to the entire assessment period. Regular contact between the proposed acquirer and the competent authority of the regulated entity in which the acquisition is proposed may also commence in anticipation of a formal notification. Such cooperation should imply a genuine effort to assist each other in order, for example, to avoid unanticipated requests for information or the submission of information late in the assessment period.’
Netherlands law
DNB is the competent authority for approving the acquisition or disposal of a qualifying holding in an insurance company in the Netherlands.
In accordance with Article 3:95(1) of the Financial Surveillance Law (Wet op het financieel toezicht) of 28 September 2006, in the version applicable at the material time (‘the Wft’), the acquisition of a ‘qualifying holding’ in an insurance company is subject to the prior issue of a ‘declaration of no objection’ drawn up by DNB. According to Article 1:1 of the Wft, ‘qualifying holding’ means ‘a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise directly or indirectly an influence over at least 10% of the voting rights in an undertaking, or the possibility to exercise directly or indirectly comparable control in an undertaking’.
Article 3:100 of the Wft provides:
‘[DNB] shall issue a declaration of no objection in respect of a transaction of the kind referred to in Article 3:95(1), unless:
(a)
the transaction might or would lead to an influence over the financial undertaking concerned that would jeopardise the sound and prudent management of that undertaking;
(b)
in the case of a transaction of the kind referred to in Article 3:95(1)(a), (d) or (e), the act might or would have the effect that the financial undertaking concerned would become affiliated to persons in a formal or de facto control structure that was so lacking in transparency that it would constitute an impediment to the adequate exercise of supervision of that financial undertaking, or
(c)
in the case of a transaction of the kind referred to in Article 3:95(1)(a), (d) or (e), the act might or would lead to an undesirable development of the financial sector.’
Pursuant to Article 3.104(1) of the Wft:
‘[DNB] may attach restrictions or requirements to a declaration of no objection as referred to in Article 3:95(1), in the light of the interests that Articles 3:100 or 3:101 of the Wft are intended to protect.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
Atradius Credit Insurance NV (‘ACINV’), established in Amsterdam (Netherlands), is a credit insurance company whose main activity is insuring undertakings against the risk of default on payments. That company belongs to the Atradius Group, of which ATNV is the ultimate holding company.
In 2007, Grupo Catalana Occidente SA (‘GCO’), established in Barcelona (Spain), decided to acquire, directly or indirectly, control of 64.23% of ATNV’s capital.
By decision of 13 August 2007, DNB issued a declaration of no objection to GCO on the basis of Articles 3:95 and 3:100 of the Wft.
GCO and its subsidiaries then decided further to increase their holding in the capital of ATNV so as to enable them to control, directly or indirectly, almost all of that company’s capital.
By decision of 25 May 2010, DNB issued a declaration of no objection in respect of that transaction for the purpose of Articles 3:95 and 3:100 of the Wft. However, it attached three requirements to that decision: first, that ATNV and the Atradius group of companies afford cooperation to DNB as regards the prudential supervision of ACINV and ATNV, in particular, by supplying the information requested by DNB; second, that dividend payments by ATNV and ACINV must not result in their solvency ratios falling below a certain threshold; and, third, that at least half of the members of the Supervisory Boards of ATNV and ACINV must be independent members and that the chair of the ACINV Supervisory Board should be an independent member.
By decision of 20 July 2010, DNB decided to amend the decision of 13 August 2007 in order retroactively to attach the same requirements as those in its decision of 25 May 2010.
CO Sociedad de Gestión y Participación and Others lodged complaints with DNB against the decisions of 25 May and 20 July 2010, in so far as, by those decisions, DNB had attached requirements to the declarations of no objection it had issued.
Since those complaints were essentially rejected by the decision of DNB of 8 December 2010, CO Sociedad de Gestión y Participación and Others brought an action before the Rechtbank Rotterdam (Rotterdam Court).
By judgment of 4 August 2011, that court held that the pleas for annulment directed against the first requirement attached to DNB’s decisions of 25 May and 20 July 2010 were inadmissible on the ground that that requirement had to be regarded as being simply a request by DNB to ATNV and to the companies of the Atradius group to send it the information it was entitled to request. However, the Rechtbank Rotterdam annulled those decisions in so far as they included the second and third requirements. That court held that, while Directive 92/49 did not preclude DNB from attaching certain requirements to the issue of declarations of no objection, those requirements could be addressed only to the persons who had made the application for the relevant declaration of no objection. In the present case, the second and third requirements imposed by DNB concerned ATNV and ACINV and not CO Sociedad de Gestión y Participación and Others.
Taking the view that, in any event, Directive 92/49 precluded DNB from being entitled to attach specific requirements to the declarations of no objection at issue in the main proceedings, CO Sociedad de Gestión y Participación and Others brought an appeal against the judgment of the Rechbank Rotterdam before the College van Beroep voor het bedrijfsleven (Administrative Court of Appeal in matters of trade and industry), at the same time as DNB cross appealed against that judgment. Before that court, CO Sociedad de Gestión y Participación and Others point out that the provisions of Directive 92/49, derived from Directive 2007/44, are intended, as set out in recital 6 in the preamble to the latter, to achieve ‘maximum harmonisation’ of the procedure and prudential assessments. Since those provisions do not provide for the competent national authority, with regard to the prudential supervision of acquisitions and increases in qualifying holdings in an insurance company (‘the competent national authority’), to be able to attach restrictions or requirements to the decisions by which they approve a proposed acquisition or increase in a qualifying holding in an insurance company, Directive 92/49 should be interpreted as meaning that it precludes that authority from being able to attach such restrictions or requirements to those decisions.
On that occasion, the referring court indicated that it intended to interpret the provisions of Articles 3:100 and 3:104 of the Wft in accordance with the provisions of Directive 2007/44.
In those circumstances, the College van Beroep decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
If the competent authority explicitly approves a proposed acquisition as referred to in Article 15a of Directive 92/49, is it permitted to impose restrictions or requirements on such approval under national law? Does it make a difference in this regard whether such restrictions or requirements are based on previous commitments given by the proposed acquirer, as referred to in recital 3 in the preamble to Directive 2007/44?
(2)
If Question 1 is answered in the affirmative, must the restrictions or requirements attached by the competent authority be necessary in the sense that, were they not to be attached, the competent authority would find it necessary to oppose the proposed acquisition in the light of the assessment based on the criteria laid down in Article 15b(1) of Directive 92/49?
(3)
If it is permissible to impose restrictions or requirements, does Article 15b(1) of Directive 92/49 provide a basis for the competent authority to lay down requirements for the acquisition in regard to the “corporate governance” of the undertaking the acquisition of which is proposed, such as a two-tier supervisory board structure?’
Consideration of the questions referred for a preliminary ruling
The first question
By its first question, the referring court asks essentially whether Directive 92/49 must be interpreted as meaning that it precludes the competent national authority, on the basis of the applicable national legislation, from attaching restrictions or requirements to the approval of proposals for acquisitions, whether on its own initiative or by formalising commitments given by the proposed acquirer.
In that connection, as regards the wording employed by Directive 92/49, it must be noted that none of its provisions expressly provides for the competent national authorities to be entitled to attach restrictions or requirements to the approval of proposed acquisitions.
However, according to settled case-law, in interpreting a provision of EU law it is necessary to consider not only its wording, but also the context in which it occurs and the objectives pursued by the rules of which it is part (see, to that effect, judgment in SGAE, C‑306/05, EU:C:2006:764, paragraph 34).
As regards the context, it should be observed that Article 15a(7) of Directive 92/49 provides that the Member States may not impose requirements for the approval by the competent national authorities of acquisitions that are more stringent than those set out in that directive.
It follows, a contrario, that the Member States may be regarded as being authorised by that provision to subject the approval by the competent national authorities of proposed acquisitions to requirements that are less restrictive than those laid down by Directive 92/49, provided that the criteria listed in Article 15b(1) are met.
A provision by which a Member State confers on the competent authority the power to attach restrictions or requirements to a proposed acquisition, in a situation in which Article 15b(2) thereof would permit the latter validly to oppose that acquisition, subjects that approval to requirements which are less restrictive than those laid down by Directive 92/49.
It follows that Directive 92/49 must be interpreted as meaning that, in a situation in which an opposition decision may be validly adopted pursuant to Article 15b(2) thereof, that directive does not preclude a Member State from authorising the competent national authority to attach restrictions or requirements to the approval of proposed acquisitions, either on its own initiative or by formalising commitments proposed by the proposed acquirer, provided, as it follows from recital 3 in the preamble to Directive 2007/44, that the rights of the proposed acquirer under that directive are not adversely affected and, accordingly, under Directive 92/49.
That finding is confirmed by the objective pursued by Directive 92/49, which, as stated in recital 1, is to complete the internal market in direct insurance other than life assurance from the point of view both of the right of establishment and the freedom to provide services, and the objective pursued by prudential assessment which, as is clear from Article 15b of Directive 92/49, is to ensure the sound and prudent management of the insurance undertaking in which an acquisition is proposed.
First, the possibility granted to the competent national authority, in a situation in which it could validly oppose proposed acquisitions, to approve them by subjecting the proposed acquirers to restrictions or requirements, is likely to encourage the exercise of the freedom of establishment and the freedom to provide services in the direct insurance other than life insurance sector. Second, the fact that that authority attaches restrictions or requirements to the approval of proposed acquisitions may help to reduce the risk of a reduction in its solvency following a change in the relevant shareholders.
Having regard to the foregoing, the answer to the first question is that Directive 92/49 must be interpreted as meaning that it does not preclude a Member State, in a situation in which the competent national authority could validly oppose a proposed acquisition pursuant to Article 15b(2) thereof, from authorising that authority, pursuant to its national legislation, to attach restrictions or requirements to the approval of the proposed acquisition, either on its own initiative or by formalising commitments given by the proposed acquirer, provided that the rights of the proposed acquirer under that directive are not adversely affected.
The second question
By its second question, the referring court asks essentially whether Directive 92/49 must be interpreted as meaning that the competent national authority is required to impose restrictions or requirements on the proposed acquirer before it can oppose the proposed acquisition and, if so, whether such restrictions or requirements must be determined by reference to the criteria set out in Article 15b(1) of that directive.
It must be noted that Article 15b(2) of Directive 92/49 provides that the competent national authority may oppose the proposed acquisition only if there are reasonable grounds for doing so on the basis of the criteria set out in Article 15b(1) thereof or if the information provided by the proposed acquirer is incomplete.
Since the wording of Article 15b(2) of that directive does not expressly lay down an obligation on the competent national authority to adopt restrictions or requirements before it can oppose a proposed acquisition, the existence of such an obligation cannot be inferred from that provision.
It follows that the competent national authority may oppose the proposed acquisition without first being required to impose restrictions or requirements on the proposed acquirer.
However, as it follows from recital 7 in the preamble to Directive 2007/44 that the competent national authority and the proposed acquirer must cooperate by making a genuine effort to assist each other in the assessment of the proposed acquisition in the light of the criteria in Article 15b(1) of Directive 92/49, it is for that authority, if the proposed acquirer concerned is willing to give commitments to it, to examine with the greatest care whether the imposition of restrictions or requirements would, taking account of those commitments, sufficiently meet the reasonable grounds that it identified and would thus be of such a nature as to enable the proposed acquisition to be approved.
In any event, the competent national authority may use the option it has to impose restrictions or requirements on the proposed acquirer of that kind only within certain limits.
It follows, first of all, from the wording of Article 15b(2) of Directive 92/49 and recitals 2, 3 and 6 in the preamble to Directive 2007/44, that the list of criteria set out in Article 15b(1) of Directive 92/49 and in the light of which the prudential assessment of the proposed acquisition must be made, are exhaustive.
The exhaustive nature is confirmed by the wording of Article 15a(7) of Directive 92/49, according to which the Member States may not impose requirements for the notification to and approval by the competent authorities of direct or indirect acquisitions of voting rights or capital that are more stringent than those set out in that directive.
In those circumstances the restrictions or requirements which the competent national authority may, if appropriate, attach to a proposed acquisition cannot be based on an assessment criterion which does not appear among those set out in Article 15b(1) of Directive 92/49.
Next, it should be noted that, where a national authority adopts measures which fall within the scope of EU law, those measures must comply with the general principles of that law such as, inter alia, the principle of proportionality which requires that those measures be appropriate for attaining the objective pursued and must not go beyond what is necessary to achieve it (see, inter alia, to that effect, judgment in ABNA and Others, C‑453/03, C‑11/04, C‑12/04 and C‑194/04, EU:C:2005:741, paragraph 68).
It follows that if the competent national authority decides to attach restrictions or requirements to the approval of a proposed acquisition, those restrictions or requirements cannot go beyond what is necessary in order for the acquisition to satisfy the criteria laid down in Article 15b(1) of Directive 92/49.
Therefore, the answer to the second question is that Directive 92/49 must be interpreted as meaning that the competent national authority is not required to impose restrictions or requirements on the proposed acquirer before it can oppose the proposed acquisition. If that authority decides to attach restrictions or requirements to the approval of a proposed acquisition, those restrictions cannot be based on a criterion which is not among those set out in Article 15b(1) of that directive, nor can they go beyond what is necessary in order for the acquisition to satisfy those criteria.
The third question
By its third question, the national court asks essentially whether Article 15b(1) of Directive 92/49 must be interpreted as offering the competent national authority a basis for imposing a requirement on the proposed acquirer relating to corporate governance concerning, as in the case in the main proceedings, the composition of the supervisory boards of the insurance undertakings concerned.
First of all, it follows from Article 15b(1)(d) of Directive 92/49 that the competent national authorities may oppose the proposed acquisition for a reason relating to the ability of the insurance undertaking in question, if the acquisition were to take place, to comply and continue to comply with the prudential requirements based inter alia on that directive, given that, according to that provision, the ability of an insurance undertaking to comply and continue to comply with the prudential obligations requires that the group of which it will become a part has a structure that makes it possible for the competent national authority to exercise effective supervision.
It follows that Article 15b(1) of Directive 92/49 must be interpreted as meaning that the competent national authority may, in principle, attach restrictions or requirements to the approval of proposed acquisitions relating to corporate governance, so as to guarantee the existence of such a structure.
Next, as has already been stated in paragraph 45 of the present judgment, in order for a requirement to comply with Directive 92/49, it must not go beyond what is necessary in order for the acquisition to satisfy the criteria laid down in Article 15b(1) of the directive.
In the present case, the third requirement, relating to the corporate governance of ATNV and ACINV, which DNB attached to its decisions of 25 May and 20 July 2010, concerns the composition of the supervisory boards of those two companies, since DNB required that at least half their members must be independent of the shareholders and that the chair of the ACINV supervisory board should be an independent member.
In that connection, it may legitimately be considered that a requirement aiming to guarantee the independence of the supervisory body of a company may contribute to the quality and reliability of the prudential information that it must provide, that being information which is necessary in order for the competent national authority to exercise effective supervision over that company.
Therefore, such a requirement may be considered, in principle, as one which is based on one of the criteria listed in Article 15b(1) of Directive 92/49.
In so far as, first, the supervisory board constitutes a supervisory body and not a decision-making body and, second, after the two acquisitions at issue in the main proceedings GCO and its subsidiaries will control almost all of ATNV and ACINV, that requirement does not appear, prima facie, as going beyond what is necessary to enable DNB to ensure that those acquisitions satisfy the criteria laid down in Article 15b(1)(d) of Directive 92/49.
However, it is for the referring court to ascertain whether that is actually the case, by taking account of all the circumstances in the main proceedings, in particular the nature and extent of the powers devolved by national legislation to the supervisory board and its president.
Having regard to the foregoing, the answer to the third question is that Article 15b(1) of Directive 92/49 must be interpreted as meaning that, in principle, it does not preclude the competent national authority from imposing a requirement relating to corporate governance concerning, as in the case in the main proceedings, the composition of the supervisory boards of the insurance companies concerned by the proposed acquisition. It is for the national court to determine, by taking account of all the circumstances in the main proceedings, whether that requirement is necessary to enable the acquisitions at issue in the main proceedings to satisfy the criteria laid down in that provision.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fourth Chamber) hereby rules:
1.
Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive), as amended by Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007, must be interpreted as meaning that it does not preclude a Member State, in a situation in which the competent national authority could validly oppose a proposed acquisition pursuant to Article 15b(2) thereof, from authorising that authority, pursuant to its national legislation, to attach restrictions or requirements to the approval of the proposed acquisition, either on its own initiative or by formalising commitments given by the proposed acquirer, provided that the rights of the proposed acquirer under that directive are not adversely affected.
2.
Directive 92/49, as amended by Directive 2007/44, must be interpreted as meaning that the competent national authority is not required to impose restrictions or requirements on the proposed acquirer before it can oppose the proposed acquisition. If that authority decides to attach restrictions or requirements to the approval of a proposed acquisition, those requirements cannot be based on a criterion which is not among those set out in Article 15b(1) of that directive, nor can they go beyond what is necessary in order for the acquisition to satisfy those criteria.
3.
Article 15b(1) of Directive 92/49, as amended by Directive 2007/44, must be interpreted as meaning that, in principle, it does not preclude the competent national authority from imposing a requirement relating to corporate governance concerning, as in the case in the main proceedings, the composition of the supervisory boards of the insurance companies concerned by the proposed acquisition.
It is for the national court to determine, by taking account of all the circumstances in the main proceedings, whether that requirement is necessary to enable the acquisitions at issue in the main proceedings to satisfy the criteria laid down in that provision.
[Signatures]
( *1 ) Language of the case: Dutch. |
JUDGMENT OF THE COURT (Third Chamber)
1 October 2015 ( *1 )
‛Reference for a preliminary ruling — Directive 93/13/EEC — Unfair terms in consumer contracts concluded between a seller or supplier and a consumer — Mortgage loan agreement — Article 7(1) — Stopping the use of unfair terms — Adequate and effective means — Acknowledgement of the debt — Notarised instrument — Affixation of the enforcement clause by a notary — Enforceable order — Notary’s obligations — Examination by the national court of its own motion of unfair terms — Judicial review — Principles of equivalence and effectiveness’
In Case C‑32/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Fővárosi Törvényszék (Hungary), made by decision of 13 December 2013, received at the Court on 23 January 2014, in the proceedings
ERSTE Bank Hungary Zrt.
v
Attila Sugár,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Chamber, A. Ó Caoimh, C. Toader (Rapporteur), E. Jarašiūnas, and C.G. Fernlund, Judges,
Advocate General: P. Cruz Villalón,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 5 February 2015,
after considering the observations submitted on behalf of:
—
ERSTE Bank Hungary Zrt., by L. Wallacher, ügyvéd,
—
the Hungarian Government, by M.Z. Fehér and G. Szima, acting as Agents,
—
the German Government, by T. Henze and D. Kuon, acting as Agents,
—
the European Commission, by K. Talabér-Ritz and M. van Beek, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 25 June 2015,
gives the following
Judgment
The request for a preliminary ruling concerns the interpretation of Article 7 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).
The reference has been made in proceedings between ERSTE Bank Hungary Zrt. (‘ERSTE Bank’) and Mr Sugár concerning an application by the latter to have set aside the enforcement clause affixed by a notarial act to the acknowledgement of the debt signed by Mr Sugár on the basis of a loan agreement and a mortgage guarantee contract concluded by the parties.
Legal context
EU law
According to Article 1(1) of Directive 93/13:
‘The purpose of this Directive is to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer.’
Article 6(1) of Directive 93/13 provides:
‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.’
Article 7(1) and (2) of that directive provides:
‘1. Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.
2. The means referred to in paragraph 1 shall include provisions whereby persons or organisations, having a legitimate interest under national law in protecting consumers, may take action according to the national law concerned before the courts or before competent administrative bodies for a decision as to whether contractual terms drawn up for general use are unfair, so that they can apply appropriate and effective means to prevent the continued use of such terms.’
Hungarian law
The Civil Code
Paragraph 200 of Law No IV of 1959 establishing the Civil Code (a Polgári Törvénykönyvről szóló 1959. évi IV. törvény) (‘the Civil Code’), in the version in force on the date on which the contract at issue in the main proceedings was concluded, provides:
‘1. The parties to a contract may determine the content of their contract freely. They may waive by mutual consent the provisions relating to contracts where such waiver is not prohibited by law.
2. Contracts which breach legal provisions and contracts concluded by evading a legal provision shall be void, save where a different legal consequence is provided for by law. A contract shall also be void if it is manifestly in breach of accepted principles of good custom and practice.’
Under Paragraph 209(1) of the Civil Code:
‘Standard contract terms and terms in a consumer contract which have not been individually negotiated are to be regarded as unfair if, contrary to the requirements of good faith, they establish the parties’ rights and obligations arising under the contract unilaterally and unjustifiably, to the detriment of the contracting party which did not stipulate those terms.’
Under Paragraph 209/A(1), unfair terms may be challenged by the injured party.
According to Paragraph 209/A(2), unfair terms which appear in consumer contracts as standard contract terms, or which the seller or supplier has drafted unilaterally and without individual negotiation, shall be void. Nullity may be invoked only in favour of the consumer.
The Civil Procedure Code
Under Paragraph 163 of Law No III of 1952 establishing the Civil Procedure Code (a polgári perrendtartásról szóló 1952. évi III. törvény; ‘the Civil Procedure Code’), the court may determine the facts which it considers to be common knowledge. The same is true for facts about which the court has direct knowledge. The court may also take account of factual evidence even if it has not been submitted by the parties, but the court is required to inform the parties of that evidence at the hearing.
Under Paragraph 366 of the Civil Procedure Code, where the termination or limitation of enforcement is not permitted within the framework of judicial enforcement proceedings, in accordance with Paragraph 41 or 56 of Law LIII of 1994 on Judicial Enforcement (a bírósági végrehajtásról szóló 1994. évi LIII. törvény), a debtor who is prejudiced by the enforcement may bring an action for the termination or limitation of enforcement against the applicant for enforcement.
Paragraph 369 of the Code of Civil Procedure provides:
‘An action may be brought for the termination or limitation of enforcement initiated by a document with an enforcement clause or by an enforcement order that is treated as equivalent if:
(a)
the claim to be enforced did not arise validly;
...’
According to Paragraph 370 of that code, the court hearing the action for termination or limitation of enforcement may grant a stay of enforcement.
The Law on judicial enforcement
Under Paragraph 13(1) of the Law on judicial enforcement:
‘(1) The enforcement order may be issued if the decision to be enforced if it:
(a)
contains a claim (sum of money),
(b)
is final or is enforceable provisionally, and
(c)
the time limit for compliance has expired. …’
Paragraph 23/C of that law governs the procedure by which the notary is to affix an enforcement clause to a notarial document he drafted himself. According to Paragraph 23/C(1), the notary drawing up the document shall affix an enforcement clause on a notarial document, if it contains:
—
an undertaking of an obligation to provide a service for consideration or a unilateral undertaking;
—
the names of the creditor and the debtor;
—
the subject matter, quantity (amount) and legal basis for the obligation;
—
the manner of and time-limit for compliance.
Paragraph 23/C(2) and (5) of the Law on judicial enforcement provides
‘2. If an obligation is subject to fulfilment of a condition or a time limit, enforceability of the obligation shall require that compliance with such condition or time limit also be attested by an authentic instrument.
…
5. Enforcement may be effected pursuant to this Paragraph if the claim contained in a notarial document is subject to judicial enforcement, and if the time limit for satisfaction of the claim has already expired. …’
Paragraph 31/E(2) of that law provides that the procedures conducted by notaries, as non-contentious civil procedures, are to have the same effect as court proceedings. Decisions adopted by notaries are to have the same effect as local court decisions.
Paragraph 56(1) of the Law on judicial enforcement provides that, by order, the court ordering the enforcement must exclude or, where appropriate, limit the enforcement if it finds, on the basis of authentic instruments, that the enforcement decision has been derogated from or amended by a final decision, or if a final decision has pronounced that the claim for which enforcement is sought, evidenced by an instrument to which an enforcement clause has been affixed, did not arise validly.
In accordance with Paragraph 211(2) of that law, if the court has endorsed a document with an enforcement clause in breach of the law, that enforcement clause must be cancelled.
Paragraph 212 of that law provides :
‘(1) The court which ordered enforcement may revoke the enforcement order or cancel the enforcement clause at any time by order on application by either party or on the basis of a report by the enforcement officer tasked with enforcement or of its own motion.
(2) Such order shall be served on the parties, who may appeal against the order.’
Paragraph 224/A of the Law on judicial enforcement provides:
‘Where it is for the notary to order the enforcement, the present provisions shall be applied by adapting them as follows:
(a)
“court ordering the enforcement” shall mean the notary; “decision issue by the court ordering the enforcement” shall mean the decision adopted by the notary;
…’
The Law on notaries
Paragraph 1(1)(2) and (4) of Law No XLI of 1991 on notaries (a közjegyzőkről szóló 1991. évi XLI. Tv) (‘the Law on Notaries’) defines the powers of notaries as follows:
‘(1) The law confers the status of public official on notaries so that they may provide parties with impartial legal services in order to prevent litigation.
(2) The notary shall issue authentic instruments concerning legal transactions and legally relevant acts, hold documents for safe keeping, receive on behalf of parties money, valuables and securities in order to transfer them to those entitled, and in connection with procedures falling within his remit, ensure equality of treatment for the parties, brief the parties to assist them in the exercise of their rights and performance of their obligations.
…
(4) The notary shall carry out tasks in the administration of justice in the exercise of the State’s activity of dispensing justice, within the framework of the powers conferred on him by law.’
Paragraph 3(1) and (2) of that law provide:
‘(1) The notary is required to refuse his services where it is incompatible with his obligations, in particular where his services are requested in respect of a legal transaction which is unlawful, or which is intended to circumvent the law, or the purpose of which is prohibited or in abuse of the law.
(2) If, during the procedure, the notary finds evidence which gives rise to doubts, without it being necessary to refuse his services, he is required to bring that evidence to the attention of the parties and to make a written record of it. If the party raises an objection to that evidence, the notary shall refuse his services.’
Paragraph 112(1) of that law is drafted in identical terms to Paragraph 23/C of the Law on judicial enforcement, as regards the information which must be set out in an authentic instrument in order for the enforcement clause to be affixed.
Facts in the main proceedings and the questions referred for a preliminary ruling
On 18 December 2007, by authentic instrument, ERSTE Bank and Mr Sugár concluded a loan agreement for CHF 30687 to finance the purchase of immoveable property. The contract is guaranteed by a mortgage on the property.
On 19 December 2007, on the basis of the loan contract, Mr Sugár signed an acknowledgement of debt, drawn up as a notarised document in favour of ERSTE Bank. The case-file states that, if Mr Sugár fails to fulfil his contractual obligations, that document confers on ERSTE Bank the right to terminate the loan agreement and to recover the debt arising under that contract on the basis of a statement that the debt is payable drawn up by ERSTE Bank itself indicating the amount of the debt.
Since Mr Sugár defaulted on the payments, ERSTE Bank terminated the loan agreement and requested the affixation of the enforcement clause on the acknowledgement of debt. On 13 December 2011, taking the view that the legal requirements had been met, the notary affixed the enforcement clause to that instrument, which had the consequence of making it enforceable and, thereby, conferring on it a character similar to that of a judicial decision.
On 5 June 2013, Mr Sugár requested the notary to cancel the enforcement clause affixed to the authentic instrument containing the acknowledgement of debt relating to the loan agreement concluded with ERSTE Bank, arguing in particular, that that agreement contained unfair terms. In addition, Mr Sugár challenged the legality of the declaration terminating the agreement and claimed that the enforcement clause ordered enforcement of obligations which did not arise from the acknowledgement of debt. He also stated that he had lodged an application to exclude enforcement and an action for annulment.
By decision of 13 June 2013, the notary rejected the application to cancel the enforcement clause, on the ground that it was not vitiated by any irregularity, since the authentic instrument concerned contained an acknowledgment of debt, the name of the creditor and that of the debtor, the legal basis of the claim and the amount of the debt, its method of enforcement and the period prescribed for that purpose. Furthermore, he found that the instrument stated that the claim depended on the fulfilment of a condition and the date on which it had occurred. The notary also pointed out that, since notarial proceedings are non-contentious, he had only limited discretion concerning the evidence and that he was not able to give a decision on a dispute between the parties concerning the lawfulness of the termination of the contract or its terms, since that falls within the exclusive jurisdiction of the courts.
Mr Sugár brought an action before the Fővárosi Törvényszék (Budapest Municipal Court) to have the notary’s decision set aside and for the cancellation of the enforcement clause. In support of that action, he argues in particular that the acknowledgement of debt concerned contains unfair contract terms and incorrect information, that the amount of the debt is established in a foreign currency, while the loan was granted in forints and was determined solely on the basis of ERSTE Bank’s internal database. He takes the view that affixing the enforcement clause is an abuse of rights, since the party applying for enforcement presents a unilateral instrument, the validity of which may be examined only in adversarial proceedings.
The referring court states that, according to the Law on judicial enforcement, the notary is to affix the enforcement clause, which thereby becomes an enforceable order. However, during the procedure for affixing the enforcement clause the notary is merely to verify that the instrument to be enforced complies with the formal and substantive requirements, without being able to examine the possible unfairness of the terms in the loan agreement which serve as a basis for that instrument. It is only in appeal proceedings to exclude or limit enforcement that a consumer may rely on the unfairness of the contractual terms, which, according to the referring court, may be contrary to the objectives pursued by Directive 93/13.
In those circumstances, the Fővárosi Törvényszék decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Does a procedure of a Member State comply with Article 7(1) of Directive 93/13 if, under that procedure, in the event of a breach by the consumer of an obligation contained in a document in due form drawn up by a notary, the other party to the contract avoids inter partes proceedings before a court and asserts its claim to the amount it indicates by issuing what is known as an enforcement clause, without any examination being possible of the unfairness of a term of the underlying contract?
(2)
In such a procedure may the consumer request the cancellation of the enforcement clause already issued on the basis that there was no examination of the unfairness of a term of the underlying contract, whereas, according to the judgment in Case C‑472/11, in court proceedings the court must inform the consumer if it finds that a term is unfair?’
Consideration of the questions referred for a preliminary ruling
By its questions, which it is appropriate to examine together, the referring court asks essentially whether Article 7(1) of Directive 93/13 must be interpreted as meaning that it precludes national legislation, such as that at issue in the main proceedings, which enables a notary who has drafted, in due form, an authentic instrument concerning a contract concluded between a seller or supplier and a consumer, to affix the enforcement clause to that instrument or to refuse to cancel it although there has been no review of the unfairness of the terms of that contract at any stage.
The order for reference states that those questions are related to the existence in national law of a procedure according to which the notary, at the creditor’s request, may affix an enforcement clause on the authentic instrument containing the debtor’s obligation, without carrying out an examination of the validity of that instrument, subject to compliance with a limited set of formal requirements relating to the content of that instrument, such as those laid down in Paragraph 23/C of the Law on judicial enforcement. Thus, under that paragraph, the instrument must indicate the undertaking to provide a service and the consideration, the names of the creditor and the debtor, the subject-matter, its amount and legal basis, and lastly, the means of enforcement and the time-limit.
In the present case, in the dispute in the main proceedings, the enforcement order consists in a notarised declaration acknowledging the debt signed by Mr Sugár, following the conclusion of a mortgage loan agreement between him and ERSTE Bank.
The affixing of the enforcement clause on that instrument, on the basis of information provided exclusively by the creditor, in fact enables the creditor to obtain, in the absence of any contentious proceedings before a judge, the enforcement of the contract. Pursuant to Article 31/E(2) of the Law on judicial enforcement, a notarised document containing the enforcement clause produces the same effect as a judgment of a local court.
The documents before the Court also state that, under Paragraphs 211(2) and 224/A of the Law on judicial enforcement, the notary may cancel an enforcement clause affixed ‘in breach of the law’. However, as the Hungarian Government has pointed out in its written submissions, that procedure does not concern the validity of contractual terms, but only the review of the lawfulness of the affixation of the enforcement clause.
Thus it follows that, under national law, a review by the notary of the validity of the terms of the agreement is not possible in the procedure for affixing the enforcement clause or in the procedure for cancelling it.
In order to determine whether such legislation is compatible with the requirements of Directive 93/13, it should be recalled that, the system of protection established by that directive is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier as regards both his bargaining power and his level of knowledge, which leads to the consumer agreeing to terms drawn up in advance by the seller or supplier without being able to influence the content of those terms (see, inter alia, judgment in Kušionová, C‑34/13, EU:C:2014:2189, paragraph 48 and the case-law cited).
As regards such a weaker position, Article 6(1) of Directive 93/13 provides that unfair terms are not to be binding on the consumer. That is a mandatory provision which aims to replace the formal balance which the contract establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them (see judgment in Sánchez Morcillo and Abril Garcia, C‑169/14, EU:C:2014:2099, paragraph 23 and the case-law cited).
In that context, the Court has stated on several occasions that the national court is required to assess of its own motion whether a contractual term falling within the scope of the directive is unfair, compensating in this way for the imbalance which exists between the consumer and the seller or supplier, where it has available to it the legal and factual elements necessary for that task (see, inter alia, judgments in Aziz, C‑415/11, EU:C:2013:164, paragraph 46; Barclays Bank, C‑280/13, EU:C:2014:279, paragraph 34; and Sánchez Morcillo and Abril Garcia, C‑169/14, EU:C:2014:2099, paragraph 24).
The Court has also held that Articles 6(1) and 7(1) of Directive 93/13 must be interpreted as meaning that the national court which has found of its own motion that a contractual term is unfair is not obliged, in order to be able to draw the consequences arising from that finding, to wait for the consumer, who has been informed of his rights, to submit a statement to that effect, provided always that the principle of audi alteram partem has been complied with (see, to that effect, judgment in Banif Plus Bank, C‑472/11, EU:C:2013:88 paragraph 36).
Furthermore, the Court has held that the directive precludes legislation of a Member State which does not allow the court before which an application for an order for payment has been brought to assess of its own motion, in limine litis or at any other stage during the proceedings, even though it already has the legal and factual elements necessary in that regard, whether a term concerning interest on a late payment contained in a contract concluded between a seller or supplier or consumer is unfair where that consumer has not lodged an objection (judgment in Banco Español de Crédito, C‑618/10, EU:C:2012:349, paragraph 57).
In its case-law, the Court has also held that the legislation of a Member State does not comply with Directive 93/13 where, while not providing in mortgage enforcement proceedings for grounds of objection based on the unfairness of a contractual term on which the right to seek enforcement is based, did not permit the court before which declaratory proceedings had been brought, which had jurisdiction to assess the unfairness of such a term, to grant interim relief, including, in particular, the staying of those enforcement proceedings, (see, to that effect, judgments in Aziz, C‑415/11, EU:C:2013:164, paragraph 64, and Barclays Bank, C‑280/13, EU:C:2014:279, paragraph 36).
Finally, the Court has ruled as being contrary to Directive 93/13, national legislation which does not allow the court responsible for the enforcement, in mortgage enforcement proceedings, either to assess of its own motion or at the consumer’s request, the unfairness of a term contained in the contract which gives rise to the debt claimed and which constitutes the basis of the right to enforcement, or to grant interim relief capable of staying or terminating the mortgage enforcement proceedings, where such relief is necessary to ensure the full effectiveness of the final decision of the court hearing the declaratory proceedings before which the consumer argues that that term is unfair (see order in Banco Popular Espaňol and Banco de Valencia, C‑537/12 and C‑116/13, EU:C;2013:759, paragraph 60, and judgment in Sánchez Morcillo and Abril Garcia, C‑169/14, EU:C:2014:2099, paragraph 28).
As regards the simplified notarial enforcement procedure at issue in the main proceedings, the European Commission has argued that the possibility for a notary to initiate the enforcement of a contract, without examining in the procedure for affixing the enforcement clause or that for its cancellation, the unfairness of the various clauses, may infringe Directive 93/13, as interpreted by the case-law cited in the preceding paragraphs and, in particular, by the judgments in Banco Espaňol de Crédito (C‑618/10, EU:C:2012:349) and Banif Plus Bank (C‑472/11, EU:C:2013:88), the latter also being mentioned by the referring court in its second question. The Commission submits that since the notarial procedure has effects similar to those of court proceedings, the notary should therefore also be able to determine of his own motion the unfairness of the contractual terms where he has available to him all the elements of law and fact necessary for that purpose.
However, as the Advocate General stated, in particular in paragraphs 65 to 67 and 72 of his Opinion, it must be held that that case-law falls within the specific framework of the exercise of the judicial function and that, having regard to the fundamental differences between it and the notarial function, cannot be transposed to the latter.
Furthermore, it must be pointed out that Directive 93/13 does not contain any provision concerning the role which may or must be devolved to notaries concerning the review of unfair contract terms. Thus, that directive does not regulate the issue of whether, in circumstances in which national legislation attributes notaries with the power to affix the enforcement clause to an authentic instrument concerning a contract, and subsequently to cancel it when it has expired, the authority should be extended to notaries to exercise powers which fall directly within the scope of the judicial function.
It follows that, in the absence of harmonisation of national mechanisms for enforcement under EU law, and the role assigned to notaries within it, it is for the national legal order of each Member State to establish such rules, in accordance with the principles of procedural autonomy, provided, however, that those rules are not less favourable than those governing similar domestic law (principle of equivalence) and that they do not make it excessively difficult or impossible in practice to exercise the rights conferred by EU law (principle of effectiveness) (see, to that effect, judgments in Aziz, C‑415/11, EU:C:2013:164, paragraph 50; Pohotovosť, C‑470/12, EU:C:2014:101, paragraph 46; and Kušinová, C‑34/13, EU:C:2014:2189, paragraph 50).
As regards the principle of equivalence, the Court does not have before it any evidence which might raise doubts as to the compliance of the legislation at issue in the main proceedings with that principle.
As far as concerns the principle of effectiveness, the Court has already held that every case in which the question arises as to whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary to take into consideration, where relevant, the principles which lie at the basis of the national legal system, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of the proceedings (see, in particular, judgment in Pohotovosť, C‑470/12, EU:C:2014:101, paragraph 51 and the case-law cited).
Therefore, it must be established whether, in a situation such as that at issue in the main proceedings, the relevant national provisions, analysed in their context by taking account of all the existing remedies, are able to guarantee that adequate and effective means exist to stop the use of unfair terms in consumer contracts and that such terms are not binding on them, as provided for by Articles 6(1) and 7(1) of Directive 93/13.
In that regard, the Hungarian Government essentially argues that the simplified enforcement procedure at issue in the main proceedings does not exclude any review of unfair terms, whether by notaries themselves or by the national courts.
It must be stated that, taking account of the particular confidence that, as a general rule, consumers place in notaries, in their capacity as impartial advisors, and the fact that documents drafted by them are not vitiated by illegality, there is a substantial risk that consumers will be less vigilant when those documents are drafted regarding the existence of unfair terms and the consequences of a simplified notarial enforcement procedure, such as that at issue in the main proceedings. Furthermore, where such a procedure has been initiated by the seller or supplier, the consumer may not have, without the intervention of a notary, all the relevant information enabling him to defend himself before the national courts in the context of that procedure.
As regards the legislation at issue in the main proceedings, it should be pointed out that, in accordance with Paragraph 1 of the Law on notaries, the latter are required, in particular, to brief the parties in procedures falling within their remit, to assist them in the exercise of their rights and fulfilment of their obligations in order to prevent any litigation.
In addition, under Article 3(1) and (2) of that law, the notary is required to verify the conformity with the law and the unfairness of a legal transaction and to inform the parties in writing if he finds information which gives rise to doubts.
It follows from that, in the Hungarian procedural system, particularly at the stage of drafting an authentic instrument concerning a contract concluded between a seller or supplier and a consumer, the notary appears to be authorised to play a preventive role with respect to unfair terms in that contract and that he is, also, explicitly called on to ensure by his advice equal treatment in all the proceedings falling within his competence, including that of enforcement.
It follows from the foregoing that the general provisions of the Law on notaries appear, in principle, subject to verifications to be made by the referring court, to be such as to contribute to compliance with the requirements laid down in Articles 6(1) and 7(1) of Directive 93/13.
It should be noted, as the Advocate General stated in paragraph 84 of his Opinion, that adequate and effective means to stop the use of unfair terms in consumer contracts must include provisions enabling the latter to be guaranteed effective judicial protection by making it possible for them to bring legal proceedings against the disputed contract including in the enforcement phase and under reasonable procedural conditions so that the exercise of their rights is not subject to conditions, in particular time-limits or costs which make it excessively difficult or impossible to exercise the rights guaranteed by Directive 93/13. It is in the context of those judicial procedures, that the case-law of the Court, cited in paragraphs 41 to 45 of the present judgment, must be applied in full.
In the present case, it is clear from the order for reference that Mr Sugár may both bring an action under Article 209/A(1) of the Civil Code challenging the validity of the contract and may initiate proceedings under Article 369 of the Civil Procedure Code to exclude or limit the enforcement. In the latter procedure the consumer may, under Paragraph 370 of the Civil Procedure Code, request the suspension of the enforcement of the contract at issue in the main proceedings.
Moreover, it is clear from the information provided to the Court, in particular by the Hungarian Government, that it is for the referring court to verify whether, notwithstanding the wording of Paragraphs 369 and 370 of the Civil Procedure Code, the national courts may and must, in the context of those procedures, examine the unfairness of contractual terms and, in accordance with Paragraph 163 thereof and in compliance with the case-law of the Kúria (Supreme Court), raise of its own motion cases involving manifest ground for invalidity which may be established on the basis of the available evidence.
Although Directive 93/13 requires that the national court hearing disputes between consumers and sellers or suppliers take positive action unconnected with the parties to the contract (judgments in Asbeek Brusse and de Man Garabito, C‑488/11, EU:C:2013:341, paragraph 39 and the case-law cited, and Pohotovosť, C-470/12, EU:C:2014:101, paragraph 40 and the case-law cited), the need to comply with the principle of effectiveness cannot be stretched so far as to make up fully for the total inertia on the part of the consumer concerned (see, to that effect, judgment in Kušionová, C‑34/13, EU:C:2014:2189, paragraph 56).
Therefore, the fact that the consumer may rely on the protection of legislative provisions on unfair terms only if he brings court proceedings cannot be regarded in itself, contrary to what the Commission argues, as contrary to the principle of effectiveness. The effective legal protection guaranteed by Directive 93/13 is based on the premiss that one of the parties to the contract will bring an action before the national courts.
However, it is for the referring court, which alone has direct knowledge of the procedural rules of actions in its own national legal system and which alone has jurisdiction to interpret national law, to determine whether, in the circumstances of the dispute in the main proceedings, those rules guarantee effective legal protection for the consumer.
Having regard to all of the foregoing considerations, the answer to the questions referred is that Articles 6(1) and 7(1) of Directive 93/13 must be interpreted as meaning that they do not preclude national legislation, such as that at issue in the main proceedings, which allows a notary who drew up, in due form, an authentic instrument concerning a contract concluded between a seller or supplier and a consumer, to affix the enforcement clause to that instrument or to refuse to cancel it when no review of the unfairness of the contractual terms has been performed at any stage.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
Articles 6(1) and 7(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as meaning that they do not preclude national legislation, such as that at issue in the main proceedings, which allows a notary who drew up, in due form, an authentic instrument concerning a contract concluded between a seller or supplier and a consumer, to affix the enforcement clause to that instrument or to refuse to cancel it when no review of the unfairness of the contractual terms has been performed at any stage.
[Signatures]
( *1 ) Language of the case: Hungarian. |
JUDGMENT OF THE COURT (Fifth Chamber)
12 November 2015 ( * )
‛Reference for a preliminary ruling — Articles 34 TFEU and 110 TFEU — Directive 94/62/EC — Articles 1(1), 7 and 15 — Distance selling and transport of alcoholic beverages from another Member State — Excise duty on certain beverage packaging — Exemption where packaging is integrated into a deposit and return system — Articles 34 TFEU, 36 TFEU and 37 TFEU — Requirement of a licence for the retail sale of alcoholic beverages — Monopoly on the retail sale of alcoholic beverages — Justification — Protection of health’
In Case C‑198/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Helsingin hovioikeus (Helsinki Court of Appeal, Finland), made by decision of 16 April 2014, received at the Court on 22 April 2014, in the proceedings
Valev Visnapuu
v
Kihlakunnansyyttäjä,
Suomen valtio — Tullihallitus,
THE COURT (Fifth Chamber),
composed of T. von Danwitz, President of the Fourth Chamber, acting as President of the Fifth Chamber, D. Šváby, A. Rosas, E. Juhász and C. Vajda (Rapporteur), Judges,
Advocate General: Y. Bot,
Registrar: I. Illéssy, Administrator,
having regard to the written procedure and further to the hearing on 29 April 2015,
after considering the observations submitted on behalf of:
—
Mr Visnapuu, by P. Snell, oikeustieteen kandidaatti,
—
the Finnish Government, by S. Hartikainen, acting as Agent,
—
the Swedish Government, by A. Falk and U. Persson, acting as Agents,
—
the Norwegian Government, by T. Skjeie and K. Nordland Hansen, acting as Agents,
—
the European Commission, by G. Wilms, E. Sanfrutos Cano and I. Koskinen, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 9 July 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 34 TFEU, 36 TFEU, 37 TFEU and 110 TFEU and Articles 1(1), 7 and 15 of European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste (OJ 1994 L 365, p. 10).
The request has been made in proceedings between Mr Visnapuu, acting on behalf of European Investment Group Oü (‘EIG’), and the Kihlakunnansyyttäjä (District Public Prosecutor) concerning the distance selling and delivery of alcoholic beverages to Finnish consumers in breach of Finnish legislation relating, inter alia, to the excise duty on certain beverage packaging and the retail sale of alcoholic beverages.
Legal context
EU law
According to Article 1(1) thereof, the aim of Directive 94/62 is to harmonise national measures concerning the management of packaging and packaging waste in order, on the one hand, to prevent any impact thereof on the environment of all Member States as well as of third countries or to reduce such impact, thus providing a high level of environmental protection, and, on the other hand, to ensure the functioning of the internal market and to avoid obstacles to trade and distortion and restriction of competition within the European Union.
Article 2(1) provides that the directive applies to all packaging placed on the market in the European Union and all packaging waste, whether it is used or released at industrial, commercial, office, shop, service, household or any other level, regardless of the material used.
Article 3(1) of Directive 94/62 defines the concept of ‘packaging’. The first sentence of that provision states, inter alia, that for the purposes of that directive, ‘packaging’ means all products made of any materials of any nature to be used for the containment, protection, handling, delivery and presentation of goods, from raw materials to processed goods, from the producer to the user or the consumer.
Article 7 of Directive 94/62, entitled ‘Return, collection and recovery systems’, provides:
‘1. Member States shall take the necessary measures to ensure that systems are set up to provide for:
(a)
the return and/or collection of used packaging and/or packaging waste from the consumer, other final user, or from the waste stream in order to channel it to the most appropriate waste management alternatives;
(b)
the reuse or recovery including recycling of the packaging and/or packaging waste collected,
in order to meet the objectives laid down in this Directive.
These systems shall be open to the participation of the economic operators of the sectors concerned and to the participation of the competent public authorities. They shall also apply to imported products under non-discriminatory conditions, including the detailed arrangements and any tariffs imposed for access to the systems, and shall be designed so as to avoid barriers to trade or distortions of competition in conformity with the [FEU] Treaty.
2. The measures referred to in paragraph 1 shall form part of a policy covering all packaging and packaging waste and shall take into account, in particular, requirements regarding the protection of environmental and consumer health, safety and hygiene; the protection of the quality, the authenticity and the technical characteristics of the packed goods and materials used; and the protection of industrial and commercial property rights.’
Article 15 of Directive 94/62, entitled ‘Economic instruments’, reads as follows:
‘Acting on the basis of the relevant provisions of the Treaty, the Council adopts economic instruments to promote the implementation of the objectives set by this Directive. In the absence of such measures, the Member States may, in accordance with the principles governing [European Union] environmental policy, inter alia, the polluter-pays principle, and the obligations arising out of the Treaty, adopt measures to implement those objectives.’
Finnish law
The Law on excise duty on certain beverage packaging
In accordance with Paragraph 5 of Law No 1037/2004 on excise duty on certain beverage packaging (Laki eräiden juomapakkausten valmisteverosta; ‘the Law on excise duty on certain beverage packaging’), excise duty is set at EUR 0.51 per litre of packaged product.
Under Paragraph 4 of that law, liability to pay excise duty on certain beverage packaging is governed, inter alia, by Law No 1469/1994 on excise duty (valmisteverotuslaki, ‘the Law on Excise Duty’).
Paragraph 6 of the Law on excise duty on certain beverage packaging lays down an exemption in respect of, inter alia, beverage packaging integrated into a functioning return system. ‘Functioning return system’ means a deposit system in which the beverage packager or importer — acting alone or as provided for in Law No 1072/1993 on waste (jätelaki, ‘the Law on Waste’) or in the corresponding provisions applicable in the Åland Islands (Finland) — ensures the reuse or recycling of beverage packaging so that the packing is refilled or recovered as raw material.
The Law on Excise Duty
According to the first subparagraph of Paragraph 2 of the Law on Excise Duty in force at the material time, that law governs, unless otherwise provided, the levying of excise duty on, inter alia, alcohol and alcoholic beverages.
Under the first subparagraph of Paragraph 3 of the Law on Excise Duty, excise duty is applicable to the products mentioned in Paragraph 2 of that law which are produced in Finland or imported into Finland from another Member State and goods which are imported from a non-member country.
The first subparagraph of Paragraph 10 of the Law on Excise Duty provides that, if a tax representative has not been designated in the context of a distance sale, the distance seller is liable to pay the excise duty on the goods received in Finland. Where a private individual purchases goods from another Member State other than by distance sales, and those goods are transported into Finland by another private individual or a trader, the private individual who purchased the goods, the person involved in the transport of the goods or the person who holds the goods in Finland are liable to pay the excise duty. According to the fifth subparagraph of Paragraph 10, in addition to the circumstances set out in that paragraph, a person is also liable to pay the excise duty if, for commercial or other purposes, he receives or has custody of goods which are subject to excise duty and was aware, or should reasonably have been aware, when he received or obtained them that those goods had not been correctly taxed in Finland.
Paragraph 7(6) of the Law on Excise Duty defines distance sales as a sale by which a person other than an authorised warehouse keeper or registered or unregistered trader buys goods in another Member State which are subject to excise duty and which the distance seller or someone acting on his behalf sends or transports directly from another Member State. Under point 6(a) of that paragraph, a distance seller is a person who sells goods in Finland in accordance with point 6.
Paragraph 9 of the Law on Excise Duty provides inter alia that all unregistered traders, all persons liable to pay excise duty for the purposes of the fourth subparagraph of Paragraph 10 of that law and all distance sellers who do not have a tax representative in Finland must, prior to exporting the goods at issue from another Member State to Finland, declare those goods to the customs authorities referred to in Paragraph 25 of that law and lodge a guarantee for the payment of the excise duty on those goods.
The first subparagraph of Paragraph 18 of the Law on Excise Duty provides that goods subject to excise duty in another Member State which are transported to Finland from another Member State by a private individual are exempt from excise duty, provided that they are for that individual’s own consumption.
The Law on Waste
At the material time, the establishment of a functioning return system in relation to beverage packaging and affiliation to that system were governed by the Law on Waste. According to the first subparagraph of Paragraph 18(g) of that law, a producer, for example a packager or an importer, may fulfil its obligations by collaborating with other producers and traders, by setting up an association or a foundation with legal capacity such as a producer group, by joining such an association or by entering into an agreement with it.
The second subparagraph of Paragraph 18(g) of the Law on Waste provides that the obligations within a producer group are to be fairly distributed between the producers and any other traders, having regard to the nature and scope of activities, and in such a way as to avoid creating obstacles to trade or distortion of competition. The producer group is to accept as a partner, member or contracting party, under the same conditions as the producers which have already joined the group, any new producer for which, as a result of its small production or for any other reason, it would be economically unfeasible to ensure, by itself, reuse, recovery and any other form of waste management.
The Law on Alcohol
Paragraph 1 of Law No 1143/1994 on alcohol (alkoholilaki; ‘the Law on Alcohol’) states that the aim of that law is to prevent the negative effects of alcohol on society, social life and health by controlling the consumption of alcohol.
According to Paragraph 8 of the Law on Alcohol, alcoholic beverages may be imported without a special import licence for personal use or for commercial or other business uses, importation for personal consumption being governed more specifically by Paragraph 10 of that law. Paragraph 8 of that law also provides that any person using alcoholic beverages for commercial or other business purposes requires the special licence provided for by that law in order to import alcoholic beverages for the purposes of the activity in question.
As regards the importation of alcoholic beverages for personal consumption, which does not require a licence, the referring court notes that the Finnish authorities have stated in various guidelines and circulars that when a private individual orders alcoholic beverages for personal consumption from abroad the right of ownership to those beverages must unequivocally be transferred to the person placing the order before they are imported. In that respect, the person placing the order is required to transport the alcoholic beverages himself or entrust their transport to a third party other than the seller.
The first subparagraph of Paragraph 13 of the Law on Alcohol provides that, save for the exceptions laid down in Paragraph 14 of that law, the state-owned enterprise for the sale of alcohol, Alko Oy (‘Alko’), holds a monopoly on the retail sale of alcoholic beverages.
According to the second subparagraph of Paragraph 13 of the Law on Alcohol, Alko is entitled to carry out the retail sale of the alcoholic beverages listed in the first subparagraph of that provision solely in an authorised alcoholic beverage outlet which is appropriately located and which may be monitored effectively.
Under the third paragraph of Paragraph 13 of the Law on Alcohol, notwithstanding the second subparagraph of Paragraph 13, Alko may carry out the retail sale of alcoholic beverages by sending those beverages to the customer or the purchaser in accordance with the provisions laid down by decree.
However, Paragraph 14 of the Law on Alcohol lays down two derogations from Alko’s monopoly on the retail sale of alcoholic beverages.
The first subparagraph of Paragraph 14 of the Law on Alcohol provides that fermented alcoholic beverages containing a maximum of 4.7% by volume of ethyl alcohol may be sold at retail, not only by Alko, but also by any person who has obtained a retail sale licence from the competent authority.
According to the second subparagraph of Paragraph 14 of the Law on Alcohol, fermented alcoholic beverages containing a maximum of 13% by volume of ethyl alcohol may be sold at retail, not only by Alko, but also by any person to whom the competent authority has granted permission to produce the product in question, under the conditions laid down by the Ministry of Social Affairs and Health.
The third subparagraph of Paragraph 14 provides that a licence for the retail sale of alcoholic beverages may be granted to any sufficiently trustworthy person who meets the necessary requirements.
The fourth subparagraph of Paragraph 14 of the Law on Alcohol provides that the retail sale referred to in the first and second subparagraphs of Paragraph 14 may be carried out only in an authorised outlet which meets the requirements in relation to placement, retail space and operation and where the sale is organised in such a way that it may be monitored effectively.
The dispute in the main proceedings and the questions referred for a preliminary ruling
EIG, a company established in Estonia and controlled by Mr Visnapuu, maintained a website (‘www.alkotaxi.eu’) through which Finnish residents could purchase various brands of alcoholic beverages of high or low alcohol strength. After those purchases were paid for, EIG organised home delivery from Estonia to Finland for some of its customers.
EIG did not declare the importation of alcoholic beverages to the Finnish customs authorities, with the result that no excise duty was imposed. EIG also did not designate a tax representative, within the meaning of the seventh subparagraph of Paragraph 7 of the Law on Excise Duty, who could have paid the excise duty on the goods received in Finland to the Finnish customs authorities. Nor did EIG declare the goods to be dispatched or lodge a guarantee for the payment of the excise duty before the goods were sent to Finland. In addition, EIG also did not pay the excise duty on certain beverage packaging in respect of the packaging of those goods. Lastly, as regards the delivery of the alcoholic beverages to the purchaser after importation, EIG had neither a wholesale licence nor a retail sale licence for the purposes of Paragraph 8 of the Law on Alcohol.
On the basis of the charges brought by the district prosecutor, the Helsingin käräjäoikeus (Helsinki District Court) found that it was clear that the activities of EIG between 24 June and 18 August 2009 had led to the non-imposition of excise duty on 4507.30 litres of beer, 1499.40 litres of cider, 238.70 litres of wine and 3450.30 litres of spirits imported into Finland. Thus, in total, excise duty on alcoholic beverages amounting to EUR 23144.89 and excise duty on certain beverage packaging amounting to EUR 5233.52 was evaded, for a total amount of EUR 28378.40.
The Helsingin käräjäoikeus (Helsinki District Court) also found that Mr Visnapuu had transported the abovementioned volumes of alcoholic beverages from Estonia to Finland and sold them in Finland. On that basis, it imposed an eight-month suspended sentence on Mr Visnapuu for aggravated tax fraud and infringement of the Law on Alcohol. Mr Visnapuu was also ordered to pay EUR 28378.40 to the Finnish State for the unpaid taxes, along with interest and costs.
In the context of his appeal before the referring court, Mr Visnapuu claimed, first, that the charges against him should be dropped and the decision ordering him to pay damages annulled and, secondly, that his costs, plus interest, should be reimbursed. In the alternative, he claimed that the referring court should make a request for a preliminary ruling to the Court of Justice.
The referring court states that the sequence of events is not in dispute on appeal. Finnish customers ordered alcoholic beverages from EIG via its website and Mr Visnapuu, as EIG’s representative, delivered those beverages to some customers by importing the beverages to Finland from Estonia, even though he did not have a licence in accordance with Paragraph 8(1) of the Law on Alcohol. EIG, which had not set up a scheme for the recycling or reuse of packaging or joined such a scheme, did not make a customs declaration to the customs authorities when those alcoholic beverages were imported, with the result that no excise duty was imposed. Nor is it disputed before the referring court that Mr Visnapuu imported the quantities of alcoholic beverages found by the Helsingin käräjäoikeus (Helsinki District Court) and failed to pay the amounts of taxes stated in the judgment delivered by that court.
The referring court considers that the application of the national legislation in the main proceedings raises several questions of EU law concerning the legislation relating to the excise duty on certain beverage packaging and the requirement to have a retail sale licence in order to import alcoholic beverages with a view to their retail sale in Finland.
In those circumstances, the Helsingin hovioikeus (Helsinki Court of Appeal), decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Is the permissibility of the Finnish system of beverage packaging duty, under which beverage packaging duty is levied if the packaging is not part of a return system, to be examined in the light of Article 110 TFEU instead of Article 34 TFEU? The return system in question must be a deposit-based system under which the packer of the alcoholic beverages or the importer alone or in accordance with the provisions laid down in the Law on Waste or in the corresponding legislation of the Åland Islands [Finland] takes care of the reuse or recycling of beverage packagings so that the packaging is refilled or recovered as raw material.
(2)
If the answer to Question 1 is affirmative, is that system compatible with Articles 1(1), 7 and 15 of Directive 94/62/EC when examined in combination with Article 110 TFEU?
(3)
If the answer to Question 1 is negative, is that system compatible with Articles 1(1), 7 and 15 of Directive 94/62/EC when examined in combination with Article 34 TFEU?
(4)
If the answer to Question 3 is negative, is the Finnish beverage packaging duty system to be regarded as authorised on the basis of Article 36 TFEU?
(5)
May the requirement that a person using alcoholic beverages for commercial or other business purposes needs a separate retail sale licence for his activity relating to imported alcoholic beverages, in a situation in which a Finnish buyer has purchased via the internet or another method of distance selling from a vendor in another Member State alcoholic beverages which the vendor transports to Finland, be regarded as concerning the existence of a monopoly or as part of the operation of a monopoly, so that the provisions of Article 34 TFEU are not therefore an impediment to it, but it is to be evaluated in the light of Article 37 TFEU?
(6)
If the answer to Question 5 is affirmative, is that licence requirement in such a case compatible with the conditions laid down for State monopolies of a commercial character in Article 37 TFEU?
(7)
If the answer to Question 5 is negative and Article 34 TFEU is applicable to the case, is the Finnish system, under which, where alcoholic beverages are ordered from abroad via the internet or another means of distance selling, their import for personal consumption is permitted only if the person ordering the goods or a person unconnected to the vendor transported the alcoholic beverages into Finland, and under which a licence in accordance with the Law on Alcohol is otherwise required for the import, a quantitative restriction on imports or a measure having equivalent effect contrary to Article 34 TFEU?
(8)
If the answer to the preceding question is affirmative, can the system be considered justified and proportionate in order to protect the health and life of humans?’
The questions referred for a preliminary ruling
Questions 1 to 4, which concern the legislation relating to the excise duty on certain beverage packaging, and Questions 5 to 8, which concern the requirement to have a retail sale licence in order to import alcoholic beverages with a view to their retail sale in Finland, must be examined separately.
Questions 1 to 4
By Questions 1 to 4, the referring court asks, in essence, whether Articles 34 TFEU and 110 TFEU and Articles 1(1), 7 and 15 of Directive 94/62 must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which imposes an excise duty on certain beverage packaging, but lays down an exemption for packaging integrated into a functioning return system.
The applicability of the Treaty provisions
Given that the Questions 1 to 4 concern provisions of Directive 94/62 as well as provisions of the Treaty, it must be noted that, in accordance with settled case-law, any national measure in an area which has been the subject of exhaustive harmonisation at EU level must be assessed in the light of the provisions of that harmonising measure and not those of the Treaty (judgment in UNIC and Uni.co.pel, C‑95/14, EU:C:2015:492, paragraph 33 and the case-law cited).
It is therefore appropriate, as a preliminary point, to examine whether the harmonisation brought about by Articles 1(1), 7 and 15 of Directive 94/62 is exhaustive in nature.
To that end, the Court must interpret those provisions taking into account not only their wording but also the context in which they occur and the objectives of the rules of which they form part (judgment in UNIC and Uni.co.pel, C‑95/14, EU:C:2015:492, paragraph 35 and the case-law cited).
According to Article 1(1) thereof, Directive 94/62 aims to harmonize national measures concerning the management of packaging and packaging waste in order, on the one hand, to prevent any impact thereof on the environment of all Member States as well as of third countries or to reduce such impact, thus providing a high level of environmental protection, and, on the other hand, to ensure the functioning of the internal market and to avoid obstacles to trade and distortion and restriction of competition within the European Union.
The Court has already held that Article 5 of Directive 94/62 does not exhaustively harmonise the organisation of national systems intended to encourage the reuse of packaging (see, to that effect, judgments in Radlberger Getränkegesellschaft and S. Spitz, C‑309/02, EU:C:2004:799, paragraph 56, and in Commission v Germany, C‑463/01, EU:C:2004:797, paragraph 44). In that respect, the Court has held, inter alia, that Article 5 of Directive 94/62 allows the Member States to encourage systems for the reuse of packaging only ‘in conformity with the Treaty’ (see judgments in Radlberger Getränkegesellschaft and S. Spitz, C‑309/02, EU:C:2004:799, paragraph 58, and in Commission v Germany, C‑463/01, EU:C:2004:797, paragraph 46).
Similarly, the second subparagraph of Article 7(1) of Directive 94/62 provides that the return and/or collection systems and the reuse or recovery systems must also apply to imported products under non-discriminatory conditions, including the detailed arrangements and any tariffs imposed for access to the systems, and must be designed so as to avoid barriers to trade or distortions of competition ‘in conformity with the Treaty’.
Accordingly, like Article 5 of Directive 94/62, Article 7 thereof does not bring about an exhaustive harmonisation, but rather refers to the relevant provisions of the Treaty.
Article 15 of Directive 94/62 does not carry out any harmonisation but rather authorises the Council to adopt economic instruments to promote the implementation of the objectives set by that directive or, in the absence of such measures, authorises the Member State, acting ‘in accordance with … the obligations arising out of the Treaty’, to adopt measures to implement those objectives. Thus, that provision also requires the application of the relevant provisions of the Treaty.
It follows from the foregoing that the harmonisation carried out by Articles 1(1), 7 and 15 of Directive 94/62 is not exhaustive in nature, as the Advocate General pointed out in point 75 of his Opinion. Accordingly, the national measures implementing those articles must be assessed not only in the light of the provisions of that directive, but also in the light of the relevant provision of primary law.
The applicability of Article 34 TFEU or Article 110 TFEU
Since the national measures implementing Articles 1(1), 7 and 15 of Directive 94/62 must be assessed in the light of the relevant provisions of primary law, it is necessary to determine whether legislation establishing an excise duty on certain beverage packaging such as that at issue in the main proceedings should be assessed in the light of Article 34 TFEU and/or Article 110 TFEU. Mr Visnapuu, the Finnish Government and the European Commission take the view that the legislation in question must be assessed in the light of Article 110 TFEU.
The Court has repeatedly held that Articles 34 TFEU and Article 110 TFEU are mutually exclusive in their scope. It is settled case-law that the scope of Article 34 TFEU does not extend to the obstacles to trade covered by other specific provisions and that the obstacles of a fiscal nature referred to in Article 110 TFEU are not covered by the prohibition laid down in Article 34 TFEU (see, inter alia, judgment in Tatu, C‑402/09, EU:C:2011:219, paragraph 33).
A pecuniary charge constitutes internal taxation within the meaning of Article 110 TFEU if it relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria applied irrespective of the origin or destination of the products (see, inter alia, judgments in Koornstra, C‑517/04, EU:C:2006:375, paragraph 16, and in Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten, C‑221/06, EU:C:2007:657, paragraph 31).
In the present case, it can be seen from paragraphs 8 to 10 of the present judgment that the legislation at issue in the main proceedings establishes an excise duty on certain beverage packaging amounting to EUR 0.51 per litre of packaged goods, but lays down an exemption from that excise duty for beverage packaging which is integrated into a functioning return system.
In view of those characteristics, it must be found, first, that the excise duty at issue in the main proceedings is a pecuniary charge relating to a general system of internal dues applied systematically to a category of products, namely beverage packaging. In that regard, the Court has already held that waste for disposal must be regarded as ‘products’ within the meaning of Article 110 TFEU (judgment in Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten, C‑221/06, EU:C:2007:657, paragraphs 36 to 38). Accordingly, an excise duty on certain beverage packaging must be regarded as being imposed on products for the purposes of that provision.
Secondly, it can be seen from the order for reference that the excise duty in question is imposed on beverage packaging in accordance with objective criteria applied irrespective of the origin or destination of the packaging. That excise duty is imposed on both domestic beverage packaging and imported beverage packaging, if that packaging has not been integrated into a functioning return system.
It follows from the foregoing that an excise duty on certain beverage packaging such as that at issue in the main proceedings constitutes internal taxation within the meaning of Article 110 TFEU. In accordance with the case-law cited in paragraph 50 of the present judgment, such an excise duty must be assessed in the light of Article 110 TFEU, and not in the light of Article 34 TFEU.
The interpretation of Article 110 TFEU
The Finnish Government and the Commission maintain that the legislation establishing an excise duty on certain beverage packing complies with Article 110 TFEU. In contrast, Mr Visnapuu submits that that legislation is discriminatory and contrary to Article 110 TFEU, since a seller operating from another Member State cannot, in practice, join a functioning return system.
Pursuant to the first paragraph of Article 110 TFEU, no Member State is to impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. The second paragraph of that provision provides that no Member State is to impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
It does not appear from the file before the Court that the Law on excise duty on certain beverage packaging, at issue in the main proceedings, is of such a nature as to afford indirect protection to domestic products other than beverage packaging, for the purposes of the second paragraph of Article 110 TFEU. Accordingly, the Court’s assessment must be limited to the first paragraph of that article and to examining whether the taxation imposed on imported beverage packaging by virtue of that excise duty is in excess of that imposed on domestic beverage packaging.
According to settled case-law, an infringement of the first paragraph of Article 110 TFEU occurs when the tax on the imported product and the tax on the similar domestic product are calculated in a different way and under different conditions so that the imported product, even if only in certain cases, is more heavily taxed. Thus, under that provision, an excise duty must not affect products originating from other Member States more onerously than similar domestic products (judgment in Brzeziński, C‑313/05, EU:C:2007:33, paragraph 29 and the case-law cited).
In the main proceedings, the Finnish Government and the Commission rightly point out that the conditions under which the excise duty on certain beverage packaging is imposed — that is to say the amount, the base and the exemption conditions — are worded identically for beverage packaging from other Member States and for similar domestic products. Accordingly, and as the Advocate General pointed out in paragraphs 79 and 80 of his Opinion, no direct discrimination in respect of beverage packaging from other Member States, for the purpose of the first paragraph of Article 110 TFEU, can be found in the present case.
Mr Visnapuu submits, however, that the conditions which must be met in order to benefit from the exemption for beverage packaging integrated in a functioning return system are indirectly discriminatory, since a distance seller engaging in e-commerce from another Member State cannot benefit from that exemption.
In support of his argument, Mr Visnapuu states that joining a functioning return system is prohibitively expensive for a distance seller engaging in e-commerce from another Member State, as a result, inter alia, of the requirement to ensure that certain particulars appear on the beverage packaging and the requirement to lodge a guarantee and to pay a membership fee. Mr Visnapuu adds that, for a small e-commerce business, setting up its own functioning return system is not an economically viable option, because of the fixed costs of operating such a system.
In that regard, it must be pointed out that the difficulties asserted by Mr Visnapuu, even if they were proven, do not show a difference in treatment between beverage packaging from other Member States and similar domestic products, within the meaning of the first paragraph of Article 110 TFEU. It cannot be inferred from such difficulties encountered by a small trader engaged in distance sales in joining a functioning return system or setting up such a system that beverage packaging from other Member States is less likely to enjoy the exemption laid down for packaging integrated into a functioning return system and, consequently, is more heavily taxed than similar national products.
Moreover, as the Finnish Government submitted at the hearing and as the Advocate General pointed out in points 89 to 91 of his Opinion, small traders established in Finland face the same difficulties in that respect as small traders established in another Member State.
It follows from the foregoing that Article 110 TFEU does not preclude national legislation imposing an excise duty on certain beverage packaging such as that at issue in the main proceedings.
The interpretation of Articles 1(1), 7 and 15 of Directive 94/62
The referring court also asks the Court whether Articles 1(1), 7 and 15 of Directive 94/62 preclude national legislation, such as that at issue in the main proceedings, establishing an excise duty on certain beverage packaging. The Finnish Government and the Commission submit that the legislation in question complies with Directive 94/62.
As a preliminary point, it must be noted that the beverage packaging constitutes ‘packaging’, within the meaning of Article 3(1) of Directive 94/62, and therefore falls within the scope of that directive in accordance with Article 2(1) thereof.
However, none of the provisions of Article 1(1), 7 and 15 of Directive 94/62 preclude legislation, such as that at issue in the main proceedings, which establishes an excise duty on certain beverage packaging.
As regards, in particular, the second subparagraph of Article 7(1) of Directive 94/62, that provision provides that the systems of return, collection, reuse or recovery of used packaging and/or packaging waste are to apply to imported products under non-discriminatory conditions and are to be designed so as to avoid barriers to trade or distortions of competition in conformity with the Treaty.
Nevertheless, it must be pointed out that that obligation relates to the operation of such systems and not the operation of a system of excise duty on certain beverage packaging such as that at issue in the main proceedings, which, as was held in paragraph 63 of the present judgment, does not involve any discrimination against beverage packaging from other Member States.
Furthermore, the Finnish Government submits in this regard that, according to the second subparagraph of Paragraph 18(g) of the Law on Waste, the obligations within a producer group are to be fairly distributed between the producers and any other traders, having regard to the nature and scope of activities, and in such a way as to avoid creating obstacles to trade or distortion of competition. That provision also requires the producer group to accept as a partner, member or contracting party, under the same conditions as the producers which have already joined the group, any new producer for which, as a result of its small production or for any other reason, it would be economically unfeasible to ensure, by itself, reuse, recovery and any other form of waste management.
Article 15 of Directive 94/62 allows the Council to adopt ‘economic instruments to promote the implementation of the objective set by this Directive’. In the absence of measures adopted by the Council, that provision authorises the Member States to adopt, ‘in accordance with the principles governing [EU] environmental policy, inter alia, the polluter-pays principle, and the obligations arising out of the Treaty, … measures to implement those objectives’.
Legislation establishing an excise duty on certain beverage packaging, such as that at issue in the main proceedings, may be regarded as a measure adopted by a Member State and intended to implement the objectives set by Directive 94/62, within the meaning of Article 15 thereof. As the Finnish Government submits, that legislation encourages traders to join a beverage packaging return system or create their own return system, in order to avoid paying that excise duty.
Under Article 15 of Directive 94/62, such a measure must be adopted in accordance with the principles governing European Union environmental policy, inter alia, the polluter-pays principle, and the obligations arising out of the Treaty. The Finnish Government rightly noted, at the hearing, that the legislation at issue in the main proceedings implements the polluter-pays principle, since the excise duty must be paid by traders which do not join a beverage packaging return system. Moreover, it has already been held that such legislation complies with the obligations arising out of Article 110 TFEU.
It follows from the foregoing that Articles 1(1), 7 and 15 of Directive 94/62 do not preclude legislation, such as that at issue in the main proceedings, establishing an excise duty on certain beverage packaging.
In the light of all the foregoing considerations, the answer to Questions 1 to 4 is that Article 110 TFEU and Articles 1(1), 7 and 15 of Directive 94/62 must be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, which imposes an excise duty on certain beverage packaging, but lays down an exemption for packaging integrated into a functioning return system.
Questions 5 to 8
By Questions 5 to 8, the referring court asks, in essence, whether, Articles 34 TFEU, 36 TFEU and 37 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, under which a seller established in another Member State must hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to consumers residing in the first Member State, where that seller, or someone acting on his behalf, transports those beverages.
The applicability of Article 34 TFEU or Article 37 TFEU
As a preliminary point, it is necessary to determine whether the licence requirement at issue in the main proceedings should be assessed in the light of Article 34 TFEU or of Article 37 TFEU.
To that end, the legislative and factual context of the case before the referring court must be summarised.
Paragraph 13 of the Law on Alcohol establishes a monopoly of a commercial character which includes the exclusive right of retail sale of alcoholic beverages in Finland. That monopoly was granted to Alko.
Paragraph 14 of the Law on Alcohol nevertheless establishes two derogations from the monopoly granted to Alko. According to the first subparagraph of that provision, fermented alcoholic beverages containing a maximum of 4.7% by volume of ethyl alcohol may be sold at retail, not only by Alko, but also by any person who has obtained a retail sale licence from the competent authority. According to the second subparagraph of Paragraph 14, fermented alcoholic beverages containing a maximum of 13% by volume of ethyl alcohol may be sold at retail, not only by Alko, but also by any person to whom the competent authority has granted permission to produce the product in question, under the conditions laid down by the Ministry of Social Affairs and Health.
According to Paragraph 8 of the Law on Alcohol, any person using alcoholic beverages for commercial or other business purposes requires the special licence provided for by that law in order to import alcoholic beverages for the purposes of the activity in question. According to the observations of the Finnish Government, the special licence referred to in Paragraph 8 of the Law on Alcohol may consist, inter alia, in the retail sale licence referred to in the first subparagraph of Paragraph 14 of that law.
As regards the case before the referring court, it is undisputed that neither EIG nor Mr Visnapuu held the retail sale licence required under Paragraphs 8 and 14 of the Law on Alcohol for the importation of alcoholic beverages with a view to their retail sale to consumers residing in Finland.
It is necessary to determine, in light of those circumstances, whether the retail sale licence required for the importation of alcoholic beverages with a view to their retail sale to consumers residing in Finland, at issue in the main proceedings, must be assessed in the light of Article 34 TFEU or of Article 37 TFEU.
According to the Finnish and Norwegian Governments, the monopoly system established by Paragraph 13 of the Law on Alcohol must be assessed in the light of Article 37 TFEU, whereas the licencing scheme laid down in Paragraph 14 of that law must be assessed in the light of Article 34 TFEU. The Swedish Government and the Commission take the view that the retail sale licence requirement at issue in the main proceedings must be assessed in the light of Article 37 TFEU, whereas Mr Visnapuu submits that it must be assessed in the light of Article 34 TFEU.
According to settled case-law, the rules relating to the existence and the operation of a monopoly must be examined in the light of the provisions of Article 37 TFEU, which are specifically applicable to the exercise, by a domestic commercial monopoly, of its exclusive rights (judgments in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 17 and the case-law cited, and in ANETT, C‑456/10, EU:C:2012:241, paragraph 22 and the case-law cited).
However, the effect on trade within the Union of the other provisions of the domestic legislation, which are separable from the operation of the monopoly although they have a bearing upon it, must be examined in the light of Article 34 TFEU (judgments in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 18 and the case-law cited, and in ANETT, C‑456/10, EU:C:2012:241, paragraph 23 and the case-law cited).
It is necessary, in accordance with that case-law, to examine whether the retail sale licence required for the importation of alcoholic beverages with a view to their retail sale to consumers residing in Finland, which forms the subject-matter of Questions 5 to 8, constitutes a rule relating to the existence and operation of a monopoly or a rule which is separable from the operation of the monopoly.
The specific function assigned to the monopoly in question by Paragraph 13 of the Law on Alcohol consists in the exclusive right of retail sale of alcoholic beverages in Finland. However the retail sale of two categories of alcoholic beverage referred to in Paragraph 14 of the Law on Alcohol is excluded from the scope of Alko’s exclusive rights, and may be carried out by any duly authorised person.
It follows from the foregoing that the monopoly system established by Paragraph 13 of the Law on Alcohol must be examined in the light of Article 37 TFEU, since it lays down the rules relating to the existence and the operation of a domestic commercial monopoly.
However, the two licencing schemes laid down in Paragraph 14 of the Law on Alcohol do not govern the operation of the monopoly granted to Alko or the exercise of its exclusive rights within the meaning of the case-law cited above, since they provide that persons other than Alko, who are duly authorised, may engage in the retail sale of certain categories of alcoholic beverages. Accordingly, those two licencing schemes are separable from the operation of the monopoly granted to Alko and must be examined in the light of Article 34 TFEU, as rightly submitted by the Finnish and Norwegian Governments.
Questions 5 to 8 expressly refer to a retail sale licence requirement imposed, in the case before the referring court, on Mr Visnapuu. Such a licence requirement necessarily falls within the scope of Paragraph 14 of the Law on Alcohol and, accordingly, must be examined in the light of Article 34 TFEU, and not in the light of Article 37 TFEU.
However, on the basis of the factual findings set out in the order for reference and summarised in paragraph 32 of the present judgment, it appears that some of the alcoholic beverages imported by Mr Visnapuu, in particular spirits, were not covered by the two licencing schemes established in Paragraph 14 of that law and were therefore covered solely by the retail sale monopoly granted to Alko under Paragraph 13 of that law.
It must be recalled, in that regard, that, although it does not require total abolition of State monopolies of a commercial character, Article 37 TFEU requires them to be adjusted in such a way as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States (judgments in Franzén, C‑189/95, EU:C:1997:504, paragraph 38 and the case-law cited, and in Hanner, C‑438/02, EU:C:2005:332, paragraph 34 and the case-law cited).
Thus, Article 37 TFEU requires that the organisation and operation of the monopoly be arranged so as to exclude any discrimination between nationals of Member States as regards the conditions under which goods are procured and marketed, so that trade in goods from other Member States is not put at a disadvantage, in law or in fact, in relation to that in domestic goods and that competition between the economies of the Member States is not distorted (judgment in Franzén, C‑189/95, EU:C:1997:504, paragraph 40).
The file before the Court does not contain enough information in that respect and it is for the referring court to examine whether the monopoly on the retail sale of alcoholic beverages granted to Alko by Paragraph 13 of the Law on Alcohol satisfies the abovementioned conditions.
Whether there is a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 34 TFEU
In the light of the foregoing, it is necessary to examine whether legislation of a Member State, such as that at issue in the main proceedings, under which a seller established in another Member State must hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to consumers residing in the first Member State, where that seller, or someone acting on his behalf, transports those beverages, constitutes a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 34 TFEU.
According to settled case-law, the prohibition of measures having an effect equivalent to a quantitative restriction, laid down in Article 34 TFEU, applies to all legislation of the Member States that is capable of hindering, directly or indirectly, actually or potentially, trade between Member States (see, inter alia, judgments in Dassonville, 8/74, EU:C:1974:82, paragraph 5, and in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 32).
In view of that case-law, it must be found that a requirement to hold a retail sale licence in order to import alcoholic beverages, such as that at issue in the main proceedings, prevents traders established in other Member States from freely importing alcoholic beverages into Finland with a view to their retail sale.
In particular, the relevant provisions of the national legislation lay down several conditions that must be met in order to obtain the retail sale licence at issue in the main proceedings. First, the third subparagraph of Paragraph 14 of the Law on Alcohol provides that a licence for the retail sale of alcoholic beverages may be granted to any sufficiently trustworthy person who meets the necessary requirements.
Secondly, the fourth subparagraph of Paragraph 14 of the Law on Alcohol provides that the retail sale referred to in the first and second subparagraphs of Paragraph 14 may be carried out only in an authorised outlet which meets the requirements in relation to placement, retail space and operation and where the sale is organised in such a way that it may be monitored effectively.
In those circumstances, the requirement to hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to Finnish consumers, at issue in the main proceedings, is liable to hinder trade between Member States within the meaning of the case-law cited above, since it prevents traders established in other Member States from freely importing alcoholic beverages into Finland with a view to their retail sale.
The Court of Justice has indeed held that national provisions restricting or prohibiting certain selling arrangements that, first, apply to all relevant traders operating within the national territory, and, secondly, affect in the same manner, in law and in fact, the marketing of domestic products and those from other Member States are not liable to hinder, directly or indirectly, actually or potentially, trade between Member States within the meaning of the case-law initiated by Dassonville (8/74, EU:C:1974:82) (see, inter alia, judgments in Keck and Mithouard, C‑267/91 and C‑268/91, EU:C:1993:905, paragraph 16, and in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraph 19).
However, the retail sale licence requirement at issue in the main proceedings does not meet the first condition set out by the Court in Keck and Mithouard (C‑267/91 and C‑268/91, EU:C:1993:905, paragraph 16), according to which the national provisions at issue must apply to all relevant traders operating within the national territory.
First, the retail sale licence requirement referred to in the first subparagraph of Paragraph 14 of the Law on Alcohol does not apply to all relevant traders operating within the national territory. Alko is entitled to engage in the retail sale of all types of alcoholic beverages, including those referred to in Paragraph 14 of the Law on Alcohol, pursuant to a legislative measure, namely Paragraph 13 of the Law on Alcohol. Thus Alko is not required to obtain a retail sale licence from the relevant authorities under conditions similar to those laid down in the third subparagraph of Paragraph 14 of the Law on Alcohol.
Secondly, the retail sale licence referred to in the second subparagraph of Paragraph 14 of the Law on Alcohol is available only to manufacturers of alcoholic beverages established in Finland, thus excluding manufacturers established in other Member States.
Consequently, the requirement to hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to Finnish consumers, at issue in the main proceedings, does not satisfy the first condition laid down in Keck and Mithouard (C‑267/91 and C‑268/91, EU:C:1993:905, paragraph 16), and therefore it is not necessary to examine whether that requirement affects in the same manner, in law and in fact, the marketing of domestic products and of those from other Member States.
In the light of the foregoing, it must be held that legislation of a Member State, such as that at issue in the main proceedings, under which a seller established in another Member State must hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to consumers residing in the first Member State, where that seller, or someone acting on his behalf, transports those beverages, constitutes a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 34 TFEU.
Whether that measure is justified within the meaning of Article 36 TFEU
Under Article 36 TFEU, the provisions of Articles 34 TFEU and 35 TFEU are not to preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions must not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.
According to settled case-law, an obstacle to the free movement of goods may be justified on one of the public interest grounds set out in Article 36 TFEU or in order to meet overriding requirements. In either case, the national provision must be appropriate for securing the attainment of the objective pursued and must not go beyond what is necessary in order to attain it (see, inter alia, judgment in Ker-Optika, C‑108/09, EU:C:2010:725, paragraph 57 and the case-law cited).
The Finnish, Swedish and Norwegian Governments, contrary to Mr Visnapuu, take the view that a requirement to hold a retail sale licence imposed on a seller established in another Member State in order to import alcoholic beverages with a view to their retail sale to customers residing on the national territory, where that seller, or someone acting on his behalf, transports those beverages, is justified by the objective of the protection of human health and life listed in Article 36 TFEU. The Finnish Government submits, inter alia, that the purpose of the Law on Alcohol, as indicated in Paragraph 1 thereof, is to control the consumption of alcohol so as to prevent the harmful effects caused to health and society by alcoholic substances, by establishing a monopoly system and a licencing scheme as regards retail sale.
More specifically, Paragraph 14 of the Law on Alcohol provides that a retail sale licence may only be granted to a sufficiently trustworthy person who meets the necessary requirements, pursuant to the third subparagraph of that provision, and that retail sale may be carried out only in an authorised outlet where the sale is organised in such a way that it may be monitored effectively, pursuant to the fourth subparagraph of that provision.
In that respect, the Finnish Government submits that the retail sale licencing scheme enables the monitoring of compliance by retail sellers with the provisions governing the sale of alcoholic beverages, in particular the obligation to sell alcoholic beverages only between 7 a.m. and 9 p.m., the prohibition on the sale of alcoholic beverages to persons under 18 years of age and the prohibition on the sale of alcoholic beverages to inebriated persons.
The Finnish Government submits, moreover, that the level of protection of health and of public order at which the Finnish policy in relation to alcohol is aimed cannot be achieved by less restrictive means than making the retail sale subject to a licencing scheme or to the exclusive rights of the monopoly. To allow sellers established in other Member States to sell and transport alcoholic beverages to Finnish residents freely would create a new distribution channel for those beverages which would not be subject to any oversight by the competent authorities.
The Court has already held that legislation which has as its objective the control of the consumption of alcohol so as to prevent the harmful effects caused to health of humans and society by alcoholic substances, and which thus seeks to combat alcohol abuse, reflects health and public policy concerns recognised by Article 36 TFEU (judgments in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraph 28, and in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 40).
However, in order for health and public policy concerns to justify a restriction such as that resulting from the prior authorisation system at issue in the main proceedings, the measure in question must be proportionate to the objective to be achieved and not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States (judgment in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraph 29; see also, to that effect, judgment in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraphs 41 and 43).
In the first place, as to whether the measure is proportionate, since it concerns an exception to the principle of the free movement of goods, it is for the national authorities to demonstrate that their rules are necessary in order to achieve the declared objective, and that this objective could not be achieved by less extensive prohibitions or restrictions, or by prohibitions or restrictions having less effect on intra-Community trade (see, to that effect, judgments in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraph 31, and in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 50 and the case-law cited).
However, if that measure is within the field of public health, account must be taken of the fact that the health and life of humans rank foremost among the assets and interests protected by the Treaty and that it is for the Member States to determine the level of protection which they wish to afford to public health and the way in which that level is to be achieved. Since the level may vary from one Member State to another, Member States should be allowed a measure of discretion (judgment in Ker-Optika, C‑108/09, EU:C:2010:725, paragraph 58 and the case-law cited, and, to that effect, judgment in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraphs 32 and 33).
In the present case, the review of the proportionality and necessity of the measures in question calls for an analysis of the circumstances of law and of fact which characterise the situation in Finland, which the national court is in a better position than the Court of Justice to carry out. Accordingly, it is for the national court to verify, on the basis of all the matters of law and fact before it, whether the prior authorisation system at issue in the main proceedings is such as to achieve the objective of the protection of health and public policy, and whether that objective can be achieved with at least an equivalent level of effectiveness by less restrictive methods (see, to that effect, judgments in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraphs 37 and 38 and the case-law cited, and in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 55).
In that respect, it must be pointed out in particular that the fourth subparagraph of Paragraph 14 of the Law on Alcohol establishes an obligation to carry out retail sales in an authorised retail outlet. As the Finnish Government confirmed at the hearing, that obligation prohibits persons authorised under the first or second subparagraphs of Paragraph 14 of the Law on Alcohol from engaging in distance selling of alcoholic beverages, where they, or someone acting on their behalf, transports those beverages.
Although Alko is, in principle, also required to carry out retail sales in an authorised retail outlet, under the second subparagraph of Paragraph 13 of the Law on Alcohol, it nevertheless follows from the third subparagraph of that provision that Alko may carry out the retail sale of alcoholic beverages by sending those beverages to the customer or the purchaser in accordance with the provisions laid down by decree. When questioned on this issue at the hearing, the Finnish Government confirmed that, in some cases, Alko indeed had the right to sell alcoholic beverages by mail order.
In those circumstances, it is for the referring court to verify, inter alia, whether the objective of allowing the competent authorities to monitor compliance with the provisions governing the sale of alcoholic beverages, in particular the obligation to sell alcoholic beverages only between 7 a.m. and 9 p.m., the prohibition on the sale of alcoholic beverages to persons under 18 years of age and the prohibition on the sale of alcoholic beverages to inebriated persons, may be achieved with at least an equivalent level of effectiveness by a licencing scheme which does not require that the retail sale of alcoholic beverages be carried out only in an authorised retail outlet.
In the second place, in order for health and public policy concerns to justify a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 34 TFEU, such as the retail sale licence requirement at issue in the main proceedings, it is also necessary that the measure in question not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States, as required under Article 36 TFEU (see, to that effect, judgments in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraph 29, and in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 41).
In that regard, as regards the retail sale licencing scheme established in the first subparagraph of Paragraph 14 of the Law on Alcohol, which covers fermented alcoholic beverages containing a maximum of 4.7% by volume of ethyl alcohol, there is nothing before the Court to suggest that the health and public policy grounds on which the Finnish authorities rely have been diverted from their purpose and used in such a way as to discriminate against goods originating in other Member States or indirectly to protect certain national products (see, to that effect, judgments in Ahokainen and Leppik, C‑434/04, EU:C:2006:609, paragraph 30, and in Rosengren and Others, C‑170/04, EU:C:2007:313, paragraph 42).
As regards the retail sale licencing scheme established in the second subparagraph of Paragraph 14 of the Law on Alcohol, which allows manufacturers of alcoholic beverages to sell their own production provided that it is obtained by fermentation and contains a maximum of 13% by volume of ethyl alcohol, the Court has already pointed out that that scheme is open only to manufactures established in Finland, thus excluding manufacturers established in other Member States.
By restricting entitlement to that derogation solely to manufactures established in Finland, that provision could have the effect of protecting the national production of fermented alcoholic beverages containing a maximum of 13% by volume of ethyl alcohol. The existence of such an effect does not however suffice to establish that the health and public policy grounds on which the Finnish authorities rely have been diverted from their purpose and used in such a way as to discriminate against goods originating in other Member States or indirectly to protect certain national products, for the purpose of Article 36 TFEU and the case-law cited above.
When questioned on this issue at the hearing, the Finnish Government stated that the licencing scheme in question pursued — in addition to the health and public policy grounds mentioned above — the objective of promoting tourism, since the measure is intended to allow a limited number of alcoholic beverage manufacturers established in Finland, using traditional and artisanal methods, to sell their products at the site of production. The Finnish Government cited, by way of example, certain berry wines produced on farms in Finland which consumers may purchase at the site of production. The Finnish Government added that it was not competent to authorise alcoholic beverage manufacturers established in other Member States to sell their products at the site of production, which, by definition, is situated outside Finnish territory.
It is for the referring court to examine, on the basis of all the relevant legal and factual circumstances, in particular the limited, traditional and artisanal nature of the national production enjoying the benefit of that derogation invoked by the Finnish Government in its observations submitted to the Court, whether the health and public policy grounds relied on by the Finnish authorities have been diverted from their purpose and used in such a way as to discriminate against goods originating in other Member States or indirectly to protect certain national products, for the purpose of Article 36 TFEU.
In the light of all the foregoing, the answer to Questions 5 to 8 is that Articles 34 TFEU and 36 TFEU must be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, under which a seller established in another Member State must hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to consumers residing in the first Member State, where that seller, or someone acting on his behalf, transports those beverages, provided that that legislation is appropriate for securing the attainment of the objective pursued, in the present case the protection of health and public policy, that the objective in question could not be achieved with at least an equivalent level of effectiveness by less restrictive methods and that the legislation does not constitute a means of arbitrary discrimination or a disguised restriction on trade between the Member States, which it is for the referring court to verify.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
1.
Article 110 TFEU and Articles 1(1), 7 and 15 of European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste must be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, which imposes an excise duty on certain beverage packaging, but lays down an exemption for packaging integrated into a functioning return system.
2.
Articles 34 TFEU and 36 TFEU must be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, under which a seller established in another Member State must hold a retail sale licence in order to import alcoholic beverages with a view to their retail sale to consumers residing in the first Member State, where that seller, or someone acting on his behalf, transports those beverages, provided that that legislation is appropriate for securing the attainment of the objective pursued, in the present case the protection of health and public policy, that the objective in question could not be achieved with at least an equivalent level of effectiveness by less restrictive methods and that the legislation does not constitute a means of arbitrary discrimination or a disguised restriction on trade between the Member States, which it is for the referring court to verify.
[Signatures]
( * ) Language of the case: Finnish. |
JUDGMENT OF THE COURT (Second Chamber)
6 October 2015 ( * )
‛Reference for a preliminary ruling — Article 82 EC — Abuse of a dominant position — Market for the distribution of bulk mail — Direct advertising mail — Retroactive rebate scheme — Exclusionary effect — ‘As-efficient-competitor’ test — Degree of likelihood and seriousness of an anticompetitive effect’
In Case C‑23/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Sø- og Handelsretten (Denmark), made by decision of 8 January 2014, received at the Court on 16 January 2014, in the proceedings
Post Danmark A/S
v
Konkurrencerådet,
intervener:
Bring Citymail Danmark A/S,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, J.-C. Bonichot, A. Arabadjiev, J.L. da Cruz Vilaça (Rapporteur) and C. Lycourgos, Judges,
Advocate General: J. Kokott,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 26 March 2015,
after considering the observations submitted on behalf of:
—
Post Danmark A/S, by S. Zinck, advokat, and T. Lübbig, Rechtsanwalt,
—
Bring Citymail Danmark A/S, by P. Jakobsen, advokat,
—
the Danish Government, by M. Wolff, acting as Agent, and J. Pinborg, advokat,
—
the German Government, by T. Henze and J. Möller, acting as Agents,
—
the European Commission, by É. Gippini Fournier, L. Malferrari and L. Grønfeldt, acting as Agents,
—
the EFTA Surveillance Authority, by X. Lewis, M. Schneider and M. Moustakali, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 21 May 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 82 EC.
The request has been made in proceedings between Post Danmark A/S (‘Post Danmark’) and the Konkurrencerådet (Competition Council) concerning a retroactive rebate scheme implemented by that undertaking in 2007 and 2008 in respect of bulk advertising mail.
The dispute in the main proceedings and the questions referred for a preliminary ruling
At the time of the facts in the main proceedings, that is to say, in 2007 and 2008, Post Danmark was controlled by the Danish State and was responsible for the one-day delivery universal postal service, throughout Danish territory, for letters and parcels, including bulk mail, weighing less than 2 kg. It was required to apply a tariff scheme under which the prices of services covered by the universal service obligation could not differ according to the place of destination.
In order to offset the universal service obligation and the uniform tariff scheme imposed on it, Post Danmark had a statutory monopoly on the distribution of letters, including — in the case of bulk mail — inter alia, direct advertising mail, weighing up to 50 grams.
Direct advertising mail is a segment of the bulk mail market, consisting in the distribution, in the context of marketing campaigns, of advertising mail of uniform content bearing the address of the addressee.
The order for reference states that Post Danmark implemented a rebate scheme in respect of direct advertising mail in 2003, at a time when there was no competition on the market for the distribution of bulk mail and when the monopoly on the distribution of letters applied to all letters weighing up to 100 grams.
Those rebates applied to mailings presented by the customer in batches of at least 3000 copies at a time, and in aggregate of at least 30000 letters per year or representing an annual gross postage value of at least 300000 Danish crowns (DKK) (approximately EUR 40200). That rebate scheme contained a scale of rates from 6% to 16%, the latter being applicable to customers sending over 2 million items of mail per year, or items of mail of over DKK 20 million (approximately EUR 2680426) per year. The rebate scale was ‘standardised’, that is to say, all customers were entitled to receive the same rebate on the basis of their aggregate purchases over the reference period, namely one year.
At the beginning of the year, Post Danmark and its customers concluded agreements setting out estimated quantities of mailings for that year. The rebates were granted and invoicing took place periodically on that basis. At the end of the year, Post Danmark made an adjustment where the quantities presented were not the same as those in the initial estimate. The price of mailings for each customer was adjusted at the end of the year, with retroactive effect from the beginning of that same year, on the basis of the quantity of items of mail actually sent. The rebate rate finally applied was thus applicable to all mailings presented during the period concerned and not only to mailings exceeding the quantity initially estimated. In the same way, a customer whose volume of mailings proved to be lower than the quantity estimated had to reimburse Post Danmark.
The rebate scheme at issue in the main proceedings was applicable to all advertising mail bearing the address of the addressee, regardless of whether that mail was covered by Post Danmark’s monopoly and of whether distribution took place in areas not covered by other operators. It is apparent from the order for reference that the progressiveness of the rebates applied to direct advertising mail was of most benefit to customers of average size, since the quantities presented by very large customers far exceeded the highest rate.
Bring Citymail Danmark A/S (‘Bring Citymail’) — a subsidiary of Poste Norge AS, a company responsible for the universal postal service in Norway — began to deliver business mail, including in the form of direct advertising mail, in Denmark on 1 January 2007. Bring Citymail offered a delivery service for that mail not within a period of one day of posting but within three days. That [three-day] service was available to approximately one million households in Copenhagen (Denmark) and the surrounding area, which corresponded to approximately 40% of all households concerned.
During the relevant period, Bring Citymail was Post Danmark’s only serious competitor on the bulk mail market.
Bring Citymail withdrew from the Danish market in 2010 after suffering heavy losses. From the explanations provided in this connection, it appears it suffered losses of DKK 500 million (approximately EUR 67010654) on account of start-up costs and losses during the accounting periods 2006 to 2009.
Following a complaint lodged by Bring Citymail, the Konkurrencerådet found, by decision of 24 June 2009, that Post Danmark had abused a dominant position on the market for the distribution of bulk mail by applying, in 2007 and 2008, rebates in respect of direct advertising mail which had the effect of tying customers and ‘foreclosing’ the market, without being able to substantiate the efficiency gains that might have benefited consumers and neutralised those rebates’ restrictive effects on competition.
The Konkurrencerådet found, inter alia, that Post Danmark was an unavoidable trading partner on the bulk mail market because it held over 95% of a market access to which was rendered difficult by high barriers and which was characterised by economies of scale. In addition, Post Danmark enjoyed significant structural advantages conferred, inter alia, by the statutory monopoly, given that during the relevant period, over 70% of all bulk mail in Denmark was covered by that monopoly, as well as unique geographical coverage encompassing all of Denmark.
According to the Konkurrencerådet, those factors obliged customers of that type of service to turn to Post Danmark for 70% of the mail in respect of which the latter held an exclusive right and for the significant proportion of bulk mail that was to be distributed beyond Bring Citymail’s geographical coverage, so that in its own geographical area, Bring Citymail could compete on approximately 30% of mail only.
In addition, the Konkurrencerådet drew attention to the structure and content of the rebate scheme, in particular, its retroactive nature with a one-year period for the acquisition of rights and the amplitude of the rebate rates applied. According to the findings of the Konkurrencerådet, approximately two-thirds of direct advertising mail not covered by the monopoly could not be transferred from Post Danmark to Bring Citymail without an adverse impact on the scale of the rebates.
It inferred that that scheme resulted in an anticompetitive exclusionary effect on the market. The Konkurrencerådet held, contrary to what was submitted by Post Danmark, that it was not appropriate to base the assessment of the anticompetitive exclusionary effect on the market caused by the rebate scheme on the ‘as-efficient-competitor’ test, involving a comparison of the dominant undertaking’s prices and costs. According to the Konkurrencerådet, in the light of the particular characteristics of the relevant market, it cannot be required, for the purposes of that comparison, that a new competitor be as efficient in the short term as Post Danmark.
By decision of 10 May 2010, the Konkurrenceankenævnet (Competition Appeals Tribunal) upheld the Konkurrencerådet’s decision of 24 June 2009.
Post Danmark brought the case before the Sø- og Handelsretten (Maritime and Commercial Court), which took the view that, while it is established that to be contrary to Article 82 EC a rebate scheme, such as that at issue in the main proceedings, must be capable of having a certain exclusionary effect on the market, there is nevertheless uncertainty as to the criteria to be applied in order to determine whether such a scheme is, in the specific case, capable of having an exclusionary effect contrary to Article 82 EC.
In those circumstances, the Sø- og Handelsretten decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
What guidelines should be used to decide whether the application by a dominant undertaking of a rebate scheme with a standardised volume threshold having the characteristics referred to in the order for reference constitutes an abuse of a dominant position contrary to Article 82 EC?
In its answer the Court is requested to clarify what relevance it has to the assessment whether the rebate scheme’s thresholds are set in such a way that the rebate scheme applies to the majority of customers on the market.
In its answer the Court is further requested to clarify what relevance, if any, the dominant undertaking’s prices and costs have to the evaluation pursuant to Article 82 EC of such a rebate scheme (relevance of an “as-efficient-competitor” test).
At the same time the Court is requested to clarify what relevance the characteristics of the market have in this connection, including whether the characteristics of the market can justify the foreclosure effect being demonstrated by examinations and analyses other than an as-efficient-competitor test (see, in that regard, paragraph 24 of the [communication from the Commission entitled “Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings” (OJ 2009 C 45, p. 7)].
(2)
How probable and serious must the anticompetitive effect of a rebate scheme having the characteristics referred to in the order for reference be for Article 82 EC to apply?
(3)
Having regard to the answers given to Questions 1 and 2, what specific circumstances must the national court take into account in assessing whether a rebate scheme, in circumstances such as those described in the order for reference (characteristics of the market and the rebate scheme), has or is capable of having such a foreclosure effect in the specific case that it constitutes an abuse covered by Article 82 EC?
In this connection, is it a requirement that the foreclosure effect should be appreciable?’
Consideration of the questions referred
First and second subparagraphs of Question 1 and first subparagraph of Question 3
By the first and second subparagraphs of Question 1 and the first subparagraph of Question 3, which it is appropriate to examine together, the referring court asks, in essence, the Court to clarify the criteria that are to be applied in order to determine whether a rebate scheme, such as that at issue in the main proceedings, is liable to have an exclusionary effect on the market contrary to Article 82 EC. The referring court also asks what relevance is to be attached, in the context of that assessment, to the fact that the rebate scheme is applicable to the majority of customers on the market.
According to the file placed before the Court, the rebate scheme operated by Post Danmark in 2007 and 2008 had three main features.
First, the rebate scale, which included rates from 6% to 16%, was ‘standardised’, that is to say, all customers were entitled to receive the same rebate on the basis of their aggregate purchases over an annual reference period.
Secondly, the rebates were ‘conditional’, in the sense that Post Danmark and its customers concluded agreements, at the beginning of the year, in which estimated quantities of mailings for that year were set out. At the end of the year, Post Danmark made an adjustment where the quantities presented were not the same as those that had been estimated initially.
Thirdly, the rebates were ‘retroactive’, in the sense that, where the threshold of mailings initially set was exceeded, the rebate rate applied at the end of the year applied to all mailings presented during the period concerned and not only to mailings exceeding the threshold initially estimated.
As regards the application of Article 82 EC to a rebate scheme, it should be recalled that, in prohibiting the abuse of a dominant market position in so far as trade between Member States could be affected, that article refers to conduct which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is already weakened and which has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition (see, to that effect, judgments in Nederlandsche Banden-Industrie-Michelin v Commission, 322/81, EU:C:1983:313, paragraph 70, and British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 66).
It is also settled case-law that, in contrast to a quantity discount linked solely to the volume of purchases from the manufacturer concerned, which is not, in principle, liable to infringe Article 82 EC, a loyalty rebate, which by offering customers financial advantages tends to prevent them from obtaining all or most of their requirements from competing manufacturers, amounts to an abuse within the meaning of that provision (see judgments in Nederlandsche Banden-Industrie-Michelin v Commission, 322/81, EU:C:1983:313, paragraph 71, and Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 70).
So far as the rebate scheme at issue in the main proceedings is concerned, it must be observed that that scheme cannot be regarded as a simple quantity rebate linked solely to the volume of purchases, since the rebates at issue are not granted in respect of each individual order, thus corresponding to the cost savings made by the supplier, but on the basis of the aggregate orders placed over a given period. Moreover, it was not coupled with an obligation for, or promise by, purchasers to obtain all or a given proportion of their supplies from Post Danmark, a point which served to distinguish it from loyalty rebates within the meaning of the case-law referred to in paragraph 27 above.
In those circumstances, in order to determine whether the undertaking in a dominant position has abused that position by applying a rebate scheme such as that at issue in the main proceedings, the Court has repeatedly held that it is necessary to consider all the circumstances, particularly the criteria and rules governing the grant of the rebate, and to investigate whether, in providing an advantage not based on any economic service justifying it, the rebate tends to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition (judgments in British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 67, and Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 71).
Having regard to the particularities of the present case, it is also necessary to take into account, in examining all the relevant circumstances, the extent of Post Danmark’s dominant position and the particular conditions of competition prevailing on the relevant market.
In that regard, it first has to be determined whether those rebates can produce an exclusionary effect, that is to say whether they are capable, first, of making market entry very difficult or impossible for competitors of the undertaking in a dominant position and, secondly, of making it more difficult or impossible for the co-contractors of that undertaking to choose between various sources of supply or commercial partners. It then has to be examined whether there is an objective economic justification for the discounts granted (judgment in British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraphs 68 and 69).
As regards, in the first place, the criteria and rules governing the grant of the rebates, it must be recalled that the rebates at issue in the main proceedings were ‘retroactive’, in the sense that, if the threshold initially set at the beginning of the year in respect of the quantities of mail was exceeded, the rebate rate applied at the end of the year applied to all mailings presented over the reference period and not only to mailings exceeding the threshold initially estimated. On the other hand, a customer whose volume of mailings proved to be lower than the quantity estimated had to reimburse Post Danmark.
It is apparent from the case-law that the contractual obligations of co-contractors of the undertaking in a dominant position and the pressure exerted upon them may be particularly strong where a discount does not relate solely to the growth in purchases of products of that undertaking made by those co-contractors during the period under consideration, but extends also to those purchases in aggregate. In that way, relatively modest variations in sales of the products of the dominant undertaking have disproportionate effects on co-contractors (see, to that effect, judgment in British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 73).
In addition, it must be pointed out that the rebate scheme at issue in the main proceedings was based on a reference period of one year. However, any system under which discounts are granted according to the quantities sold during a relatively long reference period has the inherent effect, at the end of that period, of increasing the pressure on the buyer to reach the purchase figure needed to obtain the discount or to avoid suffering the expected loss for the entire period (judgment in Nederlandsche Banden-Industrie-Michelin v Commission, 322/81, EU:C:1983:313, paragraph 81).
Consequently, as the Advocate General stated in points 37 and 38 of her Opinion, such a rebate scheme is capable of making it easier for the dominant undertaking to tie its own customers to itself and attract the customers of its competitors, and thus to secure the suction to itself of the part of demand subject to competition on the relevant market. That suction effect is further enhanced by the fact that, in the case in the main proceedings, the rebates applied without distinction both to the contestable part of demand and to the non-contestable part of demand, that is to say, in the latter case, to addressed advertising mail weighing less than 50 grams covered by Post Danmark’s statutory monopoly.
In the case in the main proceedings, according to the file placed before the Court, for 25 of Post Danmark’s largest customers, representing approximately one-half of the volume of transactions on the relevant market during the period at issue, approximately two-thirds of mail sent in the form of direct advertising mail not covered by the monopoly could not be transferred from Post Danmark to Bring Citymail without an adverse impact on the scale of the rebates. If that were established, a matter which it is for the referring court to ascertain, the incentive to obtain all or a substantial proportion of their supplies from Post Danmark would be particularly strong, reducing significantly customers’ freedom of choice as to their sources of supply.
Moreover, as regards the standardisation of the rebate scale, whereby all customers were entitled to receive the same rebate on the basis of their aggregate purchases over the reference period, such a characteristic admittedly supports the conclusion that, in principle, the rebate scheme implemented by Post Danmark did not result in the application of dissimilar conditions to equivalent transactions with other trading parties, within the meaning of Article 82(c) EC.
However, the mere fact that a rebate scheme is not discriminatory does not preclude its being regarded as capable of producing an exclusionary effect on the market, contrary to Article 82 EC. Indeed, in the judgment in Nederlandsche Banden-Industrie-Michelin v Commission (322/81, EU:C:1983:313, paragraphs 86 and 91), the Court, having rejected the Commission’s complaint that the discount system applied by Michelin was discriminatory, nevertheless held that it infringed Article 82 EC since it made dealers dependent upon Michelin.
As regards, in the second place, the extent of Post Danmark’s dominant position and the particular conditions of competition prevailing on the bulk mail market, the order for reference states that Post Danmark held 95% of that market, access to which was protected by high barriers and which market was characterised by the existence of significant economies of scale. Post Danmark also enjoyed structural advantages conferred, inter alia, by the statutory monopoly on the distribution of letters weighing up to 50 grams that concerned 70% of all bulk mail. In addition, Post Danmark enjoyed unique geographical coverage encompassing all of Denmark.
An undertaking which has a very large market share is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which secures for it freedom of action (judgment in Hoffmann-La Roche v Commission, 85/76, EU:C:1979:36, paragraph 41). In those circumstances, it is particularly difficult for competitors of that undertaking to outbid it in the face of discounts based on overall sales volume. By reason of its significantly higher market share, the undertaking in a dominant position generally constitutes an unavoidable business partner in the market (see judgment in British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 75).
That fact, together with the factors mentioned in paragraph 39 above which contribute to clarifying the competitive situation on the relevant market, supports the conclusion that competition on that market was already very limited.
In those circumstances, it must be held that a rebate scheme operated by an undertaking, such as the scheme at issue in the main proceedings, which, without tying customers to that undertaking by a formal obligation, nevertheless tends to make it more difficult for those customers to obtain supplies from competing undertakings, produces an anticompetitive exclusionary effect (see, to that effect, judgment in Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 72).
In addition, the referring court also wishes to know what relevance is to be attached, in the context of assessing the rebate scheme implemented by Post Danmark, to the fact that that scheme applies to the majority of customers on the market.
The fact that the rebates applied by Post Danmark concern a large proportion of customers on the market does not, in itself, constitute evidence of abusive conduct by that undertaking.
Indeed, in a case that concerned, inter alia, the assessment of the loyalty rebates applied by a dominant undertaking, the Court held that there was no need to ascertain the number of contracts which contained the clause at issue and the number which did not (judgment in Suiker Unie and Others v Commission, 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73, EU:C:1975:174, paragraph 511).
However, the fact that a rebate scheme, such as that at issue in the main proceedings, covers the majority of customers on the market may constitute a useful indication as to the extent of that practice and its impact on the market, which may bear out the likelihood of an anticompetitive exclusionary effect.
Lastly, should the referring court find that there are anticompetitive effects attributable to Post Danmark, it should be recalled that it is nevertheless open to a dominant undertaking to provide justification for behaviour liable to be caught by the prohibition set out in Article 82 EC.
In particular, a dominant undertaking may demonstrate that the exclusionary effect arising from its conduct may be counterbalanced, or outweighed, by advantages in terms of efficiency which also benefit the consumer (see judgments in British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 86, and TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 76).
In that last regard, it is for the dominant undertaking to show that the efficiency gains likely to result from the conduct under consideration counteract any likely negative effects on competition and consumer welfare in the affected markets, that those gains have been, or are likely to be, brought about as a result of that conduct, that such conduct is necessary for the achievement of those gains in efficiency and that it does not eliminate effective competition, by removing all or most existing sources of actual or potential competition (judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraph 42).
In the light of the foregoing considerations, the answer to the first and second subparagraphs of Question 1, and the first subparagraph of Question 3, is that in order to determine whether a rebate scheme, such as that at issue in the main proceedings, implemented by a dominant undertaking is capable of having an exclusionary effect on the market contrary to Article 82 EC, it is necessary to examine all the circumstances of the case, in particular, the criteria and rules governing the grant of the rebates, the extent of the dominant position of the undertaking concerned and the particular conditions of competition prevailing on the relevant market. The fact that the rebate scheme covers the majority of customers on the market may constitute a useful indication as to the extent of that practice and its impact on the market, which may bear out the likelihood of an anticompetitive exclusionary effect.
The third and fourth subparagraphs of Question 1
By the third and fourth subparagraphs of Question 1, the referring court asks, in essence, the Court to clarify the relevance to be attached to the as-efficient-competitor test in assessing a rebate scheme under Article 82 EC.
Given that the referring court has mentioned, in the fourth subparagraph of Question 1, the communication from the Commission entitled “Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings”, it must be observed, as a preliminary point, that that document merely sets out the Commission’s approach as to the choice of cases that it intends to pursue as a matter of priority; accordingly, the administrative practice followed by the Commission is not binding on national competition authorities and courts.
The application of the as-efficient-competitor test consists in examining whether the pricing practices of a dominant undertaking could drive an equally efficient competitor from the market.
That test is based on a comparison of the prices charged by a dominant undertaking and certain costs incurred by that undertakings as well as its strategy (see judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraph 28).
The as-efficient-competitor test has been specifically applied by the Court to low-pricing practices in the form of selective prices or predatory prices (see, in respect of selective prices, judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraphs 28 to 35, and in respect of predatory prices, judgments in AKZO v Commission, C‑62/86, EU:C:1991:286, paragraphs 70 to 73, and France Télécom v Commission, C‑202/07 P, EU:C:2009:214, paragraphs 107 and 108), and margin squeeze (judgment in TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraphs 40 to 46).
As regards the comparison of prices and costs in the context of applying Article 82 EC to a rebate scheme, the Court has held that the invoicing of ‘negative prices’, that is to say, prices below cost prices, to customers is not a prerequisite of a finding that a retroactive rebate scheme operated by a dominant undertaking is abusive (judgment in Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 73). In that same case, the Court specified that the absence of a comparison of prices charged with costs did not constitute an error of law (judgment in Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 80).
It follows that, as the Advocate General stated in points 61 and 63 of her Opinion, it is not possible to infer from Article 82 EC or the case-law of the Court that there is a legal obligation requiring a finding to the effect that a rebate scheme operated by a dominant undertaking is abusive to be based always on the as-efficient-competitor test.
Nevertheless, that conclusion ought not to have the effect of excluding, on principle, recourse to the as-efficient-competitor test in cases involving a rebate scheme for the purposes of examining its compatibility with Article 82 EC.
On the other hand, in a situation such as that in the main proceedings, characterised by the holding by the dominant undertaking of a very large market share and by structural advantages conferred, inter alia, by that undertaking’s statutory monopoly, which applied to 70% of mail on the relevant market, applying the as-efficient-competitor test is of no relevance inasmuch as the structure of the market makes the emergence of an as-efficient competitor practically impossible.
Furthermore, in a market such as that at issue in the main proceedings, access to which is protected by high barriers, the presence of a less efficient competitor might contribute to intensifying the competitive pressure on that market and, therefore, to exerting a constraint on the conduct of the dominant undertaking.
The as-efficient-competitor test must thus be regarded as one tool amongst others for the purposes of assessing whether there is an abuse of a dominant position in the context of a rebate scheme.
Consequently, the answer to the third and fourth subparagraphs of Question 1 is that the application of the as-efficient-competitor test does not constitute a necessary condition for a finding to the effect that a rebate scheme is abusive under Article 82 EC. In a situation such as that in the main proceedings, applying the as-efficient-competitor test is of no relevance.
Question 2 and the second subparagraph of Question 3
By Question 2 and the second subparagraph of Question 3, which should be answered together, the referring court asks, in essence, whether Article 82 EC must be interpreted as meaning that, in order to fall within the scope of that article, the anticompetitive effect of a rebate scheme, such as that at issue in the main proceedings, must be, on the one hand, probable and, on the other, serious or appreciable.
As regards, in the first place, the likelihood of an anticompetitive effect, it is apparent from the case-law cited in paragraph 29 above that, in order to determine whether a dominant undertaking has abused its position by operating a rebate scheme, it is necessary, inter alia, to examine whether that rebate tends to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition.
In that regard, and as the Advocate General stated in point 80 of her Opinion, the anticompetitive effect of a particular practice must not be of purely hypothetical.
The Court has also held that, in order to establish whether such a practice is abusive, that practice must have an anticompetitive effect on the market, but the effect does not necessarily have to be concrete, and it is sufficient to demonstrate that there is an anticompetitive effect which may potentially exclude competitors who are at least as efficient as the dominant undertaking (judgment in TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 64).
It follows that only dominant undertakings whose conduct is likely to have an anticompetitive effect on the market fall within the scope of Article 82 EC.
In that regard, the assessment of whether a rebate scheme is capable of restricting competition must be carried out in the light of all relevant circumstances, including the rules and criteria governing the grant of the rebates, the number of customers concerned and the characteristics of the market on which the dominant undertaking operates.
Such an assessment seeks to determine whether the conduct of the dominant undertaking produces an actual or likely exclusionary effect, to the detriment of competition and, thereby, of consumers’ interests (judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraph 44).
As regards, in the second place, the serious or appreciable nature of an anticompetitive effect, although it is true that a finding that an undertaking has a dominant position is not in itself a ground of criticism of the undertaking concerned (judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraph 21), the conduct of such an undertaking may give rise to an abuse of its dominant position because the structure of competition on the market has already been weakened (see, to that effect, judgments in Hoffmann-La Roche v Commission, 85/76, EU:C:1979:36, paragraph 123, and France Télécom v Commission, C‑202/07 P, EU:C:2009:214, paragraph 107).
Consequently, the Court has repeatedly held that a dominant undertaking has a special responsibility not to allow its behaviour to impair genuine, undistorted competition on the internal market (see judgment in Post Danmark, C‑209/10, EU:C:2012:172, paragraph 23 and the case-law cited).
In addition, since the structure of competition on the market has already been weakened by the presence of the dominant undertaking, any further weakening of the structure of competition may constitute an abuse of a dominant position (judgment in Hoffmann-La Roche v Commission, 85/76, EU:C:1979:36, paragraph 123).
It follows that fixing an appreciability (de minimis) threshold for the purposes of determining whether there is an abuse of a dominant position is not justified. That anticompetitive practice is, by its very nature, liable to give rise to not insignificant restrictions of competition, or even of eliminating competition on the market on which the undertaking concerned operates.
It follows from the foregoing considerations that Article 82 EC must be interpreted as meaning that, in order to fall within the scope of that article, the anticompetitive effect of a rebate scheme operated by a dominant undertaking must be probable, there being no need to show that it is of a serious or appreciable nature.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Second Chamber) hereby rules:
1.
In order to determine whether a rebate scheme, such as that at issue in the main proceedings, implemented by a dominant undertaking is capable of having an exclusionary effect on the market contrary to Article 82 EC, it is necessary to examine all the circumstances of the case, in particular, the criteria and rules governing the grant of the rebates, the extent of the dominant position of the undertaking concerned and the particular conditions of competition prevailing on the relevant market. The fact that the rebate scheme covers the majority of customers on the market may constitute a useful indication as to the extent of that practice and its impact on the market, which may bear out the likelihood of an anticompetitive exclusionary effect.
2.
The application of the ‘as-efficient-competitor’ test does not constitute a necessary condition for a finding to the effect that a rebate scheme is abusive under Article 82 EC. In a situation such as that in the main proceedings, applying the as-efficient-competitor test is of no relevance.
3.
Article 82 EC must be interpreted as meaning that, in order to fall within the scope of that article, the anticompetitive effect of a rebate scheme operated by a dominant undertaking, such as that at issue in the main proceedings, must be probable, there being no need to show that it is of a serious or appreciable nature.
[Signatures]
( * ) Language of the case: Danish. |
JUDGMENT OF THE GENERAL COURT (First Chamber)
1 March 2016 ( *1 )
‛State aid — Rescuing firms in difficulty — Aid in the form of a State guarantee — Decision declaring the aid compatible with the internal market — Failure to initiate the formal investigation procedure — Serious difficulties — Procedural rights of the interested parties’
In Case T‑79/14,
Secop GmbH, established in Flensburg (Germany), represented by U. Schnelle and C. Aufdermauer, avocats,
applicant,
v
European Commission, represented by L. Armati, T. Maxian Rusche and R. Sauer, acting as Agents,
defendant,
ACTION for annulment of Commission Decision C(2013) 9119 final of 18 December 2013, concerning State aid SA.37640 — Rescue aid for ACC Compressors SpA — Italy,
THE GENERAL COURT (First Chamber),
composed of H. Kanninen, President, I. Pelikánová (Rapporteur) and E. Buttigieg, Judges,
Registrar: K. Andová, Administrator,
having regard to the written procedure and further to the hearing of 8 September 2015,
gives the following
Judgment
Background to the dispute
ACC Compressors SpA is a company active since 1960 in the production and marketing of compressors for refrigerators for domestic use. It is a wholly-owned subsidiary of Household Compressors Holding SpA (HCH), which operates only as a holding company and has no production activity. ACC Compressors initially held 100% of the capital of ACC Austria GmbH and, through the latter, 100% of the capital of ACC Germany GmbH and ACC USA LLC.
In 2012, the ACC group encountered economic difficulties. In October 2012, insolvency proceedings were initiated against ACC Germany. On 20 December 2012, insolvency proceedings were initiated against ACC Austria. ACC Compressors was declared insolvent on 28 June 2013 and placed under special administration on 27 August 2013. HCH was declared insolvent 12 October 2013.
On 20 April 2013, following a call for tenders launched in the context of ACC Austria’s insolvency proceedings, a purchase agreement for the assets of ACC Austria was signed between Secop Kompressoren GmbH, a subsidiary of the applicant, Secop GmbH, now called Secop Austria GmbH, and ACC Austria’s insolvency administrators. That contract was made subject to the suspensive condition of a declaration by the European Commission that the transaction was compatible with the internal market.
On 5 November 2013, the Italian Republic notified the Commission of rescue aid in favour of ACC Compressors.
The measure notified consisted of a State guarantee of 6 months for credit lines in support of liquidity needs of a total amount of EUR 13.6 million. That guarantee was intended to enable ACC Compressors to continue its activities pending the preparation of a restructuring or liquidation plan.
By decision of 11 December 2013, the Commission decided not to raise objections to the acquisition of ACC Austria’s assets by the company which had become Secop Austria (the ‘merger decision’), thereby validating the contract entered into on 20 April 2013.
On 18 December 2013, by its decision C(2013) 9119 final, relating to State aid SA.37640 — Rescue aid to ACC Compressors SpA — Italy (‘the contested decision’), the Commission decided not to raise objections to the notified measure. In particular, it held that the notified measure constituted State aid within the meaning of Article 107(1) TFEU, but that it met the conditions for being declared compatible with the internal market, as rescue aid for a firm in difficulty.
The acquisition of ACC Austria’s assets by Secop Austria related in particular to patents used until then by ACC Compressors for its own production of compressors. Two sets of proceedings concerning those patents (‘disputed patents’) are in progress before the German and Italian courts between the Secop group and the ACC group, which disagree in particular as to whether they validly entered a licence agreement (‘the patent dispute’).
Procedure and forms of order sought
By application lodged at the Court Registry on 5 February 2014, the applicant brought the present action.
On a proposal from the Judge-Rapporteur, the General Court (First Chamber) decided to open the oral part of the procedure and, within the framework of measures of organisation of procedure pursuant to Article 64 of its Rules of Procedure of 2 May 1991, put questions in writing to the parties. The parties answered within the period prescribed by the Court.
The parties presented oral argument and answered the questions put to them by the Court at the hearing of 8 September 2015.
The applicant claims that the Court should:
—
annul the contested decision;
—
order the Commission to pay the costs.
After amendment to its claims at the stage of the rejoinder, the Commission claims that the Court should:
—
dismiss the action as unfounded;
—
order the applicant to pay the costs.
Law
In support of its action for annulment, the applicant raises three pleas in law alleging, firstly, infringement of Article 296 TFEU, infringement of essential procedural requirements and failure to state reasons, secondly, infringement of the Treaties and, thirdly, misuse of powers.
In the context of its response to the General Court’s written questions, the applicant stated, on the one hand, that its first plea in law must be interpreted as alleging a failure to conduct a proper investigation, in infringement of Article 108(3) TFEU and Article 4(1) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1).
The applicant stated, on the other hand, that its third plea in law must be interpreted as alleging errors of assessment, in that the Commission did not take into account essential elements of the case of which it had, or ought to have had, knowledge. Furthermore, it made clear, during the hearing, that it saw no barrier to the first and third pleas in law, as reclassified, being examined jointly.
It is therefore in this way that the pleas in law relied upon by the applicant will be examined below.
Second plea in law, alleging infringement of the Treaties
The second plea in law is divided into three parts alleging, respectively, infringement of Article 107(3)(c) TFEU, infringement of Article 108(2) and (3) TFEU and breach of the principle of equal treatment.
First, the first and second parts should be considered jointly. In fact, those two parts, in essence, are intended to challenge the substance of the Commission’s decision not to initiate the formal investigation procedure.
The first and second parts of the second plea in law, alleging infringement of Article 107(3)(c) TFEU and infringement of Article 108(2) and (3) TFEU
The applicant claims, in essence, that the Commission was wrong to hold that the contested aid was compatible with the internal market and to refrain from initiating the formal investigation procedure.
The Commission disputes the applicant’s arguments.
– The relevant case-law
As a preliminary matter, it must be observed that the Commission is required to initiate the formal investigation procedure in particular if, in the light of the information obtained during the preliminary examination procedure, it still faces serious difficulties in assessing the measure under consideration. That obligation follows directly from Article 108(3) TFEU, as interpreted by the case-law, and is confirmed by the provisions of Article 4(4) in conjunction with Article 13(1) of Regulation No 659/1999, when the Commission finds, after a preliminary examination, that the measure in question raises doubts as to its compatibility (see, to that effect, judgment of 12 February 2008 in BUPA and Others v Commission, T‑289/03, ECR, EU:T:2008:29, paragraph 328).
According to settled case-law, the procedure under Article 108(2) TFEU is obligatory if the Commission experiences serious difficulties in establishing whether aid is compatible with the internal market. The Commission may not, therefore, limit itself to the preliminary procedure under Article 108(3) TFEU in order to take a favourable decision on a State measure, unless it is in a position to reach the firm view, following an initial investigation, that the measure cannot be classified as aid within the meaning of Article 107(1) TFEU or, if it is classified as aid, that it is compatible with the internal market. By contrast, if that initial examination results in the Commission taking the contrary view, or if it does not put the Commission in a position to overcome all the problems raised by its assessment of the compatibility of the measure in question with the internal market, the Commission has a duty to obtain all the necessary views and, to that end, to initiate the procedure under Article 108(2) TFEU (judgments of 15 June 1993 in Matra v Commission, C‑225/91, ECR, EU:C:1993:239, paragraph 33; 2 April 1998 in Commission v Sytraval and Brink’s France, C‑367/95 P, ECR, EU:C:1998:154, paragraph 39; and in BUPA and Others v Commission, cited in paragraph 22 above, EU:T:2008:29, paragraph 329).
Thus, it is for the Commission to decide, on the basis of the factual and legal circumstances of the case, whether the difficulties involved in assessing the compatibility of the aid warrant the initiation of that procedure (judgment of 19 May 1993 in Cook v Commission, C‑198/91, ECR, EU:C:1993:197, paragraph 30). That decision must satisfy three requirements.
First, Article 108 TFEU restricts the Commission’s power to find aid compatible with the internal market, upon the conclusion of the preliminary examination procedure, solely to aid measures that raise no serious difficulties; that criterion is thus exclusive. The Commission may not, therefore, decline to initiate the formal investigation procedure in reliance upon other circumstances, such as third party interests, considerations of economy of procedure or any other ground of administrative convenience (judgment of 15 March 2001 in Prayon-Rupel v Commission, T‑73/98, ECR, EU:T:2001:94, paragraph 44).
Secondly, where it encounters serious difficulties, the Commission must initiate the formal procedure, having no discretion in that regard. If its powers are circumscribed as far as initiating the formal procedure is concerned, the Commission nevertheless enjoys a certain discretion in identifying and evaluating the circumstances of the case in order to determine whether or not they present serious difficulties. In accordance with the objective of Article 108(3) TFEU and its duty of good administration, the Commission may, inter alia, engage in talks with the notifying State or with third parties in an endeavour to overcome, during the preliminary procedure, any difficulties encountered (judgment in Prayon-Rupel v Commission, cited in paragraph 25 above, EU:T:2001:94, paragraph 45).
Thirdly, the concept of ’serious difficulties’ is objective. Whether or not such difficulties exist requires investigation of both the circumstances in which the contested decision was adopted and its content. That investigation must be conducted objectively, comparing the grounds of the decision with the information available to the Commission when it took a decision on the compatibility of the disputed aid with the internal market (see judgment in Prayon-Rupel v Commission, cited in paragraph 25 above, EU:T:2001:94, paragraph 47 and the case-law cited).
In this present case, the Commission considered, in the contested decision, that the contested aid was compatible with the internal market in that it complied with Article 107(3)(c) TFEU and the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 2004 C 244, p. 2, ‘the Guidelines’).
It should be noted, in this respect, that Article 107(3) TFEU confers on the Commission broad discretion to allow aid by way of derogation from the general prohibition laid down in paragraph 1 of that article, inasmuch as the determination, in those cases, of whether State aid is compatible or incompatible with the internal market raises problems which make it necessary to examine and appraise complex economic facts and conditions. Judicial review by the European Union judicature must therefore, in this respect, be limited to checking that the rules on procedure and the statement of reasons have been complied with, that the facts are materially accurate, and that there has been no manifest error of assessment and no misuse of powers. It is, therefore, not for the Court to substitute its economic assessment for that of the Commission. The Commission may adopt a policy as to how it will exercise its discretion in the form of measures such as the Guidelines, insofar as those measures contain rules indicating the approach which the institution is to take and they do not depart from the rules of the Treaty. In that context, it is for the Court to verify whether the rules which the Commission imposed upon itself have been observed (judgment of 30 January 2002 in Keller and Keller Meccanica v Commission, T‑35/99, ECR, EU:T:2002:19, paragraph 77; see also, to that effect, judgment of 1 December 2004 in Kronofrance v Commission, T‑27/02, ECR, EU:T:2004:348, paragraph 79 and the case-law cited).
– ACC’s alleged new firm classification
Firstly, the applicant claims that, following the disposal of ACC Austria’s assets, the patents at issue can no longer be used by ACC Compressors, which must, therefore, be considered to be a firm emerging from the liquidation of an existing firm and, consequently, a newly created firm, within the meaning of point 12 of the Guidelines. Indeed, failing the ability to use the disputed patents, ACC Compressors does not have sufficiently developed structures to be eligible for rescue aid and, in particular, cannot be assimilated to the firm with the same name which has made compressors since 1960.
Point 12 of the Guidelines is worded as follows:
Obviously, the objective of point 12 of the Guidelines is to prevent the creation of unviable undertakings or loss-making activities which, from the moment they are created, are dependent on State support. To that end, the clarification of the second sentence of that paragraph applies in particular to the situation of the disposal of the assets of an existing legal entity to another legal entity, newly created or pre-existing. Thus, it is the economic entity within which the assets acquired were newly incorporated that can, where relevant, be qualified as a new firm. As for the legal entity which disposes of the assets, the objective of such an operation could precisely be its rescue.
The applicant states, nevertheless, that the words ‘for instance’, appearing in point 12 of the Guidelines, show that the classification of a firm as ‘new’ can result not only from the taking over — by the recipient of the aid — of the assets of another company, but also from the transfer of assets of the beneficiary to another company, such as, here, the transfer of the assets of ACC Austria, a subsidiary of ACC Compressors, to Secop Austria.
For the reasons set out below, such an interpretation must be rejected in the present case.
First, ACC Compressors and ACC Austria were initially part of one and the same undertaking in that the two companies produced the same products, on two different sites, but under the same economic management. Upon the transfer of ACC Austria’s earning assets, effective from 11 December 2013, the date of adoption of the merger decision (see paragraphs 3 and 6 above), it is true that the volume of activity of this firm had been reduced, since the activities corresponding to the production site located in Austria no longer formed part of it. Thus, the undertaking to which the contested aid, approved on 18 December 2013, was granted comprised only ACC Compressors’ earning assets. Nevertheless, ACC Compressors managed the undertaking concerned, both before and after the transfer, and, as admitted by the applicant at paragraph 46 of the application, it carried on, after the date of the adoption of the contested decision, albeit in a reduced fashion, the production and marketing of compressors, which was the traditional activity of that undertaking. Therefore, contrary to the applicant’s claims, it was the same undertaking as that which had been making compressors since 1960.
Second, the interpretation suggested by the applicant is contrary to the objective in point 12 of the Guidelines, as set out in paragraph 32 above. Indeed, in the situation in which the assets are transferred, it is not the entity formed of the economic activities retained by the transferor company that is relevant, for the purpose of the classification ‘newly created firm’ but the entity made up of the economic activities of the transferee company, within which the transferred assets were integrated. It is also normal and reasonable for a firm in difficulty to dispose of certain assets and focus its activity on its core business, whether from a geographical or sectoral perspective, in order to improve the chances of economic recovery. Point 39 of the Guidelines thus expressly envisages the divestment of assets as a means of preventing undue distortions of competition, in the context of the examination of a restructuring plan for the purpose of granting restructuring aid. It would be contrary to the overall purpose of the Guidelines for such a sale of assets to lead systematically to the exclusion of the transferring company from the benefit of rescue aid.
The fact that a legal dispute over the disputed patents is under way between ACC Compressors and Secop Austria cannot lead to a different assessment.
Indeed, at the time the contested decision was adopted, the Commission could take into account only the factual and legal situation of ACC Compressors as it was at the date of that adoption; at the most, it had to take into account the foreseeable evolution of that situation, for the period for which rescue aid was granted, namely, six months (see paragraph 5 above). However, as the Commission correctly contends, at the date of the adoption of the contested decision, ACC Compressors was still using the disputed patents to manufacture compressors, which it was obliged to take into account, and there was nothing to indicate that this situation could have changed in the six following months.
In addition, the existence of the patent dispute was not relevant for the purposes of assessing the compatibility of the contested aid with the internal market. It is true that, had Secop Austria won the case in the patent dispute, it would have been conceivable that ACC Compressors could no longer have used the disputed patents and would, accordingly, have had to cease production of a significant range of compressors, known as ‘Kappa’. However, this also depended on the question of whether, after a possible defeat in the courts, ACC Compressors could obtain a user license for those patents. Moreover, it could not be ruled out from the outset that it could offset the possible disposal of its activity producing ‘Kappa’ compressors against the development of other lines or activities. In any event, it must be considered that it was not for the Commission to anticipate the outcome of the patent dispute, pending before the national courts at the date of adoption of the contested decision, by substituting its assessment for that of the competent courts, seized of that dispute.
Finally, it is appropriate to reject the applicant’s argument, put forward at the hearing, that the Commission ought to have taken into account that, in the context of the merger procedure, ACC Compressors itself had indicated that, if Secop Austria were to purchase the assets of ACC Austria, it could not pursue its production of compressors, since it would not then be able to use the disputed patents any longer.
In the merger decision, the Commission considered ACC Compressors’ claims and found that, given, in particular, the patent dispute between the two parties, it was not inconceivable that an agreement on a licence should be concluded between them. The Commission had therefore already found, in the merger proceedings, that ACC Compressors’ claims that it could not pursue the production of compressors when there was no licence for the disputed patents were hypothetical.
In these circumstances, those claims did not amount to crucial information for the assessment of the competitive relationship between ACC Compressors and Secop; accordingly, the Commission cannot be criticised for not taking them into account in the State aid procedure.
– Whether the contested aid allegedly only ‘postpones the inevitable’
Secondly, the applicant claims that the contested aid should not have been granted in that it was merely ‘postponing the inevitable’, within the meaning of point 72 of the Guidelines.
Point 72 of the Guidelines reads as follows:
In the scheme of the whole of point 72 of the Guidelines, the fact that the rescue aid must not be used merely to maintain the status quo and postpone the inevitable is therefore mentioned, for illustrative purposes, to justify the ‘one time, last time’ principle, laid down in point 72. Thus, according to the logic of that point, a request for a second rescue aid — within a 10-year period following the grant of a first rescue aid — may show that the first aid merely maintained the status quo and postponed the inevitable. In this case, it is sufficient to observe, first, that according to the findings made in paragraph 38 of the contested decision, undisputed by the applicant, the contested aid is the first rescue aid granted to ACC Compressors and, second, that the applicant merely stated that the aid only ‘postponed the inevitable’, without supporting that assertion. Finally, to the extent that the applicant based its claim on the patent dispute, it was found above that it was not relevant for the purposes of assessing the compatibility of contested aid with the internal market.
Consequently, this argument of the applicant’s must be rejected.
– Consideration of the alleged earlier aid
Third, the applicant claims that the Commission has not taken into account the cumulative effect of the contested aid with benefits allegedly previously paid through Cassa Integrazione. In its view, Cassa Integrazione is a wages guarantee fund, whose benefit payments are considered, by the Commission, to be State aid.
Point 23 of the Guidelines reads as follows:
It must therefore be observed that point 23 of the Guidelines expressly provides for the consideration of the cumulative effect of earlier aid with a new rescue or restructuring aid for illegal aid, subject to a negative decision with a recovery order which has not been implemented by the Member State concerned. Pursuant to that provision, the Commission moreover asked the Italian authorities to declare that ACC Compressors had not been granted such unrecovered aid.
The parties agree that the benefits allegedly paid through Cassa Integrazione, of which the Commission states it had no knowledge, have not been the object of a negative decision by the latter. The wording of the Guidelines and, in particular, of point 23 thereof did not oblige the Commission to take into account the alleged aid.
As to the question whether it was necessary for such consideration to be taken into account, in the absence of any obligation to do so being expressly mentioned in the Guidelines, it should be noted that the specific features of rescue aid oppose taking into account the cumulative effect of earlier aid not covered by point 23 of the Guidelines. Indeed, point 15 of the Guidelines defines rescue aid as follows:
It follows from this definition that, both by the restriction of eligible measures (loan guarantees or loans) and by their temporary and reversible nature (end of guarantee and loan repayment after a maximum of six months, subject to the submission, after this time, of a restructuring or liquidation plan) and their restriction to only those measures necessary for the temporary survival of the firm involved, rescue aid, such as the aid at issue, has very limited effects on the internal market, as the Commission rightly argues. It is these limited effects, together with the urgency of rescue aid, that justify the Commission normally examining them under a simplified procedure, in accordance with point 30 of the Guidelines, striving to take a decision within a period of one month, if the aid meets certain criteria. The consideration of the cumulative effect of any allegedly illegal possible earlier aid would make it impossible to meet that deadline and, therefore, would not be compatible with the urgency of this review and the limited impact of that aid on competition.
Furthermore, a consideration of earlier aid other than that defined in point 23 of the Guidelines — which is already the subject of a final negative decision by the Commission — requires the Commission to carry out, indirectly, a review of that earlier aid, the classification of which as aid and unlawful aid can be disputed between the Commission and the Member State concerned and must, where appropriate, be the object of a separate procedure and decision. This could lead, in the end, either to the refusal of rescue aid, on the basis of a cursory review of earlier aid, whereas the latter could later be proved lawful or not to constitute aid, or to undue delay of the decision on rescue aid. Therefore, such a way of proceeding appears incompatible too with the requirements arising from the principle of legal certainty.
For these reasons, it must be considered that the Commission cannot be required to take into account the cumulative effect of alleged earlier aid with rescue aid, beyond the cases covered in point 23 of the Guidelines.
Consequently, that argument of the appellant must be rejected as unfounded.
– Taking into account the practice of selling at a loss, allegedly practised by ACC Compressors
Fourth, the applicant considers that the Commission should have taken into account the risk that the contested aid may allow ACC Compressors to continue the policy of selling at a loss, which it allegedly has been practising since 2013.
It is sufficient to note, in that regard, that the applicant merely claims an alleged policy of selling at a loss by ACC Compressors, without presenting any explanation or evidence capable of supporting that allegation. Accordingly, that argument of the applicant should be rejected.
– The calculations submitted by the Commission
Fifth, the applicant claimed, in the application, that the calculations submitted by the Commission, when assessing the compatibility of the contested aid with the internal market, was in its view inaccurate and incomprehensible, because it did not have access to the file.
Given that, in its reply to the written questions of the Court, the applicant withdrew that complaint, having regard to the explanations provided by the Commission in its defence, there is no longer any need to adjudicate in this respect.
Since all the complaints made under the first and second parts of the second plea in law must be rejected, those parts must be rejected in their entirety.
The third part of the second plea in law, alleging infringement of the principle of equal treatment
The applicant states that it has not had the opportunity to present its views in the State aid procedure, initiated for the benefit of ACC Compressors, in order to oppose the grant of the contested aid to the latter, if necessary, in the formal investigation procedure. On the other hand, ACC Compressors has had the opportunity, as part of the merger procedure, to oppose the takeover of ACC Austria’s assets by Secop Austria. In its view, it is a violation of the principle of equal treatment, since the competitive relationship between the ACC group and the Secop group ought to have been assessed in both procedures.
According to settled case-law, the principle of equal treatment, as a general principle of EU law, requires comparable situations not to be treated differently and different situations not to be treated in the same way, unless such treatment is objectively justified (see judgment of 16 December 2008 in Arcelor Atlantique et Lorraine and Others, C‑127/07, ECR, EU:C:2008:728, paragraph 23 and the case-law cited).
In that regard, in the first place, it should be noted that, both in the context of a State aid procedure and in a merger procedure, the competitors of the firms at issue have no right to be automatically associated with the procedure, and this is particularly so in the context of the initial phase of the procedure, in the course of which the Commission makes a preliminary assessment of either the aid at issue, or the notified merger.
Indeed, first, as far as concerns State aid, according to settled case-law, on the one hand, the preliminary stage of the procedure for examining aid under Article 108(3) TFEU, merely intended to allow the Commission to form a prima facie opinion on the partial or complete conformity of the aid in question, on the one hand, must be distinguished from the actual investigation stage referred to by Article 108(2), on the other hand. It is only in connection with the latter phase, which is designed to allow the Commission to be fully informed of all the facts of the case, that the FEU Treaty imposes an obligation, for the Commission, to give interested parties notice to submit their comments (judgments in Cook v Commission, cited in paragraph 24 above, EU:C:1993:197; paragraph 22; Commission v Sytraval and Brink’s France, cited in paragraph 23 above, EU:C:1998:154, paragraph 38; and of 13 December 2005 in Commission v Aktionsgemeinschaft Recht und Eigentum, C‑78/03 P, ECR, EU:C:2005:761, paragraph 34). It follows that interested parties, other than the Member State concerned, including competitors of the aid recipient, such as the applicant in the present case, have no right to be associated with the procedure in the preliminary examination stage.
Secondly, as regards mergers, Article 18(4) of Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1, ‘the Merger Regulation’), specified by Article 11(c) of Commission Regulation (EC) No 802/2004 of 21 April 2004 on the implementation of Regulation No 139/2004 (OJ 2004 L 133, p. 1), provides that the Commission may hear — on its own motion — natural or legal persons other than the notifiers and other parties to the proposed merger, but it is obliged to do so only on the two conditions that those persons have a sufficient interest and that they make such a request (see, to that effect, judgment of 27 November 1997 in Kaysersberg v Commission, T- 290/94, ECR, EU:T:1997:186, paragraphs 108 and 109).
In the second place, however, it should be noted that ACC Compressors’ position in the merger procedure was not only that of a competitor of Secop Austria, the undertaking notifying the merger, but also one of an ‘interested party’ within the meaning of Article 11(b) of Regulation No 802/2004, in that, as ACC Austria’s parent company, all assets of which were to be sold, it had to be assimilated to the vendor of those assets and, therefore, had the status of party to the proposed merger. However, unlike its competitors, at the end, in accordance with Article 18(1) of the Merger Regulation, interested parties have the right to express their view at all stages of the procedure, including the preliminary phase (see, to that effect, judgments of 24 March 1994 in Air France v Commission, T‑3/93, ECR, EU:T:1994:36, paragraph 81, and 20 November 2002 in Lagardère and Canal+ v Commission, T‑251/00, ECR, EU:T:2002:278, paragraphs 93 and 94).
It must therefore be stated that the situation of the applicant, under the State aid procedure that led to the contested decision, is different from that of ACC Compressors under the merger procedure that led to the decision on the merger, in that ACC Compressors had a right to be heard before the adoption of that latter decision. Consequently, the fact that the Commission did not, before adopting the contested decision, give the applicant the opportunity to state its point of view does not infringe the principle of equal treatment.
Accordingly, the third part of the second plea in law and, consequently, this plea must be rejected in its entirety.
The first and third pleas in law, as reclassified, alleging failure to conduct a proper preliminary investigation and errors of assessment
The applicant complains that the Commission, in that regard, did not take into account the information in the merger decision (see paragraph 6 above), which was, however, relevant and essential for the purpose of assessing the compatibility of the contested aid with the internal market, and that it merely relied upon, in that regard, the information provided by the Italian authorities and by ACC Compressors as beneficiary. In particular, the Commission should have taken into consideration the fact that ACC Compressors had indicated, in the merger procedure, that, if it failed to obtain licences for the disputed patents, it would no longer be able to continue its activities in the market for refrigeration compressors for household appliances (see paragraph 40 above) .
The Commission disputes the applicant’s arguments.
It should be noted, at the outset, that the Commission does not dispute the facts alleged by the applicant in the first plea in law, namely, that it did not take into account, in the present State aid case, the information it had collected in the procedure leading to the merger decision. The parties therefore disagree on two issues only, namely, first, whether the Commission had the right (and even the duty) to take into account that information and, second, whether that information was relevant for the purposes of assessing the compatibility of the contested aid with the internal market.
The extent of the Commission’s duty to investigate in the preliminary examination phase
Since the first plea in law, as reclassified, alleges failure to make preliminary inquiries, the extent of the Commission’s duty to investigate in the preliminary examination phase must first of all be delimited.
As has been noted in paragraph 64 above, the preliminary examination phase of aid, under Article 108(3) TFEU, is merely intended to enable the Commission to form a prima facie opinion on the partial or complete compatibility with the Treaty of planned aid notified to it.
It also follows from the case-law that, in order to obtain approval, in derogation from the Treaty rules, of new or modified aid, it is for the Member State concerned, pursuant to its duty to cooperate with the Commission under Article 4(3) TEU, to provide all the information necessary to enable that institution to verify that the conditions for the derogation are satisfied (see, to that effect, judgments of 28 April 1993 in Italy v Commission, C‑364/90, ECR, EU:C:1993:157, paragraph 20; 6 April 2006 in Schmitz-Gotha Fahrzeugwerke v Commission, T‑17/03, ECR, EU:T:2006:109, paragraph 48 and 12 September 2007, Olympiaki Aeroporia Ypiresies v Commission, T‑68/03, ECR, EU:T:2007:253, paragraph 36).
The procedural obligations mentioned above are moreover referred to and given specific definition, in respect of the preliminary procedure, in Articles 2(2) and 5(1) and (2) of Regulation No 659/1999.
It follows that, under the preliminary examination procedure, the Commission may generally confine itself to taking into account the information provided by the Member State at issue — if necessary, following an additional request from the Commission (judgment of 15 June 2005 in Regione autonoma della Sardegna v Commission, T‑171/02, ECR, EU:T:2005:219, paragraphs 40 and 41) — and is not required to conduct on its own initiative preparatory inquiries into all the circumstances if the information provided by the notifying Member State enables it to satisfy itself, after an initial examination, that the measure in question either does not constitute aid within the meaning of Article 107(1) TFEU or, if it is classified as aid, is compatible with the internal market (see case-law cited in paragraph 23 above).
Furthermore, if it were to become apparent, subsequently, that the information provided by the Member State concerned was incomplete or erroneous on essential points, to the extent of calling into question the Commission’s assessment as regards the compatibility of the aid with the internal market as it has in fact been implemented, this would then be new non-notified aid and therefore illegal within the meaning of Article 1(f) of Regulation No 659/1999, which would justify the opening of a new procedure by the Commission (see, to that effect, judgment of 20 September 2011 in Regione autonoma della Sardegna and Others v Commission, T‑394/08, T‑408/08, T‑453/08 and T‑454/08, ECR, EU:T:2011:493, paragraphs 177 to 180).
In this case, as is clear from the considerations set out in paragraphs 37 and 39 above, the fact that a legal dispute over disputed patents is ongoing between ACC Compressors and Secop Austria could not affect the outcome of the assessment of the compatibility of the contested aid with the internal market. Consequently, there was no obligation for the Commission to take into account the claims made by ACC Compressors in that regard in the merger procedure.
Prohibition for the Commission of using the information obtained in a merger procedure for other purposes
Furthermore, in accordance with Article 17(1) of the Merger Regulation, information obtained under that regulation can be used only for the purposes of the request for information, investigation or hearing.
This provision prohibited in principle the Commission from using, in the context of the State aid procedure, the information that had been submitted to it in connection with the merger procedure.
However, the applicant submits that the case-law of the Court has reduced the scope of Article 17 of the Merger Regulation inasmuch as, when the Commission incidentally gains knowledge of certain information in a procedure under competition law, and if this information indicates the existence of an infringement of other competition rules, it may then open a second procedure to verify the accuracy of the information or to supplement it, in particular by asking for the same documents and using them for purposes of evidence.
It should be noted, in that regard, that, even if the information gathered under the Merger Regulation may not be directly used as evidence in a procedure not governed by that regulation, they nevertheless amount to factors that may, where appropriate, be taken into account to justify the opening of a procedure under another legal basis (see, by analogy, in the situation of the use by a national competition authority of information gathered in the course of EU level cartel proceedings, judgments of 17 October 1989 in Dow Benelux v Commission, 85/87, ECR, EU:C:1989:379, paragraphs 18 to 20, and 16 July 1992 in Asociación Española de Banca Privada and Others, C‑67/91, ECR, EU:C:1992:330, paragraphs 39 and 55).
In the present case, the applicant does not allege that the Commission failed to open a State aid procedure on the basis of information gathered as part of the merger procedure, but alleges that the Commission did not take the latter into account in the aid procedure already under way. Therefore, it must be held that, under the case-law cited in paragraph 82 above, the Commission was at least entitled, in the State aid procedure, to request the production of information or documents that had come to its knowledge in the merger procedure, if that information or those documents were relevant for the assessment of the aid in question.
Furthermore, the applicant claims, relying on various judgments of the courts of the EU, that a derogation may be made from the prohibition in Article 17(1) of the Merger Regulation if there are associative links between various procedures before the Commission. In the present case, the HCH group’s restructuring and the disposal of assets of the former ACC Austria, and the consequences that ensued for ACC Compressors, constitute such associative links between the merger and the State aid procedures.
On that basis, it follows from the case-law that the Commission must, as a matter of principle, avoid the inconsistencies that can arise in the implementation of the various provisions of EU law. That obligation for the Commission to maintain the consistency between the provisions of the Treaty relating to State aid and other provisions of the Treaty is all the more necessary when the other provisions also have undistorted competition in the internal market as their aim (see judgment of 31 January 2001 in RJB Mining v Commission, T‑156/98, ECR, EU:T:2001:29, paragraph 112 and the case-law cited).
It follows in particular that, when adopting a decision on the compatibility of aid with the internal market, the Commission is not to ignore the risk of individual traders undermining competition in the internal market (judgment in RJB Mining v Commission, cited in paragraph 85 above, EU:T:2001:29, paragraph 113). By analogy, it must be considered that, by adopting a decision on the compatibility of State aid, the Commission must take into account the consequences of a merger that it is assessing under another procedure, insofar as the conditions of this merger are of such a kind as to influence the assessment of the effect on competition the aid at issue may have. Where appropriate, the Commission may then be required to ask a question of the Member State concerned, in order to introduce the information at issue in the State aid procedure.
Given that the patent dispute was not relevant for the purposes of assessing the compatibility of the aid at issue with the internal market (see paragraphs 37 and 39 above), such an obligation did not exist in this case.
It follows that the first and third pleas in law, as reclassified, must be rejected.
Because all the applicant’s pleas in law must be rejected, the action must be dismissed in its entirety.
Costs
Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.
On those grounds,
THE GENERAL COURT (First Chamber),
hereby:
1.
Dismisses the action;
2.
Orders Secop GmbH to pay the costs.
Kanninen
Pelikánová
Buttigieg
Delivered in open court in Luxembourg on 1 March 2016.
[Signatures]
Table of contents
Background to the dispute
Procedure and forms of order sought
Law
Second plea in law, alleging infringement of the Treaties
The first and second parts of the second plea in law, alleging infringement of Article 107(3)(c) TFEU and infringement of Article 108(2) and (3) TFEU
– The relevant case-law
– ACC’s alleged new firm classification
– Whether the contested aid allegedly only ‘postpones the inevitable’
– Consideration of the alleged earlier aid
– Taking into account the practice of selling at a loss, allegedly practised by ACC Compressors
– The calculations submitted by the Commission
The third part of the second plea in law, alleging infringement of the principle of equal treatment
The first and third pleas in law, as reclassified, alleging failure to conduct a proper preliminary investigation and errors of assessment
The extent of the Commission’s duty to investigate in the preliminary examination phase
Prohibition for the Commission of using the information obtained in a merger procedure for other purposes
Costs
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Second Chamber)
9 July 2015 ( *1 )
‛Reference for a preliminary ruling — Taxation — Value-added tax — Sixth Directive 77/388/EEC — Articles 2(1) and 4(1) — Tax liability — Immovable property transactions — Sale of lands assigned to the private assets of a natural person exercising the profession of sole trader — Taxable person acting as such’
In Case C‑331/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Vrhovno sodišče (Slovenia), made by decision of 12 June 2014, received at the Court on 8 July 2014, in the proceedings
Petar Kezić s.p. Trgovina Prizma
v
Republika Slovenija,
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, J.-C. Bonichot (Rapporteur), A. Arabadjiev, J.L. da Cruz Vilaça and C. Lycourgos, Judges,
Advocate General: E. Sharpston,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
Petar Kezić s.p. Trgovina Prizma, by B. Ozimek, odvetnica,
—
the Slovenian Government, by A. Grum, acting as Agent,
—
the European Commission, by L. Lozano Palacios and B. Rous Demiri, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 2(1) and 4(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1; ‘the Sixth Directive’).
The request has been made in proceedings between Petar Kezić s.p. Trgovina Prizma (Petar Kezić, a natural person exercising the profession of sole trader under the name ‘Trgovina Prizma’) and the Republika Slovenija (Republic of Slovenia), represented by the Ministrstvo za finance (Ministry of Finance), concerning the levying of value added tax (‘VAT’) on the sale of lands.
Legal context
EU law
Article 2 of the Sixth Directive provides:
‘The following shall be subject to [VAT]:
1.
the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;
...’
Under Article 4(1) and (2) of the Sixth Directive:
‘1. “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.
2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.’
Slovenian law
The Sixth Directive was transposed into Slovenian law by the Law on value added tax (Zakon o davku na dodano vrednost, Uradni list RS, št. 89/98, p. 8433) which provides at Article 3(1) thereof that VAT is to be calculated and paid on the supply of goods and the supply of services for consideration by a taxable person in the course of his economic activity within the territory of the Republic of Slovenia.
According to Article 27 of that law, the transfer of immovable property is exempt from VAT, except for the first assignment of a property right or of a right of disposal in or over newly constructed buildings.
The dispute in the main proceedings and the question referred for a preliminary ruling
Mr Kezić has, since 1995, been registered as a sole trader exercising his profession as a natural person under the trade name ‘Trgovina Prizma’.
According to the order for reference, between 1998 and 2002, Mr Kezić purchased, not as a sole trader but in his private capacity, seven plots of land. Two plots of land were accordingly acquired from a natural person in 1998 and 2000, while the remaining five were acquired from a commercial company in 2001 and 2002. Mr Kezić was not required to pay VAT on those various acquisitions.
Between 2001 and 2003, Mr. Kezić obtained the administrative permits required for the construction of a shopping centre on the abovementioned seven plots. Then, in his capacity as a sole trader, he began the construction work in May 2003.
In June 2003, Mr Kezić assigned the five plots of land acquired last to the assets of his business, thereby taking into account their value estimated by a court-appointed land surveyor. However, he maintained the two other plots as part of his private assets (‘the land at issue’).
In 2004, Mr Kezić sold the shopping centre and the seven plots on which it was built to two commercial companies. Accordingly, on the one hand, when he sold, acting as a sole trader, the five plots of land on which part of the shopping centre was built and that part of the shopping centre, he charged the purchasers output VAT, and, on the other hand, when he sold, acting as a private individual, the land at issue and the other part of the shopping centre built on that land, he did not charge output VAT.
By decision of 26 October 2004, the competent tax authority, having concluded that the sale of the land at issue fell within the economic activity carried out by Mr Kezić acting as a sole trader, demanded from him payment of VAT relating to that sale.
On 18 July 2007, the Ministry of Finance rejected the action brought by Mr Kezić against that decision as unfounded.
The Upravno sodišče (Administrative Court) upheld that decision and, by judgment of 25 May 2011, the Vrhovno sodišče (Supreme Court) dismissed the appeal on a point of law brought by Mr Kezić. That decision was, however, set aside by the Ustavno sodišče (Constitutional Court) which, by decision of 21 November 2013, referred the case to the Vrhovno sodišče for a fresh decision.
The referring court considers that the dispute before it involves determining the conditions under which the Sixth Directive allows a taxable person to exclude from the VAT system property which he uses in the exercise of his economic activity.
In those circumstances, the Vrhovno sodišče decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Are Articles 2(1) and 4(1) of the Sixth Directive to be interpreted to the effect that, in circumstances such as those of this case — in which a person buys plots of land acting as a natural person, without being charged any input VAT, then, acting as a sole trader, builds on those plots a shopping centre, enters as assets of his business on the basis of national accounting rules only some of the plots on which he built the shopping centre and then sells the centre together with all the plots of land to the developer — such a person, merely because he has not entered certain plots of land as assets of his business, has excluded those plots from the VAT system, and is therefore not to be considered a taxable person obliged to calculate and pay output VAT when selling those plots of land?’
The question referred for a preliminary ruling
By its question, the referring court asks, in essence, whether Articles 2(1) and 4(1) of the Sixth Directive must be interpreted as meaning that, in circumstances such as those of the case in the main proceedings — where a taxable person has acquired plots of land, some of which have been assigned to his private assets and others to his business and, where he has built, in his capacity as a taxable person, upon all of those plots of land, a shopping centre which was then sold together with the plots of land on which the building was erected — the sale of the plots of land which were assigned to that taxable person’s private assets must be subject to VAT.
It is clear from the wording of Article 2(1) of the Sixth Directive that a taxable person must act ‘as such’ for a transaction to be subject to VAT. However, a taxable person carrying out a transaction in a private capacity does not act as a taxable person and such a transaction is not subject to VAT (see, to that effect, judgments in Armbrecht, C-291/92, EU:C:1995:304, paragraphs 16 to 18, and Bakcsi, C-415/98, EU:C:2001:136, paragraph 24).
It should also be recalled that, according to the Court’s settled case-law, a ‘taxable person’ is defined by reference to the term ‘economic activity’ which, under Article 4(2) of the Sixth Directive, encompasses all activities of producers, traders and persons supplying services and, in particular, transactions comprising the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis (see, to that effect, judgment in Słaby and Others, C-180/10 and C-181/10, EU:C:2011:589, paragraphs 43 and 44).
Moreover, where capital goods are used both for business and for private purposes the taxpayer has the choice, for the purposes of VAT, of (i) allocating those goods wholly to the assets of his business, (ii) retaining them wholly within his private assets, thereby excluding them entirely from the system of VAT, or (iii) integrating them into his business only to the extent to which they are actually used for business purposes (judgment in Charles and Charles-Tijmens, C-434/03, EU:C:2005:463, paragraph 23). Thus, such property may be excluded from the VAT system even if it is used partially for the needs of the economic activity of the taxable person, who is then, however, deprived of any right of deduction (judgment in Bakcsi, C-415/98, EU:C:2001:136, paragraph 27).
In addition, a taxable person who sells property, part of which he had chosen to reserve for his private use, does not act as a taxable person with respect to the sale of that part (see, to that effect, judgment in Armbrecht, C-291/92, EU:C:1995:304, paragraph 24). The taxable person must, however, throughout his period of ownership of the property in question, demonstrate an intention to retain part of it amongst his private assets (see judgment in Armbrecht, C-291/92, EU:C:1995:304, paragraph 21).
It cannot however be inferred from the abovementioned case-law that the sale by a taxable person of land which he had assigned to his private assets is not subject to VAT for that reason alone. Since transactions effected for consideration by a taxable person are in principle subject to VAT where that person acted as such, it is also necessary, in addition to there being an assignment to those private assets, that such a sale be made by the taxable person concerned not in the course of his economic activity, but in the course of the management and the administration of his private assets.
In this respect it is true that the mere exercise of the right of ownership by its holder cannot, in itself, be regarded as constituting an economic activity (see, to that effect, judgment in Słaby and Others, C-180/10 and C-181/10, EU:C:2011:589, paragraph 36). Furthermore, from that point of view, the fact that the subject-matter of the sale was acquired by the taxable person using his personal resources cannot have a decisive effect.
However, as regards the sale of building land, the Court has already stated that a relevant assessment criterion is the fact that the party has taken active steps to market property by mobilising resources similar to those deployed by producers, traders or persons supplying services within the meaning of Article 4(2) of the Sixth Directive, such as, in particular, the carrying out on that land of preparatory work to make development possible, and the deployment of proven marketing measures (see, to that effect, judgment in Słaby and Others, C‑180/10 and C‑181/10, EU:C:2011:589, paragraphs 39 and 40). Such initiatives do not normally fall within the scope of the management of private assets so that the sale of land designated for development in such a situation cannot be regarded as the mere exercise of the right of ownership by its holder (see, to that effect, judgment in Słaby and Others, C‑180/10 and C‑181/10, EU:C:2011:589, paragraph 41).
As regards the facts referred to by the referring court, in particular the fact that (i) the seven plots of land were acquired by Mr Kezić over a relatively short time, between 1998 and 2002, (ii) those plots were, together, a necessary requirement for the construction, from May 2003, of a shopping centre, and (iii) Mr Kezić carried out restoration work on the land at issue which cost more than EUR 48000, it should be noted that those facts are liable to show that the sale of the land at issue falls outside the mere exercise by Mr Kezić of his right to property, but in fact forms part of his commercial economic activity.
It should be added that none of the documents submitted to the Court attempts to explain why the sale of the land at issue should be regarded as an act of administration of private assets and should, on that basis, be distinguished from the sale of the other plots of land on which Mr Kezić erected a shopping centre in the course of his commercial economic activity.
In those circumstances, and subject to the checks which are for the referring court to carry out, Mr Kezić must be regarded as having acted as a taxable person for VAT purposes when selling the land at issue, such that that transaction should have been subject to that tax.
In the light of the foregoing, the answer to the question referred is that Articles 2(1) and 4(1) of the Sixth Directive must be interpreted as meaning that, in circumstances such as those of the case in the main proceedings — where a taxable person has acquired plots of land, some of which have been assigned to his private assets and others to his business and, where he has built, in his capacity as a taxable person, upon all of those plots of land, a shopping centre which was then sold together with the plots of land on which the building was erected — the sale of the plots of land which were assigned to that taxable person’s private assets must be subject to VAT since that person, at the time of that transaction, acted as such.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Second Chamber) hereby rules:
Articles 2(1) and 4(1) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that, in circumstances such as those of the case in the main proceedings — where a taxable person has acquired plots of land, some of which have been assigned to his private assets and others to his business and, where he has built, in his capacity as a taxable person, upon all of those plots of land, a shopping centre which was then sold together with the plots of land on which the building was erected — the sale of the plots of land which were assigned to that taxable person’s private assets must be subject to value added tax since that person, at the time of that transaction, acted as such.
[Signatures]
( *1 ) Language of the case: Slovenian. |
OPINION OF ADVOCATE GENERAL
SHARPSTON
delivered on 3 September 2015 ( )
Case C‑235/14
Safe Interenvios, SA
v
Liberbank, SA
Banco de Sabadell, SA
Banco Bilbao Vizcaya Argentaria, SA
(Request for a preliminary ruling
from the Audiencia Provincial de Barcelona (Spain))
‛Prevention of the use of the financial system for the purpose of money laundering and terrorist financing — Directive 2005/60/EC — Customer due diligence measures — Directive 95/46/EC — Protection of personal data — Directive 2007/64/EC — Payment services in the internal market’
1.
This dispute involves three credit institutions (Banco Bilbao Vizcaya Argentaria, SA (‘BBVA’), Banco de Sabadell, S.A. (‘Sabadell’) and Liberbank, SA (‘Liberbank’); collectively, ‘the banks’) and a payment institution (Safe Interenvios, SA; ‘Safe’). ( ) The banks closed accounts Safe held with them because they had concerns about money laundering. Safe claims this was an unfair commercial practice.
2.
Questions have arisen as to whether EU law, in particular Directive 2005/60/EC (‘the Money Laundering Directive’), ( ) precludes a Member State from authorising a credit institution to apply customer due diligence measures to a payment institution. That directive provides for three types of customer due diligence measure (standard, simplified and enhanced) depending on the risk of money laundering or terrorist financing. Standard customer due diligence measures under Article 8 comprise, for example, identifying a customer and obtaining information on the purpose and intended nature of a business relationship. Article 11(1) foresees that simplified customer due diligence will apply when the customers of an institution or person covered by that directive (‘a covered entity’) are credit and financial institutions (including payment institutions) themselves covered by the Money Laundering Directive. Article 13 requires enhanced customer due diligence in situations presenting a higher risk of money laundering or terrorist financing. Moreover, Article 5 authorises Member States to impose stricter obligations than those laid down in other provisions of the Money Laundering Directive.
3.
If a credit institution may be authorised to apply (enhanced) customer due diligence measures to a payment institution which itself is covered by the Money Laundering Directive, the Court is asked for guidance on the conditions under which Member States may provide for that to happen. Does their application depend on a risk analysis and may such measures include requiring a payment institution to transfer to a credit institution data pertaining to its own consumers and the recipients of the funds transmitted abroad? Those questions also invite the Court to consider Directives 95/46/EC (‘the Personal Data Directive’), ( ) 2005/29/EC (‘the Unfair Commercial Practices Directive’) ( ) and 2007/64/EC (‘the Payment Services Directive’). ( )
EU law
Treaty on the Functioning of the European Union
4.
According to Article 16(1) TFEU, ‘[e]veryone has the right to the protection of personal data concerning [him or her]’.
Charter of Fundamental Rights of the European Union
5.
Article 8(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’) states that ‘[e]veryone has the right to the protection of personal data concerning him or her’. In accordance with Article 8(2), ‘[s]uch data must be processed fairly for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law’.
6.
Article 52(1) provides that ‘[a]ny limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others’.
Money Laundering Directive
7.
Recital 5 in the preamble to the Money Laundering Directive explains that measures taken in the field of money laundering and terrorist financing should be consistent with other action undertaken in other international fora and take particular account of the recommendations of the Financial Action Task Force (‘FATF’), ( ) which constitutes the foremost international body active in the fight against money laundering and terrorist financing. The Money Laundering Directive should be in line with the FATF Recommendations as substantially revised and expanded in 2003 (‘the 2003 FATF Recommendations’). ( )
8.
Recital 10 states that covered entities should identify and verify the identity of the beneficial owner. When doing so, it should be left to them whether they make use of public records of beneficial owners, ask their clients for relevant data or obtain the information otherwise, taking into account the fact that the extent of such customer due diligence measures relates to the risk of money laundering and terrorist financing, which depends on the type of customer, business relationship, product or transaction.
9.
Recital 22 recognises that the risk of money laundering and terrorist financing is not the same in every case. In line with a risk-based approach, the principle should be that simplified customer due diligence is allowed in appropriate cases.
10.
At the same time, according to recital 24, EU legislation should recognise that certain situations present a greater risk. Thus, although the identity and business profile of all customers should be established, there are cases where particularly rigorous customer identification and verification procedures are required.
11.
Recital 33 states that disclosure of information as referred to in Article 28 ( ) should be in accordance with the rules on transfer of personal data to third countries as laid down in the Personal Data Directive and that, moreover, Article 28 cannot interfere with national data protection and professional secrecy legislation.
12.
According to recital 37, Member States are expected to tailor detailed implementation to the particularities of the various professions and to the differences in scale and size of the covered entities.
13.
Recital 48 states that the Money Laundering Directive respects fundamental rights, observes the principles recognised in particular by the Charter and should not be interpreted and implemented in a manner that is inconsistent with the European Convention on Human Rights.
14.
Article 1(1) provides: ‘Member States shall ensure that money laundering and terrorist financing are prohibited’. Article 1(2) identifies four types of conduct which, when committed intentionally, are to be regarded as money laundering:
‘(a)
the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action;
(b)
the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity or from an act of participation in such activity;
(c)
the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity;
(d)
participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing points’.
15.
In accordance with Article 2(1), the Money Laundering Directive applies to (1) credit institutions, (2) financial institutions and (3) a series of legal and natural persons acting in the exercise of their professional activities. Elsewhere, the Money Laundering Directive refers to these categories as being collectively ‘the institutions and persons covered’ (‘covered entities’ in this Opinion).
16.
A ‘credit institution’ is defined in Article 3(1) by reference to the definition of that same term in the first subparagraph of Article 1(1) of Directive 2000/12/EC, ( ) and thus means ‘an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account’.
17.
The definition of a ‘financial institution’ includes ‘an undertaking, other than a credit institution, which carries out one or more of the operations included in points 2 to 12 and points 14 and 15 of Annex I to Directive 2006/48/EC’ ( ) (Article 3(2)(a)). That list of operations includes, under point 4, ‘[p]ayment services as defined in Article 4(3) of [the Payment Services Directive]’ ( ) and, under point 5, ‘[i]ssuing and administering other means of payment … insofar as this activity is not covered by point 4’. According to the Payment Services Directive, a payment service includes the execution of payment transactions and payment institutions are undertakings providing payment services which otherwise satisfy the requirements under that directive. ( )
18.
Article 5 provides that ‘[t]he Member States may adopt or retain in force stricter provisions in the field covered by [the Money Laundering Directive] to prevent money laundering and terrorist financing’.
19.
Chapter II (‘Customer due diligence’) contains, apart from general provisions on standard customer due diligence (Articles 6 to 10), separate sections on simplified customer due diligence (Articles 11 and 12) and enhanced customer due diligence (Article 13).
20.
Under Article 7, covered entities are to apply customer due diligence measures: (a) when establishing a business relationship; (b) when carrying out occasional transactions amounting to EUR 15000 or more; (c) when there is a suspicion of money laundering or terrorist financing, regardless of any derogation, exemption or threshold; and (d) when there are doubts about the veracity or adequacy of previously obtained customer identification data.
21.
Customer due diligence measures include: ‘identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source’ (Article 8(1)(a)); ‘identifying, where applicable, the beneficial owner and taking risk-based and adequate measures to verify his identity …’ (Article 8(1)(b)); ‘obtaining information on the purpose and intended nature of the business relationship’ (Article 8(1)(c)); and ‘conducting ongoing monitoring of the business relationship including scrutiny of transactions undertaken throughout the course of that relationship …’ (Article 8(1)(d)).
22.
Article 8(2) provides that covered entities may determine the extent of customer due diligence measures on a risk-sensitive basis depending on the type of customer, business relationship, product or transaction. They must be able to demonstrate to the competent authorities that the extent of the measures is appropriate in view of the risks of money laundering and terrorist financing.
23.
In accordance with Article 9(1), Member States must, subject to certain exceptions, require that verification of the identity of the customer and the beneficial owner takes place before a business relationship is established or a transaction is carried out.
24.
Where a covered entity is unable to comply with Article 8(1)(a) to (c), Member States must, under the first subparagraph of Article 9(5), require that ‘it may not carry out a transaction through a bank account, establish a business relationship or carry out the transaction, or [must] terminate the business relationship, and [must] consider making a report to the financial intelligence unit (FIU) in accordance with Article 22 [ ( ) ] in relation to the customer’. Under Article 9(6), Member States are to require that covered entities apply the due diligence procedures not only to all new customers but also at appropriate times to existing customers on a risk-sensitive basis.
25.
Article 11(1) provides: ‘By way of derogation from Articles 7(a), (b) and (d), 8 and 9(1), [covered entities] shall not be subject to the requirements provided for in those Articles where the customer is a credit or financial institution covered by this Directive, or a credit or financial institution situated in a third country which imposes requirements equivalent to those laid down in this Directive and supervised for compliance with those requirements’. Article 11(2) sets out other circumstances under which, by way of derogation from Articles 7(a), (b) and (d), 8 and 9(1), Member States may allow covered entities not to apply standard customer due diligence. Under Article 11(3), covered entities must in any case gather sufficient information to establish if the customer qualifies for an exemption as mentioned in paragraphs 1 and 2. ( )
26.
Pursuant to Article 13(1), in addition to the measures set out in Articles 7, 8 and 9(6), Member States must require covered entities to apply, on a risk-sensitive basis, enhanced customer due diligence measures in particular in situations which by their nature can present a higher risk of money laundering or terrorist financing. They must do so at least with respect to the situations set out in paragraphs 2 to 4 of Article 13 but also in other situations representing a high risk which meet the technical criteria established in accordance with Article 40(1)(c). ( ) The situations set out in Articles 13(2) to Article 13(4) are: where the customer has not been physically present for identification purposes; cross-frontier correspondent banking relationships with respondent institutions from third countries; and transactions or business relationships with politically exposed persons residing in another Member State or in a third country. For such situations, specific enhanced customer due diligence measures (or examples of appropriate measures) are listed.
27.
In accordance with Article 20, Member States must require that covered entities pay special attention to any activity which they regard as particularly likely, by its nature, to be related to money laundering or terrorist financing.
28.
Article 22, which together with Article 23 contains reporting obligations, requires covered entities (and where applicable their directors and employees) to cooperate fully by, inter alia, promptly informing the FIU, on their own initiative, where they know, suspect or have reasonable grounds to suspect that money laundering or terrorist financing is being or has been committed or attempted (Article 22(1)(a)).
29.
Article 28 prohibits covered entities, their directors and employees from disclosing to the customer concerned or to other third persons the fact that information has been transmitted in accordance with Articles 22 and 23 or that a money laundering or terrorist financing investigation is being or may be carried out.
30.
According to Article 34(1), Member States must require that covered entities establish adequate and appropriate policies and procedures of due diligence, reporting, record keeping, internal control, risk assessment, risk management, compliance management and communication in order to forestall and prevent operations related to money laundering or terrorist financing.
31.
Articles 36 and 37 concern ‘Supervision’. In particular, Article 37(1) provides that Member States are to require that the competent authorities at least monitor effectively and take the necessary measures with a view to ensuring that all covered entities comply with the requirements of the directive.
32.
In accordance with Article 40(1)(c), the Commission may adopt implementing measures that establish technical criteria for assessing whether situations represent a high risk of money laundering or terrorist financing as referred to in Article 13.
Personal Data Directive
33.
Recital 8 in the preamble to the Personal Data Directive states that ‘the level of protection of the rights and freedoms of individuals with regard to the processing of [personal] data must be equivalent in all Member States’. Recital 9 recognises that, whilst the Member States will no longer be able to inhibit the free movement between them of personal data on grounds relating to protection of the rights and freedoms of individuals, they will be left a margin for manoeuvre which may (in the context of implementing the Personal Data Directive) also be exercised by business and social partners.
34.
Article 1 provides: ‘Member States shall protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data’. In accordance with Article 1(2), ‘Member States shall neither restrict nor prohibit the free flow of personal data between Member States for reasons connected with the protection afforded under paragraph 1’.
35.
Article 2(a) defines ‘personal data’ as ‘any information relating to an identified or identifiable natural person (“data subject”)’ and ‘an identifiable person’ as ‘one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity’.
36.
The ‘processing of personal data’ is defined in Article 2(b) as ‘any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organisation, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction’.
37.
In accordance with Article 3(1), the Personal Data Directive applies to ‘the processing of personal data wholly or partly by automatic means, and to the processing otherwise than by automatic means of personal data which form part of a filing system or are intended to form part of a filing system’.
38.
Article 7 lays down the criteria that determine whether data processing is legitimate. According to, respectively, Article 7(c) and (f), that is so where processing is necessary ‘for compliance with a legal obligation to which the controller is subject’ and ‘for the purposes of the legitimate interests pursued by the controller or by the third party or parties to whom the data are disclosed, except where such interests are overridden by the interests for fundamental rights and freedoms of the data subject which require protection under Article 1(1)’.
Unfair Commercial Practices Directive
39.
Recital 8 in the preamble to the Unfair Commercial Practices Directive states that this directive directly protects consumer economic interests from unfair business-to-consumer commercial practices and indirectly protects legitimate businesses from their competitors who do not play by the rules it contains. This directive thus guarantees fair competition in fields which it coordinates.
40.
A ‘consumer’ within the meaning of the Unfair Commercial Practices Directive is ‘any natural person who, in commercial practices covered by this Directive, is acting for purposes which are outside his trade, business, craft or profession’ (Article 2(a)). A ‘trader’ is ‘any natural or legal person who, in commercial practices covered by this Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trader’ (Article 2(b)). ‘Business-to-consumer commercial practices’ or ‘commercial practices’ means ‘any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product [that is, any good or service ( )] to consumers’ (Article 2(d)).
41.
Article 3(1) provides that the Unfair Commercial Practices Directive ‘shall apply to unfair business-to-consumer commercial practices, as laid down in Article 5 [which sets out the prohibition of unfair commercial practices and defines what such practices are], before, during and after a commercial transaction in relation to a product’.
42.
Article 3(4) states that ‘[i]n the case of conflict between the provisions of [the Unfair Commercial Practices Directive] and other Community rules regulating specific aspects of unfair commercial practices, the latter shall prevail and apply to those specific aspects’.
Payment Services Directive
43.
The Payment Services Directive lays down, inter alia, the rules for distinguishing between six categories of payment service provider, including credit institutions within the meaning of Article 4(1)(a) of Directive 2006/48 (Article 1(1)(a)) and payment institutions within the meaning of the Payment Services Directive (Article 1(1)(d)).
44.
Article 4(3) defines a ‘payment service’ as ‘any business activity listed in the Annex’, which includes execution of payment transactions. A ‘payment institution’ is, according to Article 4(4), ‘a legal person that has been granted authorisation in accordance with Article 10 [which requires undertakings intending to provide payment services to obtain authorisation as a payment institution before commencing the provision of payment services] to provide and execute payment services throughout the Community’. A ‘payment service’ means ‘any business activity listed in the Annex’ (Article 4(3)). An ‘agent’ is ‘a natural or legal person which acts on behalf of a payment institution in providing payment services’ (Article 4(22)).
45.
According to Article 5, an application for authorisation as a payment institution is to contain a series of documents, including ‘a description of the internal control mechanisms which the applicant has established in order to comply with obligations in relation to money laundering and terrorist financing under [the Money Laundering Directive]’. Article 10(2) provides that authorisations are to be granted ‘if the information and evidence accompanying the application complies with all the requirements under Article 5 and if the competent authorities’ overall assessment, having scrutinised the application, is favourable’. Under Article 12(1), authorisations may be withdrawn only in defined circumstances, including where the payment institution no longer fulfils the conditions for granting the authorisation (Article 12(1)(c)).
46.
In accordance with Article 17(1), a payment institution intending to provide payment services through an agent must communicate to its home Member State certain information enabling that agent to be listed in a publicly available register provided for in Article 13. That information includes the name and address of the agent and a description of the internal control mechanism that will be used by agents in order to comply with the obligations under the Money Laundering Directive in relation to money laundering and terrorist financing.
47.
Under Article 20(1), first subparagraph, Member States are to designate as competent authorities ‘… either public authorities, or bodies recognised by national law or by public authorities expressly empowered for that purpose by national law, including national central banks’. The second subparagraph states that such authorities must guarantee independence from economic bodies and avoid conflicts of interest. Without prejudice to the first subparagraph, such authorities should not themselves be payment institutions, credit institutions, electronic money institutions or post office giro institutions.
48.
Article 21 (‘Supervision’) states:
‘1. Member States shall ensure that the controls exercised by the competent authorities for checking continued compliance with this Title [“Payment Service Providers”] are proportionate, adequate and responsive to the risks to which payment institutions are exposed.
In order to check compliance with this Title, the competent authorities shall be entitled to take the following steps, in particular:
(a)
to require the payment institution to provide any information needed to monitor compliance;
(b)
to carry out on-site inspections at the payment institution, at any agent or branch providing payment services under the responsibility of the payment institution, or at any entity to which activities are outsourced;
(c)
to issue recommendations, guidelines and, if applicable, binding administrative provisions; and
(d)
to suspend or withdraw authorisation in cases referred to in Article 12.
2. … [T]he Member States shall provide that their respective competent authorities, may, as against payment institutions or those who effectively control the business of payment institutions which breach laws, regulations or administrative provisions concerning the supervision or pursuit of their payment service business, adopt or impose … penalties or measures aimed specifically at ending observed breaches or the causes of such breaches.
...’
49.
Article 79 on ‘Data protection’ provides: ‘Member States shall permit the processing of personal data by payment systems and payment service providers when this is necessary to safeguard the prevention, investigation and detection of payment fraud. The processing of such personal data shall be carried out in accordance with [the Personal Data Directive].’
National law
50.
Ley 10/2010, de 28 de abril, de prevención del blanqueo de capitales y de la financiación del terrorismo (Law 10/2010 of 28 April on the prevention of money laundering and terrorist financing; ‘Law 10/2010’), which transposed the Money Laundering Directive into Spanish law, distinguishes between three types of customer due diligence measure: (i) standard customer due diligence measures (Articles 3 to 6); (ii) simplified customer due diligence measures (Articles 9); ( ) and (iii) enhanced customer due diligence measures (Article 11).
51.
Standard customer due diligence measures include formally identifying the persons concerned (Article 3), identifying the real beneficiaries (Article 4), obtaining information on the object and nature of the envisaged business relationship (Article 5) and constant monitoring of the business relationship (Article 6).
52.
In accordance with Article 7(3), persons subject to Law 10/2010 may not start a business relationship or carry out a transaction if they cannot apply the customer due diligence measures foreseen by this law. If such impossibility occurs during the course of the business relationship, they should terminate that relationship.
53.
Article 9(1)(b) states that the persons subject to Law 10/2010 are authorised not to apply certain standard customer due diligence measures with regard to customers which are financial institutions having their seat in the European Union or in equivalent third countries and whose compliance with customer due diligence measures is subject to supervision. According to the referring court, the use of the word ‘authorised’ suggests that this provision does not set out an obligation. However, the referring court has doubts as to its exact meaning.
54.
In accordance with Article 11, enhanced customer due diligence measures must be taken where, based on a risk assessment, there is a high risk of money laundering or terrorist financing. Certain situations, by their nature, present such a risk, notably services of sending money.
Facts, procedure and questions referred
55.
Safe is a company that transfers customers’ funds abroad (that is, to other Member States and to third States) through the accounts it holds with credit institutions.
56.
The request for a preliminary ruling indicates that the banks closed Safe’s accounts with them after it refused to provide them with information (regarding its customers and the destination of funds remitted) which they had requested on the basis of Law 10/2010, in response to irregularities regarding agents which were authorised by Safe to conduct transfers through its accounts and which had been verified by the Banco de España (Bank of Spain).
57.
On 11 May 2011, BBVA communicated those irregularities to the Servicio Ejecutivo de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias del Banco de España (Executive Service of the Commission for the Prevention of Money Laundering and Financial Crime of the Bank of Spain; ‘SEPBLAC’). On 22 July 2011, BBVA notified Safe of the irrevocable closure of its account.
58.
Safe challenged BBVA’s decision to close its account (and similar decisions by the two other banks) before the Juzgado de lo Mercantil No 5 de Barcelona (Commercial Court No 5, Barcelona; ‘the Commercial Court’), on the grounds that the closure was an act of unfair competition which prevented it from operating normally by transferring funds abroad. According to Safe: (i) sending remittances abroad necessarily required it to hold accounts; (ii) it competed in the market with the banks; (iii) the banks had never previously required it to give them the requested data regarding Safe’s customers and the origin and destination of the funds (the practice started when the banks relied on Law 10/2010); and (iv) providing the banks with such data would be contrary to legislation on the protection of personal data. The banks responded that their measures were in accordance with Law 10/2010, were justified in particular because of risks relating to the transfer of funds abroad, and were not contrary to competition law.
59.
On 25 September 2009, the Commercial Court rejected Safe’s application. It held that the banks were entitled to ask Safe to adopt enhanced customer due diligence measures and to provide data relating to its customers, subject to the condition that they detected in Safe’s behaviour signs of conduct that infringed Law 10/2010. Whether the banks were justified in closing Safe’s accounts had to be examined in each case. Whilst none of the banks had infringed any specific prohibition of anti-competitive conduct, Sabadell and Liberbank (but not BBVA) had acted unfairly by failing to set out the reasons underpinning their measures. BBVA’s conduct was deemed to be justified because it was based on checks which showed that 22% of transfers made through Safe’s account during the period from 1 September to 30 November 2010 were not undertaken by agents who had been authorised by Safe and verified by the Bank of Spain. Moreover, during that period, transfers were made by 1291 persons, which far exceeded the number of Safe’s agents. An expert report had further highlighted the risks of transfers not conducted by identified agents.
60.
Safe, Sabadell and Liberbank appealed against that judgment to the Audiencia Provincial, Barcelona (Provincial Court, Barcelona; ‘the referring court’), which is hearing the three appeals together.
61.
The referring court states that all parties involved are subject to Law 10/2010, as they fall within the categories listed in Article 2 of that law, which include credit institutions and payment institutions. Furthermore, all parties compete on the market and carry out the same activity of sending remittances abroad. However, payment institutions (such as Safe) must do so through accounts held with credit institutions (such as the banks).
62.
Safe argues, first, that BBVA was not required to adopt customer due diligence measures in relation to financial institutions because these are supervised directly by the public authorities, in particular by the Bank of Spain. Second, in Spain only SEPBLAC may access data relating to the customers of payment institutions. Third, even if BBVA was required to adopt customer due diligence measures, it had to conduct a detailed and exhaustive study of Safe’s policy for complying with relevant legislation prior to adopting such measures. In the present case, BBVA had merely requested an expert report which had been prepared using BBVA’s data. Fourth, Law 10/2010 does not apply to persons, such as agents, offering support to financial institutions for transfers of funds.
63.
Sabadell’s appeal addresses the fact that the Commercial Court’s judgment accepted that Sabadell could in principle adopt enhanced customer due diligence measures, but not that it could do so in this case. Liberbank argues that closing the account was justified because Safe had failed to provide the information requested.
64.
Against that background, the referring court seeks a preliminary ruling on the following questions:
‘(1)
On the interpretation of Article 11(1) of [the Money Laundering Directive]:
a.
If this provision is read in conjunction with Article 7 of that directive, was it the Union legislature’s intention to establish a genuine derogation from the possibility that credit institutions may adopt due diligence measures when their customers are themselves payment institutions in turn subject to their own supervision system, or is it simply an authorisation to derogate?
b.
If this provision is read in conjunction with Article 5 of that directive, may the national legislature transpose the derogation laid down in the provision concerned in terms other than the actual wording thereof?
c.
Does the derogation contained in Article 11(1) apply to enhanced due diligence measures too in the same terms as it applies to due diligence measures?
(2)
In the alternative, should the reply to the above questions confirm that credit institutions may adopt due diligence measures and enhanced due diligence measures in relation to payment institutions:
a.
How far does the possibility that credit institutions may supervise the operations of payment institutions extend? Can they be deemed to be authorised under the provisions of [the Money Laundering Directive] to supervise the due diligence procedures and measures adopted in turn by payment institutions or does that power belong exclusively to the public institutions referred to in [the Payment Services Directive], in the present case, the Banco de España …?
b.
Does the application of that right of credit institutions to adopt measures require any special justification that may be deduced from the acts of the payment institution or may those measures instead be adopted generally, simply on account of the fact that the payment institution carries out a risky activity such as the sending of remittances abroad?
c.
If it is held that a specific justification is required in order for credit institutions to be able to adopt due diligence measures in relation to payment institutions:
i.
What is the relevant conduct that a bank must bear in mind for the purposes of adopting due diligence measures?
ii.
Can a credit institution be considered authorised to assess, for that purpose, the due diligence measures which a payment institution applies in its procedures?
iii.
Does the exercise of that power require the bank to have identified in a payment institution’s operations conduct leading it to suspect collaboration in money laundering activities or in terrorist financing?
(3)
In addition, if it should be held that credit institutions are authorised to adopt enhanced due diligence measures in relation to payment institutions:
a.
Is it acceptable that those measures may include a measure requiring payment institutions to provide identification data for all their customers from whom the funds remitted originate, and the identities of the recipients?
b.
Is the obligation of payment institutions to provide their customers’ data to credit institutions with which they are forced to operate and with which they also compete on the market compatible with [the Personal Data Directive]?’
65.
Written observations have been submitted by BBVA, Safe, the Spanish and Portuguese Governments and the European Commission. At the hearing on 6 May 2015, except for BBVA and the Portuguese Government, the same parties presented oral argument.
Assessment
Preliminary remarks
66.
The essence of the dispute before the national court is whether the banks were entitled or required to take the action they did pursuant to the Money Laundering Directive (as properly implemented), or whether they were unjustifiably using that directive as an excuse for unfair competitive behaviour.
67.
The questions referred arise only in so far as the banks and Safe are covered entities under the Money Laundering Directive. ( ) No party has contested the referring court’s decision, in formulating its questions, to characterise them as, respectively, credit institutions and a payment institution within the meaning of national law transposing Article 3 of the Money Laundering Directive.
68.
By Question 1, the referring court seeks guidance on Article 11(1) of the Money Laundering Directive, in particular on whether that provision, when read together with Articles 5 and 7, precludes a Member State from authorising or requiring a credit institution to apply standard customer due diligence measures in relation to a customer which is a payment institution and also subject to the Money Laundering Directive (Questions 1(a) and (b)). By Question 1(c), it asks a similar question in relation to enhanced customer due diligence measures under Article 13.
69.
As I see it, the answer to Question 1 depends first and foremost on the scope of Articles 7, 11(1) and 13 of the Money Laundering Directive. If, in implementing any of these provisions, Member States are not precluded from authorising or requiring a credit institution to close the accounts of a payment institution in circumstances such as those at issue, it is not necessary to consider Article 5, because the obligations under national law then merely correspond to those under the Money Laundering Directive.
70.
Conversely if Articles 5, 7, 11(1) and 13 of the Money Laundering Directive should be read as precluding Member States from authorising or requiring credit institutions, such as the banks, to apply (enhanced) customer due diligence measures in circumstances that call for simplified customer due diligence, Questions 2 and 3 are no longer relevant because there could have been no lawful basis for the banks’ measures.
71.
If the Money Laundering Directive does not preclude Member States from authorising or requiring (enhanced) customer due diligence measures in such circumstances, Questions 2 and 3 ask the Court about the scope of such measures and the conditions under which they may be imposed. In particular: may national law foresee that credit institutions supervise the operations and the customer due diligence procedures and measures adopted by payment institutions and, if so, to what extent (Question 2(a))? Must there be a specific justification in order to exercise the right to apply (enhanced) customer due diligence measures, or is it sufficient that the customer carries out a risky activity (Question 2(b))? If a specific justification is needed, on what criteria must such an analysis be based (Question 2(c))? Finally, may such customer due diligence measures include requiring payment institutions to provide identification data for all their customers from whom the funds remitted originate and the identities of the recipients and is that in conformity with the Personal Data Directive (Question 3(a) and (b))?
72.
In interpreting the Money Laundering Directive, all parties have relied on recommendations and other materials produced by the FATF, which is an inter-governmental body that sets standards and develops and promotes policies to combat money laundering and terrorist financing. ( ) The Court has already recognised that the Money Laundering Directive (like its predecessor Directive 91/308/EEC) was adopted in order to apply and make FATF recommendations binding in the European Union. ( ) The Money Laundering Directive should therefore be interpreted in line with the 2003 FATF Recommendations, ( ) which are in essence minimum standards in this field. I shall accordingly take them into account where relevant.
73.
In some questions, the referring court has identified specific provisions of EU law. In others, it has not. However, it is well established that, in order to provide a satisfactory answer to the questions referred, this Court may deem it necessary to consider provisions of EU law to which no reference has been made. ( ) I have adopted that approach in suggesting answers to the questions referred.
74.
Whilst Question 3(b) does not refer to the Unfair Commercial Practices Directive, the referring court none the less expresses, elsewhere in the order for reference, doubts about the relationship between rights under that directive and the Money Laundering Directive. However, the Unfair Commercial Practices Directive does not apply here because Safe is not‘acting for purposes which are outside [its] trade, business, craft or profession’. ( ) The Court has held that the terms ‘customer’ and ‘trader’ in this directive are diametrically opposed and that the term ‘consumer’ refers to ‘any individual not engaged in commercial or trade activities’. ( ) Thus, Safe is not a consumer within the meaning of that directive.
Scope of Article 11(1) of the Money Laundering Directive (Question 1(a) to (c))
75.
Whilst the referring court has not said so explicitly, elements in the file and the written and oral observations suggest that BBVA became suspicious of money laundering or terrorist financing after it discovered irregularities in the information about the agents which transferred funds through Safe’s account with BBVA.
76.
BBVA closed Safe’s account on the basis of Law 10/2010 which, on the one hand, authorises the application of simplified customer due diligence measures with respect to financial institutions whose compliance with customer due diligence measures is subject to surveillance and, on the other hand, requires covered entities to apply, depending on their risk assessment, enhanced customer due diligence measures in situations which, by their very nature, present a high risk of money laundering and terrorist financing, such as the transfer of funds.
77.
By Question 1, the referring court asks in essence whether the Money Laundering Directive precludes a national law which regulates (simplified and enhanced) customer due diligence measures in that way.
78.
The Money Laundering Directive provides for three different types of customer due diligence measure (standard, simplified and enhanced). Member States must provide for the appropriate application of these measures in order to prevent the financial system being used for money laundering and terrorist financing. Such measures may need to be applied before or after a business relationship is established or a transaction is carried out. The intended degree of deterrence of each type of measure depends on the perceived degree of risk that the financial system will be used for such purposes. That degree of risk necessarily varies and thus Member States must ensure that the measures to be applied fit the situation in each case. ( ) I therefore consider that the decision as to what level of customer due diligence to apply must always be based on verifiable grounds.
79.
As I see it, the starting point for understanding Chapter II (‘Due diligence’) in the Money Laundering Directive and the relationship between Articles 5, 7, 11(1) and 13 is the obligation to apply standard customer due diligence measures.
80.
Article 7 lays down the situations that automatically trigger the obligation to apply standard customer due diligence measures, because there are deemed to present risks of money laundering or terrorist financing which can be prevented by the measures under Articles 8 and 9. ( ) These situations concern: (a) the establishment of a business relationship; (b) the carrying out of occasional transactions amounting to EUR 15000 or more; (c) the existence of suspicion of money laundering or terrorist financing; and (d) the existence of doubts about the veracity or adequacy of previously obtained customer identification data. Thus, standard customer due diligence measures can apply before a business relationship has been formed or a transaction has taken place (Articles 7(a) and (b)), or regardless of whether or not that is the case (Article 7(c) and (d)). In particular, nothing in Article 7(c) suggests that the suspicion of money laundering or terrorist financing referred to must arise before establishing, rather than in the course of, a business relationship or transaction.
81.
The Money Laundering Directive does not define ‘suspicion of money laundering or terrorist financing’. Although Article 22(1)(a) (on the scope of the obligation to report to the FIU) suggests that having ‘suspicion’ is not the same as having ‘reasonable grounds to suspect’ that money laundering or terrorist financing is being (or has been) committed or attempted, I consider that that distinction cannot be read to mean that ‘suspicion’ in Article 7(c) is a purely subjective matter. In my opinion, suspicion must be based on some objective material that is capable of review in order to verify compliance with Article 7(c) and other provisions of the Money Laundering Directive. ( ) Thus, in my opinion, ‘a suspicion of money laundering or terrorist financing’ within the meaning of Article 7(c) arises in particular where, taking into account the individual circumstances of a customer and his transactions (including with respect to the use and management of his account(s)), there are verifiable grounds showing a risk that money laundering or terrorist financing exists or will occur in relation to that customer.
82.
Pursuant to the Money Laundering Directive, national law must provide that, where there is such suspicion (and in the other situations listed in Article 7), covered entities must apply standard customer due diligence measures, including identifying the customer and verifying his identity (Article 8(1)(a)); identifying, where applicable, the beneficial owner (Article 8(1)(b)); obtaining information on the purpose and intended nature of the business relationship (Article 8(1)(c)); and conducting ongoing monitoring of an existing business relationship and transactions already undertaken (Article 8(1)(d)). Article 8(1)(d) can only be applied ex post. The other three types of measure can be applied at any stage. This is consistent with Article 9(6), under which Member States must require covered entities to apply customer due diligence procedures to all new customers and, at appropriate times, to existing customers on a risk-sensitive basis. However, before a business relationship is established or a relevant transaction is carried out, Member States must require the identity of the customer and the beneficial owner to be verified (Article 9(1)).
83.
Thus, Articles 7, 8 and 9 identify the circumstances in which the EU legislator has considered that national law must provide for ‘standard’ preventive measures where there is a risk of money laundering and terrorist financing, and has defined the appropriate measures to prevent that risk from materialising.
84.
In other circumstances (depending, for example, on the type of customer, business relationship, product or transaction ( )), the risk may be lower or higher. Articles 11 and 13 deal respectively with those situations, and require Member States to ensure that different degrees of customer due diligence measures are applied.
85.
Subject to certain conditions laid down in Article 11, the customer due diligence measures in Articles 8 and 9(1) are not to be applied in circumstances where, pursuant to Article 7(a), (b) and (d), they would otherwise be required. The conditions concern situations in which the EU legislator has deemed there to be a lower risk of money laundering and terrorist financing by reason of, for example, the identity of the customer or the value and content of the transaction or product.
86.
That is the case where a customer of a covered entity is itself a credit or financial institution covered by the Money Laundering Directive. In accordance with Article 11(1), Member States may not require covered entities (such as the banks) to apply customer due diligence measures under Articles 8 and 9(1) with respect to their customers (such as Safe) in the circumstances listed in Articles 7(a), (b) and (d).
87.
The fact that Article 11(1) requires that covered entities should not be subject to standard customer due diligence measures whereas other paragraphs of Article 11 (such as Article 11(2)) allow Member States to authorise simplified due diligence, does not alter that conclusion. The use of a permissive form elsewhere in Article 11 indicates that Member States have the option to impose the simplified due diligence measures set out in Article 11; standard due diligence measures under Article 8; or enhanced or stricter due diligence obligations in conformity with, respectively, Articles 13 and 5. As I see it, the use of an injunctive form in Article 11(1) means that the options there are fewer: either simplified due diligence is applied or, where relevant and necessary, enhanced or stricter due diligence obligations in conformity with, respectively, Articles 13 and 5. What may not be applied is standard due diligence as such. Thus, I do not interpret Article 11(1) as prohibiting stricter provisions based on Article 5.
88.
The rationale for the derogation in Article 11(1) is that the customer is itself covered by the Money Laundering Directive. That customer must comply with all relevant requirements in that directive as implemented in national law, including those as to customer due diligence measures which it must apply in relation to its own customers, and is subject to that directive’s reporting, surveillance and other requirements. In such circumstances, the need to take preventive action is attenuated.
89.
That rationale is also consistent with the 2012 FATF Recommendations. Point 16 of the interpretative note to recommendation 10 recognises that there may be circumstances in which the risk of money laundering or terrorist financing is lower and, subject to an adequate risk analysis, it could be reasonable to allow financial institutions to apply simplified customer due diligence measures. ( ) Point 17 expressly identifies the example of financial institutions which are themselves subject to requirements to combat money laundering and terrorist financing consistent with the 2012 FATF Recommendations, have effectively implemented those requirements and are supervised for compliance with those obligations. ( )
90.
Thus, I take the view that Article 11(1) reflects the principle that customer due diligence measures should be commensurate with the risks identified. ( ) Article 11(1) assumes a reduced risk because, since the customer is a covered entity, customer due diligence, reporting and surveillance measures are already in place to manage the risk that that covered entity and in particular that entity’s own customers might present. Article 11(1) thus seeks to reconcile the interests of effective regulation, cost-efficient risk management and appropriate and proportionate prevention of the risk of money laundering and terrorist financing.
91.
Article 11(1) applies to all covered entities, even if some entities may be subject to additional conditions, as is the case for payment institutions by virtue of the Payment Services Directive. Their authorisation to operate as payment institutions depends on compliance with the Money Laundering Directive and, where they intend to use registered agents, they must have an internal control mechanism in place to verify such compliance. ( )
92.
However, despite the application of the Money Laundering Directive, the Payment Services Directive and other EU legislation, ( ) protection under existing EU law (and national implementing laws) against the risk of money laundering and terrorist financing cannot guarantee a zero risk. ( )
93.
That is why Article 11(1) does not derogate from Article 7(c). Regardless of any derogation, exemption or threshold and thus regardless of whether the customer is or is not a covered entity, Article 7(c) provides that customer due diligence measures are always required where there is suspicion of money laundering or terrorist financing. ( ) Put differently, where such a suspicion arises, a Member State is therefore precluded from allowing or requiring simplified customer due diligence measures to be applied. Thus, if the competent national court in the present case finds that BBVA and the two other banks rightly found there to be such suspicion as regards Safe, EU law requires it to interpret national law (so far as possible) so as to mean that the banks were required under Article 7(c) to apply (at least) standard customer due diligence measures. ( )
94.
Nor does the fact that the customer is itself an entity covered by the Money Laundering Directive mean that a Member State must not require enhanced customer due diligence measures within the meaning of Article 13 of that directive to be applied with respect to that customer if, despite the guarantees already provided by the Money Laundering Directive, the Payment Services Directive and other EU legislation, there exists a higher risk of money laundering and terrorist financing as foreseen by that provision. Article 11 only derogates from standard customer due diligence measures in situations of lower risk. Since it does not refer to Article 13, it has no bearing on the customer due diligence that is required where there is a higher risk.
95.
Article 13 requires Member States to provide that covered entities apply, on a risk sensitive basis, enhanced customer due diligence measures in particular in situations which by their nature can present a higher risk of money laundering or terrorist financing and at least in the situations of higher risk identified in paragraphs 2 to 4 of Article 13. Sending remittances abroad is not listed in those paragraphs. Nor has the referring court suggested that any of these paragraphs applies. ( ) However, Article 13 does not preclude Member States from identifying in their national laws, taking a risk-based approach, other situations which by their nature present a higher risk and therefore justify or even require the application of enhanced due diligence (in additional to standard customer due diligence).
96.
Therefore, notwithstanding the derogation in Article 11(1), Articles 7 and 13 of the Money Laundering Directive require Member States to ensure that covered entities apply, in situations involving customers who are themselves covered entities under that directive (i) standard customer due diligence measures under Articles 8 and 9(1) where there is suspicion of money laundering or terrorist financing within the meaning of Article 7(c) and (ii) enhanced customer due diligence measures under Article 13 in situations foreseen under that provision.
97.
Even where Member States have properly transposed Articles 7, 11 and 13 into national law, ( ) Article 5 permits them to adopt or retain in force ‘stricter provisions’ that seek to strengthen the fight against money laundering or terrorist financing, ( ) and confirms that the Money Laundering Directive merely provides for a minimum level of harmonisation. ( ) Those ‘stricter provisions’, as I see it, might relate to situations for which the directive provides for some type of customer due diligence and also to other situations which Member States deem to present a risk.
98.
Article 5 forms part of Chapter I (‘Subject matter, Scope and Definitions’) and applies with respect to all ‘provisions in the field covered by [the Money Laundering Directive] to prevent money laundering and terrorist financing’. Its remit is thus not limited to the provisions in Chapter II (‘Customer due diligence’). A Member State may therefore provide for customer due diligence measures to be applied by a credit institution in relation to a payment institution even where the conditions of Article 11(1) are satisfied (and thus even where there is no suspicion within the meaning of Article 7(c)) and in situations other than those listed in Articles 7 and 13, where this is justified and otherwise consistent with EU law. ( )
99.
In summary, provisions such as Articles 8 or 13 of the Money Laundering Directive leave Member States a significant degree of freedom, in implementing that directive, in precisely how they give effect to the obligations to provide for different types of due diligence, depending on the circumstances at issue and in accordance with their overarching obligations to evaluate risk and to put into place laws that require measures to be applied which are commensurate with the identified risk and which comply with other applicable obligations under EU law. Article 5 then provides for a further margin of freedom as it permits Member States to adopt or retain ‘stricter provisions’ where they deem them necessary, provided that in so doing they respect their obligations under EU law.
May credit institutions supervise the customer due diligence measures adopted by payment institutions (Questions 2(a) and 2(c)(ii))?
100.
In Question 2(a), the referring court seeks guidance as to the supervision powers of credit institutions, under the Money Laundering Directive and the Payment Services Directive, in relation to the operations and due diligence procedures and measures of payment institutions who are their customers. Question 2(c)(ii), which is closely related, asks whether a credit institution may assess the due diligence measures applied by a payment institution.
101.
I understand these questions to be based on the assumption that Safe’s accounts were closed because Safe failed to provide information requested by the banks in the context of customer due diligence measures applied by the latter. The closure should therefore be considered as a means of enforcing Safe’s obligations under the Money Laundering Directive, and possibly the Payment Services Directive, for which only the competent authorities, not the banks, are competent. ( )
102.
I do not see how the banks’ action can be construed as being supervisory in nature. The Money Laundering Directive concerns customer due diligence requirements which apply to covered entities, not to customers because of their status as customers. The directive does not require customers to provide covered entities with the information which the latter must obtain and verify in order to satisfy their own customer due diligence obligations. Thus, for example, Article 8 describes elements of a business relationship about which information is to be obtained and verified. It does not specify that national law must provide that the information is to be obtained from the customer and that the latter is, pursuant to the Money Laundering Directive as properly implemented, required to respond to such requests (even if the customer has a strong interest in doing so in order to avoid the consequences described under Article 9(5)). ( )
103.
As a result, action of the kinds provided for in the first subparagraph of Article 9(5) (including, where a business relationship has already been established, termination of that relationship) is the consequence of a covered entity’s inability to comply with the customer due diligence obligations under Article 8(1)(a) to (c) as implemented by the Member States. That consequence is justified by the resulting risk that customers, transactions and relationships are (or may be) used for money laundering or terrorist financing purposes.
104.
Article 9(5) does not depend, for its application, on why a covered entity cannot comply with the required customer due diligence measures under Article 8(1)(a) to (c). Thus, the fact that a covered entity’s customers do not cooperate by providing information enabling it to comply with national law implementing Article 8 is neither necessary nor always sufficient to trigger the consequences set out in Article 9(5).
105.
It is true that Article 37 of the Money Laundering Directive requires competent authorities to monitor effectively and to take the necessary measures to ensure that covered entities, including credit institutions and payment institutions applying customer due diligence measures to any of their customers, comply with that directive. As Advocate General Bot has put it, the effectiveness of customer due diligence and disclosure measures is assured by conferring powers of supervision and penalties on the competent national authorities. ( ) I agree with him that the customer due diligence, reporting, supervision and monitoring measures together constitute preventive and dissuasive measures to combat money laundering and financing of terrorism effectively, and to safeguard the soundness and integrity of the financial system.
106.
However, that does not imply that covered entities, when acting on the basis of national laws implementing Articles 8 and 9 of the Money Laundering Directive, assume the supervisory role that is reserved to the competent authorities.
107.
Nor does it mean that covered entities may undermine the supervision tasks which competent authorities under Article 21 of the Payment Services Directive are to exercise over payment institutions to verify compliance with the provisions of Title II (‘Payment service providers’) in that directive. ( ) Whilst those authorities might, in appropriate circumstances, withdraw the registration of agents, the branch or the payment institution itself pursuant to that directive, ( ) such powers coexist with the preventive measures to be applied by covered entities and the supervisory powers of competent authorities under the Money Laundering Directive.
Is a specific justification needed in order to exercise the right to apply (enhanced) customer due diligence measures, or is it sufficient that the customer carries out a risky activity (Question 2(b))? If specific justification is needed, what criteria apply (Question 2(c)(i) to (iii))?
108.
If Member States may authorise or require credit institutions to apply customer due diligence measures to a payment institution, the referring court asks, by Questions 2(b) and 2(c)(i) to (iii), in essence whether such measures can be based merely on the general type of activity pursued by that payment institution or whether individual acts of that institution must be analysed.
109.
I recall that the questions arise in the context of a dispute involving covered entities which claim to have based their customer due diligence measures on national law applicable to situations that the legislator has deemed to present high risk (such as the provision of services to send money) and that are not listed in Article 13. Moreover, I have already addressed what is required in case of suspicion of money laundering within the meaning of Article 7(c). ( )
110.
I therefore understand Questions 2(b) and 2(c)(i) to (iii) to relate to circumstances in which a Member State is acting within the freedom left to it by the Money Laundering Directive.
111.
When a Member State acts within that freedom, it must nevertheless exercise that competence in accordance with EU law, in particular the basic freedoms guaranteed by the Treaties. ( ) The Court has accepted that the objective of combating the use of the financial system for money laundering or terrorist financing, which underlies the Money Laundering Directive, is to be balanced against the protection of other interests, including the freedom to provide services. Thus, in Jyske Bank Gibraltar, the Court in essence found that restrictions on the freedom to provide services resulting from an information requirement ‘in so far as such legislation seeks to strengthen, in compliance with [EU] law, the effectiveness of the fight against money laundering and terrorist financing’ were permissible. ( ) Where (as here) EU law has not been completely harmonised, national legislation which restricts basic freedoms may be justified because it meets an overriding requirement relating to the public interest, if that interest is not already safeguarded by the rules to which the service provider is subject in the Member State in which he is established, in so far as it is appropriate to secure the attainment of the aim which it pursues and does not go beyond what is necessary in order to attain it. ( )
112.
The Court has already accepted that preventing and combating money laundering and terrorist financing are legitimate objectives which concern the protection of public order and can justify a barrier to the freedom to provide services. ( )
113.
Is national law such as that at issue appropriate to secure the attainment of that objective because it helps to reduce the risk and, more generally, genuinely reflects a concern to attain the objective in a consistent and systematic manner? ( ) A national law that identifies, following an appropriate risk assessment (including in relation to customers which are payment institutions), a high risk with respect to a type of (for example) customer, country, product or transaction and that on that basis authorises or even requires covered entities to apply, following their own individualised risk assessment, appropriate customer due diligence measures seems to me to satisfy that requirement.
114.
Assessing whether the national law is proportionate involves determining the level of protection desired by the Member State with respect to the identified level of risk of money laundering and terrorist financing. I read the Money Laundering Directive as confirming that Member States may set, for example, a level of protection that is higher than that chosen by the EU legislator, identify other situations of (high) risk and authorise or require customer due diligence measures other than those foreseen by that directive.
115.
Where they do so, Member States may, for example, identify the specific measures to be applied in certain specified situations or give covered entities discretion to apply, based on an appropriate risk assessment, the measures deemed to be commensurate with the risk at issue in a specified situation. In either event, Member States must guarantee that the enhanced customer due diligence measures applied are based on assessing the existence and level of a risk of money laundering or terrorist financing with respect to a customer, business relationship, account, product or transaction, as the case may be. Without such assessment, it is not possible for either the Member State or, where relevant, a covered entity to decide in an individual case what measures to apply. And, where there is no risk of money laundering or terrorist financing, preventive action cannot be taken on those (legitimate) grounds.
116.
That risk assessment must take into account, at least, all relevant facts capable of showing the (level of) risk of one of the types of conduct that are to be considered as money laundering or terrorist financing. Such risks (and their level) can depend on, inter alia, customers, countries or geographic areas, products, services, transactions or delivery channels. Thus, it may be necessary to ascertain, based on any information already available, (for example) who is involved in a transfer of property, the origin of that property, the rights transferred, whether there was knowledge of criminal activity, the degree of involvement of particular persons and entities in the acquisition, possession, use or transfer of property, the purpose of any transaction or relationship, the geographic scope of any operation involving the property, the value of the property or a transaction involving that property, or the regularity or duration of the business relationship.
117.
Such an assessment makes it possible in general and in individual cases to decide how to manage the risk by adopting appropriate measures. In choosing such measures, it is necessary (for both Member States and, where relevant, covered entities) to assess how far the perceived risk is already managed and the desired level of protection already secured by other measures, including those based on the Money Laundering Directive, the Payment Services Directive and other EU (or national) legislation. It is probably unlikely that a single customer due diligence or other measure can eliminate any risk of money laundering or terrorist financing. Rather, EU legislation suggests that Member States must adopt many different types of response to such risks.
118.
Moreover, whether a national law is proportionate will also depend on the degree to which the customer due diligence measures for which it provides may intrude upon other protected rights and interests under EU law, such as the protection of personal data (Article 8 of the Charter) and the principle of free competition between entities operating in the same market. Their objectives must be balanced against such other legitimate interests.
119.
Finally, whether a national law is proportionate will depend on whether there are alternative, less restrictive means to achieve the same level of protection. Thus, for example, rather than a blanket law that assumes that sending funds abroad will always be high risk, ( ) a law that differentiates between transferee countries (based on the risk which sending money there presents) or requires covered entities so to differentiate may be less restrictive and yet still achieve the Member State’s desired level of protection.
Customer due diligence measures and the protection of personal data (Question 3(a) and (b))
120.
By Question 3(b), the referring court in essence asks whether the Personal Data Directive precludes Member States from requiring payment institutions to provide data regarding the identity of their customers to credit institutions, which are in direct competition with them, in the context of enhanced customer due diligence measures applied by the latter. Question 3(a) is similar, though it refers neither to any specific provision of EU law nor to the competitive relationship between the payment institution and the credit institutions (but, conversely, does refer to data pertaining to recipients of funds transmitted through Safe’s accounts).
121.
Some doubts have arisen as to whether Question 3 is admissible, because BBVA insists that it has never asked for personal data regarding Safe’s customers or recipients of the transmitted funds; it sought only information regarding the agents who acted on behalf of Safe and used Safe’s accounts.
122.
If BBVA’s presentation of the facts is correct and corresponds also with what happened in the dispute between the two other banks and Safe, Question 3 would indeed appear not to be relevant to the resolution of the dispute in the main proceedings. However, it is well established that it is not for the Court to ascertain and assess the facts which have given rise to the dispute. That task is the prerogative of national courts ( ) and their jurisdiction in that regard is a matter of national law. I shall therefore answer Question 3 in so far as possible.
123.
Covered entities, such as credit institutions and payment institutions, may need to collect and verify data pertaining to at least their own customers either in accordance with the Money Laundering Directive or, if subject to stricter provisions as permitted by Article 5 of that directive, under other rules of national law that are consistent with EU law. Where this involves treatment of personal data falling within the scope of the Personal Data Directive (the Money Laundering Directive is not very specific in this regard), the requirements under both directives apply in principle. Recital 33 in the preamble to the Money Laundering Directive confirms this with respect to the disclosure of information under Article 28. So does recital 48, which refers to respecting fundamental rights, thus including the protection of personal data under Article 8 of the Charter.
124.
I see no basis for reading ‘the customer’ in either Article 8(1)(a) ( ) or Article 13 so as to refer also to the customer(s) of the customer of the covered entity. These provisions essentially concern the relationship between a covered entity and its customer(s) and transactions undertaken in the context of that relationship. It is of course true that Article 13(4)(c) lists measures to establish the source of wealth and funds involved in a business relationship or transaction with politically exposed persons residing in another Member State or a third country. However, nothing in the request for a preliminary ruling suggests that that is the situation here.
125.
That said, I think that the Money Laundering Directive does not necessarily preclude national laws which require or authorise a covered entity, where justified, to obtain information about the customers of its customer. Information about those customers might be relevant to assessing whether the customer of the covered entity, its transactions and business relationships present risks of money laundering or terrorist financing.
126.
I do not therefore accept that a covered entity under the Money Laundering Directive may never be authorised or required under national law to seek information about the customers of its own customers in order to prevent money laundering or terrorist financing. Nor does the Personal Data Directive, in particular Article 7, appear to preclude processing of personal data in such circumstances.
127.
However, such national laws must also be consistent with that Member State’s other obligations under EU law, including the requirements of the Personal Data Directive and Articles 8 and 52(1) of the Charter.
Conclusion
128.
In the light of all the above considerations, I suggest that the Court should answer the Audiencia Provincial de Barcelona (Spain) to the effect that:
—
Notwithstanding the derogation in Article 11(1), Articles 7 and 13 of Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing require Member States to ensure that covered entities apply, in situations involving customers who are themselves covered entities under that directive, (i) standard customer due diligence measures under Articles 8 and 9(1) where there is suspicion of money laundering or terrorist financing within the meaning of Article 7(c); and (ii) enhanced customer due diligence measures under Article 13 in situations foreseen under that provision.
—
‘A suspicion of money laundering or terrorist financing’ within the meaning of Article 7(c) of Directive 2005/60 arises in particular where, taking into account the individual circumstances of a customer and his transactions (including with respect to the use and management of his account(s)), there are some verifiable grounds showing a risk that money laundering or terrorist financing exists or will occur in relation to that customer. Article 11(1) does not derogate from Article 7(c). Regardless of any derogation, exemption or threshold and thus regardless of whether the customer is or is not a covered entity, Article 7(c) provides that customer due diligence measures are always required where there is suspicion of money laundering or terrorist financing. Where such a suspicion arises, a Member State is therefore precluded from allowing or requiring simplified customer due diligence measures to be applied.
—
The fact that the customer is itself an entity covered by Directive 2005/60 does not mean that a Member State must not require enhanced customer due diligence measures within the meaning of Article 13 of that directive to be applied with respect to that customer if, despite the guarantees already provided by Directive 2005/60 and other EU legislation, there exists a higher risk of money laundering and terrorist financing as foreseen by that provision. Article 11 only derogates from standard customer due diligence measures in situations of lower risk. Since it does not refer to Article 13, it has no bearing on the customer due diligence that is required where there is a higher risk.
—
Even where Member States have properly transposed Articles 7, 11 and 13 of Directive 2005/60 into national law, Article 5 permits them to adopt or retain in force stricter provisions that seek to strengthen the fight against money laundering or terrorist financing, and confirms that Directive 2005/60 merely provides for a minimum level of harmonisation. The remit of Article 5 of Directive 2005/60 is not limited to the provisions in Chapter II (‘Customer due diligence’) of that directive. A Member State may therefore provide for customer due diligence measures to be applied by a credit institution in relation to a payment institution even where the conditions of Article 11(1) are satisfied and in situations other than those listed in Articles 7 and 13, where this is justified and otherwise consistent with EU law.
—
When Member States act within the freedom left them by Article 5 of Directive 2005/60, they must nevertheless exercise that competence in accordance with EU law, in particular the basic freedoms guaranteed by the Treaties. Where (as here) EU law has not been completely harmonised, national legislation which restricts basic freedoms may be justified because it meets an overriding requirement relating to the public interest, in so far as it is appropriate to secure the attainment of the aim which it pursues and does not go beyond what is necessary in order to attain it.
—
Assessing whether the national law is proportionate involves determining the level of protection desired by the Member State with respect to the identified level of risk of money laundering and terrorist financing. Member States may set a level of protection that is higher than that chosen by the EU legislator, identify other situations of (high) risk and authorise or require other customer due diligence measures. Member States must guarantee that the enhanced customer due diligence measures applied are based on assessing the existence and level of a risk of money laundering or terrorist financing with respect to a customer, business relationship, account, product or transaction, as the case may be. In choosing what measures to apply, it is necessary (for both Member States and, where relevant, covered entities) to assess how far the perceived risk is already managed and the desired level of protection already secured by other measures, including those based on Directive 2005/60, Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market and other EU (or national) legislation. Whether a national law is proportionate will also depend on the degree to which the customer due diligence measures for which it provides may intrude upon other protected rights and interests under EU law, such as the protection of personal data (Article 8 of the Charter of Fundamental Rights of the European Union) and the principle of free competition between entities operating in the same market. Finally, whether a national law is proportionate will depend on whether there are alternative, less restrictive means to achieve the same level of protection.
—
Covered entities under Directive 2005/60 may not undermine the supervision tasks which competent authorities under Article 21 of Directive 2007/64 are to exercise over payment institutions to verify compliance with the provisions of Title II (‘Payment service providers’) of the latter directive. Whilst those authorities might, in appropriate circumstances, withdraw the registration of agents, the branch or the payment institution itself pursuant to that directive, such powers coexist with the preventive measures to be applied by covered entities and the supervisory powers of competent authorities under Directive 2005/60.
—
Directive 2005/60 does not necessarily preclude national laws which require or authorise a covered entity, where justified, to obtain information about the customers of its customer. However, such national law must also be consistent with that Member State’s other obligations under EU law, including the requirements of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data and Articles 8 and 52(1) of the Charter of Fundamental Rights of the European Union.
( ) Original language: English.
( ) For the definitions of ‘credit institution’ and ‘payment institution’ under the relevant EU law, see points 16, 17 and 44 below.
( ) Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ 2005 L 309, p. 15), as last amended by Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 (OJ 2010 L 331, p. 120).
( ) Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ 1995 L 281, p. 31), as amended in certain respects by Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003 (OJ 2003 L 284, p. 1).
( ) Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (OJ 2005 L 149, p. 22).
( ) Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (OJ 2007 L 319, p. 1), as amended.
( ) See also point 72 below.
( ) A more recent version dates from February 2012: International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: The FATF Recommendations (‘the 2012 FATF Recommendations’). Both versions are available on the FATF’s website: http://www.fatf-gafi.org/.
( ) See point 29 below.
( ) Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (OJ 2000 L 126, p. 1), as amended.
( ) Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (OJ 2006 L 177, p. 1). This directive repealed Directive 2000/12.
( ) See point 44 below.
( ) The full definition of a ‘payment institution’ is found in Article 4(4) of the Payment Services Directive: see point 44 below.
( ) See also point 29 below.
( ) Implementing rules were adopted in Commission Directive 2006/70/EC of 1 August 2006 laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of ‘politically exposed person’ and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis (OJ 2006 L 214, p. 29). Whilst that directive lays down implementing measures as regards, inter alia, technical criteria for assessing whether situations represent a low risk of money laundering or terrorist financing as referred to in Article 11(2) and (5) of the Money Laundering Directive, it does not cover Article 11(1).
( ) See point 32 below.
( ) See Article 2(c) of the Unfair Commercial Practices Directive.
( ) Article 10 concerns simplified measures but with regard to products or transactions.
( ) Namely, credit institutions or financial institutions as listed in Article 2(1)(1) and (2) of the Money Laundering Directive.
( ) See 2003 FATF Recommendations, Introduction, footnote 1, and 2012 FATF Recommendations, Introduction, page 7. The Commission is listed as one of the FATF’s Members.
( ) See, for example, judgment in Jyske Bank Gibraltar, C‑212/11, EU:C:2013:270 (‘judgment in Jyske Bank Gibraltar’), paragraphs 46 and 63.
( ) See point 7 above.
( ) See judgment in Jyske Bank Gibraltar, paragraph 38 and case-law cited.
( ) Article 2(a) of the Unfair Commercial Practices Directive.
( ) Judgment in Zentrale zur Bekämpfung unlauteren Wettbewerbs, C‑59/12, EU:C:2013:634, paragraph 33.
( ) See, for example, Articles 8(2) and 34(1) of and recitals 22 and 24 in the preamble to the Money Laundering Directive.
( ) There may be other circumstances in which such a risk is found to exist.
( ) Such as Articles 22(1)(a), 24 and 27.
( ) I note that, whilst the Money Laundering Directive does not appear to define the term ‘product’, the context in which this term is used suggests that it is intended to cover various financial and commercial offerings.
( ) See also interpretative note 9 to recommendation 5 of the 2003 FATF Recommendations.
( ) See also interpretative note 10 to recommendation 5 of the 2003 FATF Recommendations.
( ) See recitals 22 and 24 in the preamble to the Money Laundering Directive. See also recommendation 1 of the 2012 FATF Recommendations.
( ) See, for example, Articles 17 and 21 of the Payment Services Directive.
( ) For example, other EU legislation relating to the combating of money laundering and terrorist financing includes: Regulation (EC) No 1781/2006 of 15 November 2006 on information on the payer accompanying transfers of funds (OJ 2006 L 345, p. 1); Regulation (EC) No 1889/2005 of 26 October 2005 on controls of cash entering or leaving the Community (OJ 2005 L 309, p. 9); Regulation (EC) No 2580/2001 of 27 December 2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism (OJ 2001 L 344, p. 70).
( ) The FATF has also taken the position that the risk-based approach is not a ‘zero failure’ approach and there might be occasions where an institution has taken all reasonable measures to identify and mitigate the risk but is still being used for money laundering and terrorist financing. See FATF, Guidance for a Risk-Based Approach – The Banking Sector (October 2014), point 10.
( ) This implication was the basis for the European Parliament’s proposal to exclude (what is now) Article 7(c) from the derogation: see Report on the proposal for a directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering, including terrorist financing (COM(2004)0448 – C6-0143/2004 – 2004/0137(COD)), p. 43.
( ) This is also consistent with the 2003 FATF Recommendations. Interpretative note 13 to recommendation 5 states that ‘[s]implified [customer due diligence] measures are not acceptable whenever there is suspicion of money laundering or terrorist financing or specific higher risk scenarios apply’. See also interpretative note 2 to recommendation 1 of the 2012 FATF Recommendations.
( ) It is true that Member States must provide for similar obligations in situations other than those listed in paragraphs 2 to 4, which represent a high risk of money laundering or terrorist financing and which meet the technical criteria established in implementing measures taken by the Commission based on Article 40(1)(c). As far as I can see, such implementing measures have not yet been adopted.
( ) See point 54 above.
( ) Judgment in Jyske Bank Gibraltar, paragraph 61.
( ) See judgment in Jyske Bank Gibraltar, paragraph 61.
( ) See points 108 to 119 below.
( ) See Article 21 of the Payment Services Directive.
( ) See also recital 10 in the preamble to the Money Laundering Directive.
( ) Opinion of Advocate General Bot in Jyske Bank Gibraltar, C‑212/11, EU:C:2012:607, point 61.
( ) That title includes Article 17(1) of the Payment Services Directive.
( ) See Article 17(6) of the Payment Services Directive.
( ) See points 81 and 82 above.
( ) See, for example, judgment in Commission v Portugal, C‑438/08, EU:C:2009:651, paragraph 27 and case-law cited.
( ) Judgment in Jyske Bank Gibraltar, paragraph 49, read together with paragraphs 59 and 60.
( ) Judgment in Jyske Bank Gibraltar, paragraphs 57 to 60 (and, in particular, case-law cited at paragraph 60).
( ) Judgment in Jyske Bank Gibraltar, paragraphs 62 to 64 and 85 and case-law cited.
( ) Judgment in Jyske Bank Gibraltar, paragraph 66 and case-law cited.
( ) Interpretative note 15, read together with interpretative note 14, to the 2012 FATF Recommendations contains examples that offer guidance on what are helpful indicators of a high risk. However, the text of note 14 expressly states that these examples may not be relevant in all circumstances. Under item (c) are listed: private banking, anonymous transactions, non-face-to-face business relations or transactions, payment received from unknown or un-associated third parties.
( ) See, for example, the judgments in Accor, C‑310/09, EU:C:2011:581, paragraph 37 and case-law cited, and ProRail, C‑332/11, EU:C:2013:87, paragraph 30 and case-law cited.
( ) That being so, I do accept that that provision must be interpreted as covering also all those whose conduct, when acting in the capacity of agent, engages the responsibility of the entity for which they act. Article 9(4), which refers to transactions being carried out by ‘the customer or on its behalf’, confirms this reading of Article 8(1)(a). That interpretation is also in conformity with recommendation 5 of the 2003 FATF Recommendations and its interpretative note 4 according to which, where the customer is a legal person, the customer due diligence measure of identifying it and verifying its identity includes the obligation to ‘[v]erify that any person purporting to act on behalf of the customer is so authorised, and identify that person’. See also interpretative note 4 to recommendation 10 of the 2012 FATF Recommendations. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 28 October 2015 ( )
Case C‑263/14
European Parliament
v
Council of the European Union
‛Action for annulment — Council Decision 2014/198/CFSP — Operation Atalanta — Agreement between the European Union and the United Republic of Tanzania — Transfer of suspected pirates and seized property from the European Union-led naval force to Tanzania — Choice of correct legal basis — Common foreign and security policy (CFSP, Article 37 TEU) — Judicial cooperation in criminal matters and police cooperation (Articles 82 TFEU and 87 TFEU) — Rights of the European Parliament to have a say where ‘international agreements relate exclusively to the CFSP’ (Article 218(6) TFEU) — Provision of immediate and full information to the Parliament (Article 218(10) TFEU) — Maintenance of the effects of the decision’
I – Introduction
1.
Is the transfer of a pirate by the European Union to the State authorities of the United Republic of Tanzania primarily an act of foreign and security policy? Or does such a measure also include significant elements of international cooperation between police and law enforcement authorities? These are essentially the legal questions which the Court is asked to clarify in the present case. In doing so, it will be able to build on the foundations which it laid in Case C‑658/11. ( )
2.
Like Case C‑658/11, this case also concerns the military operation through which the European Union has for some time now been participating in the fight against piracy off the Somali coast in the form of an EU-led naval force. In many cases the persons arrested and property seized by the EU Member States’ warships are transferred to third States in that region with a view to a prosecution. In order to establish the detailed arrangements for such transfers, the Union has concluded international agreements with those third States — in Case C‑685/11 with Mauritius and in this case with Tanzania.
3.
In the present case the European Parliament is again at odds with the Council of the European Union over the choice of the substantive legal basis for the conclusion of such agreements. Whilst the Council based its Decision 2014/198/CFSP ( ) approving the agreement with Tanzania ( )solely on the rules on the common foreign and security policy (CFSP), namely on Article 37 TEU, the Parliament takes the view that recourse should have been had additionally to the provisions on judicial cooperation in criminal matters and police cooperation, more specifically, Articles 82 TFEU and 87 TFEU.
4.
At first sight this might all seem a question of technical detail which certainly does not hold the same excitement as many literary treatments of the subject of piracy. ( ) Nevertheless, the problem at issue here has considerable political and even constitutional implications because it is necessary to define more sharply the limits of the common foreign and security policy and to delimit it from other European Union policies. ( ) The choice of the substantive legal basis predetermines, to a significant degree, the powers of the European Parliament. If it transpires that the disputed agreement is to be attributed exclusively to the CFSP, as it was here, and could therefore be concluded solely on the basis of Article 37 TEU, the Parliament had no rights at all to have a say under the first part of the second subparagraph of Article 218(6) TFEU, not even a right of consultation. If, however, recourse should rightly have been had to a combination of Article 37 TEU and Articles 82(1) and (2) and 87(2) TFEU as the legal bases, the disputed agreement would have required the consent of the Parliament under point (a)(v) of the second subparagraph of Article 218(6) TFEU. The scope of the European Commission’s powers in the procedure for the conclusion of such an international agreement is also dependent to a considerable extent on the choice of legal basis.
5.
The debate over the choice of the correct legal basis forms the main subject-matter of this action for annulment which the Parliament has brought against the Council. However, the parties are also in dispute over the extent of the Council’s duty under Article 218(10) TFEU to inform the Parliament fully and immediately at all stages of the procedure for the conclusion of an international agreement.
II – Legislative framework
6.
The legislative framework of this case is formed by Articles 216 and 218 TFEU, both contained in Title V of the FEU Treaty, which is dedicated to ‘International agreements’.
7.
Article 216(1) TFEU summarises the substantive legal bases on which the Union has been able to conclude international agreements since the Treaty of Lisbon:
‘The Union may conclude an agreement with one or more third countries or international organisations where the Treaties so provide or where the conclusion of an agreement is necessary in order to achieve, within the framework of the Union’s policies, one of the objectives referred to in the Treaties, or is provided for in a legally binding Union act or is likely to affect common rules or alter their scope.’
8.
Article 218 TFEU governs the procedure for negotiating and concluding international agreements and includes the following provisions:
‘…
4. The Council may address directives to the negotiator and designate a special committee in consultation with which the negotiations must be conducted.
5. The Council, on a proposal by the negotiator, shall adopt a decision authorising the signing of the agreement and, if necessary, its provisional application before entry into force.
6. The Council, on a proposal by the negotiator, shall adopt a decision concluding the agreement.
Except where agreements relate exclusively to the common foreign and security policy, the Council shall adopt the decision concluding the agreement:
(a)
after obtaining the consent of the European Parliament in the following cases:
…
(v)
agreements covering fields to which either the ordinary legislative procedure applies, or the special legislative procedure where consent by the European Parliament is required.
The European Parliament and the Council may, in an urgent situation, agree upon a time-limit for consent.
(b)
after consulting the European Parliament in other cases. ...
…
10. The European Parliament shall be immediately and fully informed at all stages of the procedure.
…’
9.
From the point of view of substantive law, Article 37 TEU, which appears in Chapter 2 of Title V of the EU Treaty (‘Common foreign and security policy’) and is contained in Section 1 (‘Common provisions’), is also relevant. That provision states:
‘The Union may conclude agreements with one or more States or international organisations in areas covered by this Chapter.’
10.
Reference should also be made to Articles 82 TFEU and 87 TFEU, which are part of Title V of the FEU Treaty on the ‘Area of freedom, security and justice’.
11.
Article 82 TFEU concerns judicial cooperation in criminal matters. Under the second subparagraph of Article 82(1), the European Parliament and the Council may adopt ‘measures’ in the ordinary legislative procedure, inter alia, to
—
‘support the training of the judiciary and judicial staff’ (point (c)) and to
—
‘facilitate cooperation between judicial or equivalent authorities of the Member States in relation to proceedings in criminal matters and the enforcement of decisions’ (point (d)).
12.
Furthermore, the second subparagraph of Article 82(2) TFEU permits the European Parliament and the Council in the ordinary legislative procedure to adopt directives to establish certain minimum rules for criminal procedure concerning inter alia
—
mutual admissibility of evidence between Member States (point (a)) and
—
the rights of individuals in criminal procedure (point (b)).
13.
Article 87 TFEU concerns police cooperation. Under Article 87(2)(a), the European Parliament and the Council may, for the purposes of developing such cooperation, establish measures in the ordinary legislative procedure concerning the collection, storage, processing, analysis and exchange of relevant information.
III – Background to the dispute
14.
In view of the rising incidence of piracy off the Somali coast, at the end of 2008 the Council adopted, within the framework of the EU common foreign and security policy, a Joint Action ( ) establishing a joint military operation called Operation Atalanta. The operation consisted in the deployment of an EU-led naval force (EU NAVFOR) for the protection of vulnerable vessels cruising off the Somali coast and the deterrence, prevention and repression of acts of piracy and armed robbery off the Somali coast.
15.
It is apparent from Article 1(1) of the Joint Action, that, through that military operation, which was decided on the basis of Articles 14, 25(3) and 28(3) EU, ( ) the Union is supporting the objectives set by the United Nations Security Council in its Resolutions 1814, 1816, 1838, 1846 and 1851 (2008) and also refers to Article 100 et seq. of the United Nations Convention on the Law of the Sea. ( )
16.
The mandate of EU NAVFOR under Article 2(e) of the Joint Action includes ‘in view of prosecutions potentially being brought by the relevant States … [to] arrest, detain and transfer persons suspected of intending, as referred to in Articles 101 and 103 of the United Nations Convention on the Law of the Sea, to commit, committing or having committed acts of piracy or armed robbery’ and to ‘seize the vessels of the pirates or armed robbers or the vessels caught following an act of piracy or an armed robbery and which are in the hands of the pirates or armed robbers, as well as the property on board’.
17.
According to the first sentence of Article 10(3) of the Joint Action, the ‘detailed modalities for the participation by third States’ in the activity of EU NAVFOR are ‘the subject of agreements concluded in accordance with … Article 37 [TEU]’. In addition, Article 10(6) of the Joint Action states:
‘The conditions for the transfer to a State participating in the operation of persons arrested and detained, with a view to the exercise of jurisdiction of that State, shall be established when the participation agreements referred to in paragraph 3 are concluded or implemented.’
18.
Article 12 of the Joint Action then sets out general conditions under which EU NAVFOR transfers the arrested persons to European Union Member States or to third States if the Member State or the third State of which the EU NAVFOR vessel concerned flies the flag cannot, or does not wish to, exercise its jurisdiction. The aim is prosecution with due regard to certain minimum standards. Under Article 12(3) of the Joint Action, the transfer of persons to a third State requires that ‘the conditions for the transfer have been agreed with that third State in a manner consistent with relevant international law, notably international law on human rights, in order to guarantee in particular that no one shall be subjected to the death penalty, to torture or to any cruel, inhuman or degrading treatment’.
19.
Against this background, following authorisation by the Council on 22 March 2010, the High Representative of the Union for Foreign Affairs and Security Policy negotiated the agreement with Tanzania on the conditions of transfer of suspected pirates and associated seized property from the European Union-led naval force to Tanzania, which is the subject of the present dispute. ( )
20.
By the contested decision, which has Article 37 TEU as its sole substantive legal basis and Article 218(5) and (6) TFEU as its formal legal basis, ( ) the Council approved the agreement on behalf of the Union without the consent or consultation of the Parliament and authorised its signature. The agreement was then signed on 1 April 2014.
21.
The Parliament takes the view that, in respect of the contested decision, recourse should also have been had, alongside Article 37 TEU, to Articles 82 TFEU and 87 TFEU as additional substantive legal bases and the decision therefore required its consent in accordance with point (a)(v) of the second subparagraph of Article 218(6) TFEU.
22.
As regards provision of information to the Parliament, the Council notified that institution by letter of 22 March 2010 of its decision to authorise negotiations with a view to an agreement under Article 37 TEU. The Council did not provide the Parliament with any information on the further progress of the negotiations. It was not until the procedure had been concluded that the Council informed the Parliament, by letter of 19 March 2014, that it had approved the disputed agreement and authorised its signature, although it did not apprise the Parliament of the wording of the contested decision or the text of the disputed agreement. The Parliament was able to ascertain their content only following the publication of the decision and the agreement in the Official Journal of the European Union on 11 April 2014.
23.
In the Parliament’s view, the Council did not therefore properly fulfil its duty under Article 218(10) TFEU to inform the representative body of the people immediately and fully.
IV – Procedure before the Court and forms of order sought
24.
By written pleading of 28 May 2014, the Parliament brought the present action for annulment under the second paragraph of Article 263 TFEU.
25.
Pursuant to Article 131(2) of the Rules of Procedure, the President of the Court of Justice granted the European Commission leave to intervene in support of the form of order sought by the Parliament and granted the Czech Republic, the Kingdom of Sweden and the United Kingdom of Great Britain and Northern Ireland leave to intervene in support of the form of order sought by the Council.
26.
The Parliament, supported by the Commission, claims that the Court should:
—
annul Council Decision 2014/198/CFSP of 10 March 2014;
—
order that the effects of that decision be maintained until it is replaced, and
—
order the Council to pay the costs.
27.
The Council, likewise supported by its interveners, contends that the Court should dismiss the application as unfounded. Furthermore, the Council and the Czech Republic claim that the Parliament should be ordered to pay the costs.
28.
Should the contested decision be annulled, the Council further requests the Court to maintain effects of that decision
—
either until such time as it is replaced, if the annulment is based on a finding that the choice of legal basis is incorrect in accordance with the first plea in law,
—
or indefinitely, if the annulment is based solely on a finding that the Parliament was not informed adequately in accordance with the second plea in law.
29.
The Czech Republic and the United Kingdom of Great Britain and Northern Ireland also expressly ask that in the event of the annulment of the contested decision, ( ) its effects should be maintained; in that connection the Czech Republic simply requests that the Court use its power under the second paragraph of Article 264 TFEU, whilst the United Kingdom requests it to take the same course of action as in its judgment in Case C‑658/11.
30.
The Court received written submissions on the Parliament’s action, ( ) followed by oral argument on 22 September 2015.
V – The relevant provisions of the disputed agreement
31.
According to Article 1, the disputed agreement defines the conditions and modalities for the transfer of suspected pirates detained by EU NAVFOR, and associated property seized by EU NAVFOR, to Tanzania, and the conditions for their treatment after such transfer.
32.
The second sentence of Article 3(1) of the agreement provides that agreement on acceptance of a handover proposed by EU NAVFOR will be made on a case-by-case basis by Tanzania, taking into account all relevant circumstances including the location of the incident.
33.
Under Article 3(3) and Article 4(1) of the agreement, the parties must treat the persons concerned, both prior to and following transfer, humanely and in accordance with international human rights obligations, including the prohibition of torture and cruel, inhuman and degrading treatment or punishment, the prohibition of unlawful detention, and in accordance with the requirement to have a fair trial. The second part of Article 4(1) of the agreement further states that transferred persons must receive reasonable accommodation and nourishment and access to medical treatment and must be able to carry out religious observance.
34.
Further rights of transferred persons are laid down in Article 4(2) to (7) of the agreement, in particular the right to an impartial tribunal and to trial within a reasonable time or to release.
35.
Under Article 5 of the agreement, no transferred person may be tried for an offence which has a maximum punishment that is more severe than imprisonment for life.
36.
Article 6 of the agreement regulates EU NAVFOR’s duties to keep records in connection with the persons and property concerned and the way in which records are to be provided to the Tanzanian authorities.
37.
Article 7 of the agreement deals with the Union and EU NAVFOR obligation to facilitate investigation and prosecution by the Tanzanian judicial authorities.
38.
Lastly, regard should be had to the preamble to the agreement, which expressly mentions the Joint Action. Reference is also made to various instruments of international law, in particular the relevant United Nations Security Council resolutions and the United Nations Convention on the Law of the Sea.
VI – Legal assessment
39.
The Parliament’s action for annulment is based on two pleas in law, the first of which relates to the choice of the correct legal basis for the contested decision (see below, section B), whilst the second concerns the Council’s duty to inform the Parliament fully and immediately at all stages of the procedure for the conclusion of an international agreement (see below, section C).
40.
Before I turn to the substantive assessment of these two pleas in law, I will briefly consider the Court’s jurisdiction to hear the present case (see immediately below, section A).
A – The Court’s jurisdiction
41.
In principle, the jurisdiction of the Court of Justice of the European Union has, since the Treaty of Lisbon, extended to all areas of EU law, the EU Courts being authorised to interpret all rules of EU law and to review the legality of all acts of the institutions, bodies, offices or agencies of the Union (first subparagraph of Article 19(1) TEU, first paragraph of Article 263 TFEU and first paragraph of Article 267 TFEU).
42.
In derogation from that principle, the Court of Justice of the European Union does not have jurisdiction either with respect to the provisions of primary law relating to the CFSP or with respect to acts adopted on the basis of those provisions (see the sixth sentence of the second subparagraph of Article 24(1) TEU in conjunction with the first paragraph of Article 275 TFEU). However, the second paragraph of Article 275 TFEU makes an exception in so far as it establishes the jurisdiction of the EU Courts inter alia to monitor compliance with Article 40 TEU.
43.
It is precisely the latter ‘exception to the exception’ that is the subject of the Parliament’s first plea in law, which focuses on the choice of the correct legal basis. Even though, regrettably, the Parliament does not at any point refer expressly to Article 40 TEU, it clearly has in mind, from a substantive point of view, the problem addressed therein of the demarcation between the CFSP on the one hand and the ‘communitarised’ policies on the other. If, as the Parliament claims, the Council wrongly based the contested decision solely on the CFSP, rather than additionally relying on the rules on judicial cooperation in criminal matters and police cooperation, it would have encroached on the powers of the other institutions in the area of freedom, security and justice, which is prohibited under the first paragraph of Article 40 TEU and may be reviewed by the Court under the second paragraph of Article 275 TFEU.
44.
The second plea in law raised by the Parliament is based on the general duty to provide information under Article 218(10) TFEU, a rule which — as the Court has already held in Case C‑658/11 ( ) — is not as such among the provisions of primary law relating to the CFSP in Chapter 2 of Title V of the EU Treaty, but applies across the board to all Union procedures for the conclusion of international agreements. Consequently, that rule is not affected by the limitation on the Court’s jurisdiction which applies to the CFSP under the sixth sentence of the second subparagraph of Article 24(1) TEU in conjunction with the first paragraph of Article 275 TFEU.
45.
The Czech Republic requests the Court, in the present case, to reconsider, and if necessary nuance, its conclusions with regard to Article 218(10) TFEU as set out in the judgment in Case C‑658/11.
46.
However, contrary to the view taken by the Czech Republic, it certainly cannot be inferred from the sixth sentence of the second subparagraph of Article 24(1) TEU in conjunction with the first paragraph of Article 275 TFEU that the Court has only limited jurisdiction to hear an action based on Article 218(10) TFEU, such that it would have to confine itself simply to declaring a breach of the duty to inform the Parliament without annulling the contested decision.
47.
The Court either has jurisdiction or it does not. Exceptions to its jurisdiction require an express provision and must be given a strict interpretation. Neither in the sixth sentence of the second subparagraph of Article 24(1) TEU nor in the first paragraph of Article 275 TFEU are there any gradations in respect of the EU Courts’ powers to deal with actions for annulment concerning Article 40 TEU or Article 218(10) TFEU. ( )
48.
Aside from this, it would be incompatible with the nature of the action for annulment to deliver a declaratory judgment, as the Czech Republic appears to have in mind. It would be contrary to Article 264 TFEU, which governs the legal consequences of a successful action and reflects the cassatory nature of the action for annulment. There are no grounds to waive Article 264 TFEU on the basis of either the sixth sentence of the second subparagraph of Article 24(1) TEU or the first paragraph of Article 275 TFEU.
49.
All in all, the Court therefore has full jurisdiction to determine the present action, including the possible annulment of the contested decision. ( )
B – The choice of the correct legal basis (first plea in law)
50.
By its first plea in law, which is the main focus of this case, the Parliament challenges the legal basis chosen by the Council for the contested decision.
51.
The Parliament submits that it was an error in law to base the decision solely on the CFSP, and on Article 37 TEU to be precise. In the Parliament’s view, recourse should also have been had to Articles 82 TFEU and 87 TFEU, two provisions in the fields of judicial cooperation in criminal matters and police cooperation, as additional legal bases. The Parliament thus ultimately advocates a dual substantive legal basis, combining powers from the CFSP with powers from the area of freedom, security and justice. If a combination of legal bases from these two policy areas is impossible, because the respective procedures are mutually incompatible, the Parliament considers only Articles 82 TFEU and 87 TFEU to be relevant, as it stated at the hearing. ( )
Preliminary remark
52.
It has already been made clear in case-law that a European Union measure — including a decision approving an international agreement ( ) — may have a dual substantive legal basis. This is necessary wherever it is established that the measure concerned simultaneously pursues a number of objectives, or has several components, which are inseparably linked without one being incidental to the other, so that various provisions of the Treaty are equally applicable. ( )
53.
Contrary to the view taken by the Council and its interveners, the Court has certainly not thus far rejected the possibility of such a dual legal basis in a case like the present one. In particular, the judgment in Case C‑658/11 does not set a precedent in this regard.
54.
That judgment does concern an international agreement — the agreement with Mauritius — whose content was essentially similar to the disputed agreement in this case. However, in that judgment the Court did not take a definitive view on the correct substantive legal basis, because on that occasion, unlike in the present case, the applicant, the Parliament, had not challenged the exclusive applicability of Article 37 TEU and even acknowledged that the approval of the EU/Mauritius agreement ‘could legitimately be founded solely on Article 37 TEU, to the exclusion of any other substantive legal basis’. ( ) Accordingly, in Case C‑658/11 the Court concentrated on the interpretation of the special procedural rule in the first part of the second subparagraph of Article 218(6) TFEU, based on the complaints raised by Parliament at the time.
55.
Even if it were to be assumed, like the Council and its interveners, that the Court has helped to determine the question of the correct substantive legal basis at least implicitly in Case C‑658/11, ( ) that would not permit a definitive assessment of the complaint raised by the Parliament in the present case. It is settled law that, in a review of the legal basis of the decision that is contested here, the legal basis used for the adoption of other European Union measures which might display similar characteristics is irrelevant. ( )
56.
Consequently, in the present case an autonomous examination must be conducted of the choice of the substantive legal basis for the contested decision, including the possibility of a dual legal basis for that decision.
57.
It is by no means impossible to rely on legal bases other than the CFSP for the Union’s external action as the Parliament and the Commission argue. For example, it is expressly recognised in Article 21(3) TEU that, in addition to the CFSP, the Union’s other policies can include ‘external aspects’. It is therefore perfectly conceivable, in principle, to have recourse, for the approval of an international agreement for the European Union, to competences in the area of freedom, security and justice or to have a dual substantive legal basis by exercising additional competences.
58.
That conclusion is not affected by the fact that the provisions of primary law concerning the area of freedom, security and justice — in particular the two relevant chapters of the FEU Treaty on judicial cooperation in criminal matters and police cooperation — do not include express enabling provisions for external action. ( ) As we know, the Union institutions may, under certain circumstances, also have implicit external competences. Such powers were originally derived from the existing competences for internal action in accordance with the ‘ERTA principle’. ( ) Such external competences are now even expressly enshrined in the Treaties by Article 216(1) TFEU. If recourse is now had to the ERTA principle, Article 216(1) TFEU must also therefore be expressly cited in the Union measure concerned. ( )
59.
The assessment whether additional legal bases from the fields of judicial cooperation in criminal matters (Article 82 TFEU) and police cooperation (Article 87 TFEU) were necessary in the case in point must, according to settled case-law, have regard to objective factors amenable to judicial review, which include in particular the aim and content of the contested decision, ( ) but also the context of that decision. ( )
Insufficient connection with the area of freedom, security and justice
60.
If regard is had only to the content of the disputed agreement, the Parliament and the Commission are right in stating that it contains a number of provisions that are typical of cross-border judicial cooperation in criminal matters and cross-border police cooperation. It deals with the transfer of persons and property for the purpose of prosecution ( ) and the rights of the persons concerned with a view to humane treatment in accordance with the rule of law. ( ) The agreement also governs the duties of the Union and EU NAVFOR in relation to records and notifications ( ) and the form in which they provide assistance to the competent Tanzanian authorities with a view to investigating and prosecuting transferred persons. ( )
61.
Against this background, the content of the disputed agreement undoubtedly has a certain affinity with the subject-matter regulated in the area of freedom, security and justice, in particular with regard to cooperation between authorities in relation to proceedings in criminal matters (point (d) of the second subparagraph of Article 82(1) TFEU), the collection, storage, processing, analysis and exchange of relevant information (Article 87(2)(a) TFEU), the mutual recognition of evidence (point (a) of the second subparagraph of Article 82(2) TFEU), the rights of individuals in criminal procedure (point (b) of the second subparagraph of Article 82(2) TFEU), and the training of personnel of the competent authorities (point (c) of the second subparagraph of Article 82(1) TFEU).
62.
It would be insufficient, however, to conclude solely from this similar content that recourse should have been had to Articles 82 TFEU and 87 TFEU as additional legal bases for the contested decision. The rules concerning the area of freedom, security and justice are not necessarily the sedes materiae in every case where measures having some connection with the subjects of judicial cooperation in criminal matters or police cooperation are to be adopted. ( )
63.
As the Council and the Kingdom of Sweden very rightly state, the crucial factor is that the relevant rules in Articles 82 TFEU and 87 TFEU deal only with cooperation within the Union. This can be seen, on the one hand, from a glance at the wording of the two provisions, ( ) but, on the other, it also follows from the concept of the area of freedom, security and justice, to the creation of which they contribute. It is the Union that provides its citizens with such an area and it is the Union that constitutes that area (Article 67(1) TFEU), with the emphasis on an area without internal frontiers (Article 3(2) TEU and 67(2) TFEU).
64.
By contrast, the contested decision — or the disputed agreement which it approves — does not regulate judicial or police cooperation within the Union. Nor does it affect or alter such cooperation in accordance with the last variant of Article 216(1) TFEU. Rather, contrary to the claim made by the Parliament and the Commission, the Member States’ power to prosecute international crimes like piracy is completely unaffected by the agreement. The sole subject of the agreement is cooperation with the authorities of Tanzania, a third State, and then only if the authorities of the Member States do not take on the prosecution themselves. ( )
65.
There may certainly be cases where cooperation with a third State is also capable of helping to achieve the objectives of the area of freedom, security and justice within the Union (see the second variant of Article 216(1) TFEU) and thus of giving that area a genuine ‘external dimension’. Examples are the inclusion of Norway, Iceland, Liechtenstein and Switzerland in the Schengen area or the Lugano Convention, which includes some of those States in certain aspects of judicial cooperation in civil matters. However, external action has no evident repercussions on the area within the Union in the case of cooperation like that with Tanzania, for which the contested decision and the disputed agreement lay the legal foundations.
66.
That cooperation between the Union and Tanzania is intended solely to promote international security outside the territory of the Union. It makes an important contribution to combating piracy on the high seas in an effective and sustainable manner and thus to improving the general security situation worldwide if suspected pirates are effectively brought to a just prosecution in accordance with the rule of law.
67.
On the other hand, a specific connection with security within the European Union or with the national security of its Member States is not evident. It would be only very indirect if it did exist, as the cooperation with Tanzania does not seek to combat and prosecute piracy off European coasts, but in the much more distant Horn of Africa, off the Somali coast.
68.
Nor can an internal Union dimension be inferred from the mere fact that suspected pirates who are to be transferred to the Tanzanian authorities by EU NAVFOR are temporarily on board EU Member States’ warships and are detained there. Although the persons concerned are thus temporarily subject to the sovereignty of the Member States and are therefore also able to benefit from guarantees laid down by EU law, in particular by the Charter of Fundamental Rights, ( ) this does not mean that they come within the territory of the Union and thus within the geographical scope of the area of freedom, security and justice.
69.
For the same reason, the present case is also not comparable with the situation of a readmission agreement in accordance with Article 79(3) TFEU. The latter case — unlike this instance — concerns the transfer to third States of persons who have resided illegally within the territory of the Union.
Foundation of the disputed agreement in the CFSP
70.
Ultimately, the cooperation with Tanzania has a genuine foreign and security policy context. It is a ‘mission outside the Union’‘strengthening international security in accordance with the principles of the United Nations Charter’, the conduct of which the Union has set as an objective within the framework of the CFSP or, to be precise, within the framework of its common security and defence policy (second sentence of Article 42(1) TEU and 43(1) TEU).
71.
According to its preamble and the preamble to the contested decision, the disputed agreement serves to implement several United Nations Security Council resolutions and clarifies the legal conditions for EU NAVFOR’s activity as part of Operation Atalanta, ( ) a joint military action falling within the scope ratione materiae of the CFSP.
72.
The fact that the disputed agreement stipulates humane treatment of detained persons and certain principles connected with the rule of law as basic conditions for the cooperation with Tanzania does not in any way militate against its attribution to the CFSP. The rule of law and protection of human rights are, in general, among the principles governing the Union’s external action which are to be observed and implemented not only, but also within the framework of the CFSP (first subparagraph of Article 21(1), Article 21(2)(b) and (3) TEU). ( )
73.
All in all, the Council was therefore right to rely on the CFSP, and more precisely Article 37 TEU, as the sole legal basis for the contested decision. ( ) Consequently, the first plea in law raised by the Parliament is unfounded.
C – The provision of information to the Parliament (second plea in law)
74.
By the second plea in law, it is claimed that the Parliament was not informed immediately and fully at all stages of the procedure for the conclusion of the disputed agreement, in contravention of Article 218(10) TFEU.
75.
As the Court has held, Article 218(10) TFEU is applicable to all international agreements of the European Union, including those, like the disputed agreement, which relate exclusively to the CFSP. ( ) However, the extent of the Council’s duties vis-à-vis the Parliament under that provision is still hotly disputed.
General remarks
76.
The wording used in Article 218(10) TFEU points to a very extensive duty for the Council to provide information. The Parliament must be informed ‘immediately’, ‘fully’ and ‘at all stages of the procedure’. This is a reflection of the fundamental democratic principle applying to any decision-making process at EU level ( ) (see Article 2 TEU), including in the field of foreign and security policy.
77.
Unlike Advocate General Bot ( ) and some of the parties in this case, I am decidedly not of the view that informing the Parliament under Article 218(10) TFEU is subject to more or less strict requirements depending on whether the Parliament must consent to an international agreement under Article 218(6) TFEU, is consulted on it or — as in the present case — has no formal rights to have a say with regard to the agreement.
78.
Democratic control is not limited to the exercise of formal rights to have a say, and the purpose of informing the Parliament is not only to prepare for the exercise of such rights. Rather, the transparency created by informing the Parliament immediately and fully at all stages of the procedure is in itself an element of democratic control which is not to be underestimated and therefore has inherent value.
79.
This transparency is a corollary of the fundamental principle that decisions in the European Union are taken as openly as possible and as closely as possible to the citizen (second paragraph of Article 1 TEU). It helps to encourage all those involved in the Union’s external action to act responsibly. It also ensures that the elected representatives of the citizens of the Union have an opportunity, in full knowledge of the facts, to have a public debate on foreign policy matters of general European interest and to scrutinise the entire procedure for the conclusion of an international agreement critically through spontaneous expressions of opinion. ( ) In this way they can also endeavour, entirely legitimately, to influence the content of the planned agreement, even if from a formal perspective the agreement can be concluded without their consent or consultation. Numerous controversial examples from the recent past show very clearly how important democratic control is in the field of the Union’s external action and how much it depends on the Parliament being properly informed. ( )
80.
An ‘increase in the role of the European Parliament’ which would be incompatible with the Declaration concerning the common foreign and security policy ( ) does not follow from this interpretation of Article 218(10) TFEU. The same principles of democratic control and transparency that now find expression in Article 218(10) TFEU were enshrined in the system of the European Treaties even before the entry into force of the Treaty of Lisbon for all policies, including the common foreign and security policy. ( )
81.
Aside from this, it is only the provision of full and immediate information at all stages of the procedure, in accordance with Article 218(10) TFEU, that ensures that the Parliament is able to examine critically the Council’s choice of the — formal and substantive — legal basis and, if appropriate, make known its views on the matter. ( ) Only if the Parliament has sufficient information on the subject and on the progress of negotiations on a planned international agreement can it form its own views in a timely manner of the choice of the correct legal basis and effectively assert any rights to have a say that might exist. The less the Council informs the Parliament, the more it is able to decide on a legal basis which is convenient for it without major political opposition.
82.
Accordingly, I will now examine whether the Parliament was informed in the present case as required by Article 218(10) TFEU, namely at all stages of the procedure, fully and immediately.
The duty to inform the Parliament at all stages of the procedure
83.
With regard, first, to the duty to inform the Parliament at all stages of the procedure, that duty undoubtedly covers information about the initiation and the conclusion of the procedure. In this respect, the Council fulfilled its duty under Article 218(10) TFEU, as it first informed the Parliament of the imminent commencement of negotiations with Tanzania by letter of 22 March 2010 and then of the approval of the final negotiated agreement by letter of 19 March 2014.
84.
However, the Council’s duties vis-à-vis the Parliament certainly do not end there. As is very clear from the wording ‘at all stages of the procedure’ in Article 218(10) TFEU, the Parliament must be informed not only at the beginning and the end of the procedure for the conclusion of an international agreement but also — and with some regularity — during the ongoing procedure as to its progress. This was even acknowledged in principle by the Council at the hearing before the Court.
85.
Of course, informing the Parliament under Article 218(10) TFEU cannot have the same quality and intensity as, for example, informing a special committee under Article 218(4) TFEU, with which the Union negotiator must be ‘in consultation’ throughout negotiations with a third State. Nor does the Parliament have to be notified of purely preparatory internal processes within the other Union institutions, such as discussions in Council working groups or in the Committee of the Permanent Representatives of the Member States.
86.
Contrary to the view taken by the Council, however, informing the Parliament cannot be confined solely to the stages of the procedure in which the Council takes formal decisions, in particular issuing a negotiating mandate and adopting directives for the negotiator. Rather, the Parliament must also be informed about intermediate results achieved, significant progress in the negotiations and any major difficulties arising during the negotiations. Information must always be provided — having regard to all the circumstances of the individual case and, if necessary, with appropriate steps being taken for the confidential treatment of sensitive information — in such a way as to allow the Parliament sufficient room effectively to exercise its powers of control.
87.
Only through such ongoing provision of information can the Parliament fulfil its function of democratic control and, furthermore, ensure that the legal basis initially chosen by the Council is still correct. This function fulfilled by the Parliament is particularly important in the CFSP because, as has already been mentioned, judicial review is very limited in that area (sixth sentence of the second subparagraph of Article 24(1) TEU in conjunction with Article 275 TFEU). If the Parliament could not perform its role until the end of the procedure, on the basis of a final negotiated or even already approved international agreement, its democratic control would be much less effective.
88.
As the Parliament did not receive any information about the current status during the ongoing procedure in this case, there is therefore a clear infringement of Article 218(10) TFEU.
89.
In this connection, it cannot be claimed that it is not the Council but the High Representative of the Union for Foreign Affairs and Security Policy who holds the reins during the ongoing procedure. On the one hand, as the decision-making body, the Council is responsible for the proper conduct of the entire procedure. On the other, the Council must assume responsibility for any failures on the part of the High Representative, as the High Representative not only presides over the Foreign Affairs Council (Article 18(3) TEU) but is also responsible for carrying out the common foreign and security policy as mandated by the Council (second sentence of Article 18(2) TEU); in this particular case the High Representative was specifically authorised by the Council to open negotiations with Tanzania ( ) (Article 218(3) TFEU).
The duty to inform the Parliament fully
90.
With regard, second, to the duty to inform the Parliament fully, both letters from the Council to the Parliament in this case leave something to be desired.
91.
First, the letter of 22 March 2010, by which the Parliament was informed of the imminent commencement of negotiations with Tanzania, does not state anything about possible negotiating directives in accordance with Article 218(4) TFEU.
92.
This is contrary to Article 218(10) TFEU. Informing the Parliament fully logically requires that, in addition to simple notification of the commencement of negotiations, details of the Union’s desired content for the planned international agreement are also communicated. Only then is effective democratic control possible.
93.
As the Council itself has conceded with reference to earlier cases, there are no insurmountable obstacles to the communication of negotiating directives to the Parliament. In particular, appropriate steps can be taken, if necessary, to guarantee the confidential treatment of sensitive information, such as details of the Union’s negotiating strategy or information affecting the foreign policy interests or the security of the European Union and its Member States.
94.
Second, the texts of neither the contested decision nor the disputed agreement were enclosed with the letter of 19 March 2014 by which the Parliament was informed of the conclusion of the procedure. The Council failed to communicate those two texts officially to the Parliament even subsequently.
95.
This likewise does not satisfy the requirements of Article 218(10) TFEU. ( )
96.
In this connection, it cannot be claimed that the Parliament was aware of the context of the planned agreement with Tanzania, in particular because two similar agreements had already been concluded with other third States. As the Parliament rightly states, it is not acceptable that the elected representatives of the Union’s citizens have to exercise their democratic control on the basis of speculation about the likely content of a proposed international agreement.
97.
Contrary to the claim made by the Council, it is also not for the Parliament to request further information of its own motion. In contrast with other rules such as Article 319(2) TFEU, Article 218(10) TFEU does not impose on the Parliament any obligation to take the initiative itself. Such an obligation would place the Parliament at a serious disadvantage on account of its lack of knowledge of the details and the progress of the negotiations and make it significantly more difficult for it to exercise democratic control. Under Article 218(10) TFEU, the Council must inform the Parliament without being requested to do so. This is ultimately required by institutional balance and the principle of sincere cooperation among the institutions (Article 13(2) TEU).
98.
A fortiori the Parliament cannot be required to rely, as it was in this case, on finding out the content of a Council decision and of the agreement approved by it from the Official Journal of the European Union. As the Court has held, publication in the Official Journal under Article 297 TFEU does not serve the same purpose as informing the Parliament under Article 218(10) TFEU. ( )
99.
It is true that even publication in the Official Journal would still allow the Parliament sufficient time to have the legality of the decision, and thus also indirectly the disputed agreement, reviewed by way of an action for annulment (second paragraph of Article 263 TFEU). However, that is a judicial review by another EU institution, which is, moreover, limited to points of law. This must be distinguished sharply from the democratic control performed by the Parliament itself, which focuses on political assessments and questions of expediency. If that democratic control can only take place ex post, it is inevitably much less effective than during the ongoing procedure for the conclusion of an international agreement. If, on the other hand, it is allowed at an early stage, this may possibly even help to prevent subsequent legal disputes between the institutions.
The duty to provide information immediately
100.
Finally, under Article 218(10) TFEU the Parliament must also be informed immediately. As is apparent in particular from other language versions (French: ‘immédiatement’, [German: ‘unverzüglich’]), this wording is directed at the Parliament being informed straight away, or at least as quickly as possible. ( )
101.
Through the information sent by it regarding the imminent commencement of negotiations, the Council undoubtedly fulfilled that duty, as it sent its letter on 22 March 2010, the very date on which it had given the authorisation to open negotiations with Tanzania.
102.
That is not the case, however, with the information about the conclusion of the procedure. The fact that the Council had approved the disputed agreement by the contested decision was notified to the Parliament only over a week later, by letter of 19 March 2014. Admittedly, this is a relatively short delay in comparison with Case C‑658/11, in which the Council allowed three months to pass. ( ) It is none the less an appreciable delay, especially in the age of modern communication. The Council has not put forward the slightest justification for this delay either in the extrajudicial procedure or in the proceedings before the Court. ( ) Under these circumstances, a delay of even one week, as in the present case, shows a lack of respect for the representative body of the people which is not consistent with the wording and spirit of Article 218(10) TFEU or the principle of sincere cooperation among the institutions (second sentence of Article 13(2) TEU).
Interim conclusion
103.
All in all, in the present case the Council failed in several respects to fulfil its duty under Article 218(10) TFEU to inform the Parliament fully and immediately at all stages of the procedure. The Parliament’s second plea in law is therefore well founded.
D – Summary
104.
In conclusion, it can be stated that only the Parliament’s second plea in law has prospect of success. However, because the Council infringed an essential procedural requirement under Article 218(10) TFEU, the second plea in law alone justifies the annulment of the contested decision ( ) (Article 263(1) and (2) TFEU in conjunction with Article 264(1) TFEU).
E – Maintenance of the effects of the contested decision
105.
If the Court annuls the contested decision, as I suggest, solely on the basis of the second plea in law, it should maintain its effects in accordance with the second paragraph of Article 264 TFEU, as all the parties unanimously agree.
106.
The effects of the contested decision must be maintained for reasons of legal certainty so as not to impair the full effectiveness of the prosecution and trial of suspected pirates. In this way, with reference to Article 10(6) and Article 12(3) of the Joint Action, ( ) the basis for any attempt to question EU NAVFOR’s mandate in relation to the transfer to Tanzania of persons arrested off the Somali coast and suspected of piracy is removed from the outset. Similarly, the legal effects of actions already undertaken pursuant to the disputed agreement cannot be called into question. Furthermore, in general terms, maintaining the effects of the contested decision at international level will avoid any uncertainty over the continued application of the obligations in international law entered into by the Union when it approved and signed the disputed agreement.
107.
Because the contested decision is annulled in connection with the second plea in law not by reason of an incorrect substantive or formal legal basis, but only for a failure to fulfil the duty to inform the Parliament, the effects of that decision should be maintained not just temporarily, but indefinitely, ( ) as, in accordance with the first part of the second subparagraph of Article 218(6) TFEU, the Council’s failure to provide information, even if it were properly remedied, would not be linked with any rights for the Parliament to have a say, not even a right of consultation. Under those circumstances, it would seem excessively formalistic still to require the Council to repeat its decision-making process within a reasonable time.
108.
It would be a different matter only if the Court (also) upheld the Parliament’s first plea in law and found an error in law in the choice of the legal basis for the contested decision. Such action would have implications for the Parliament’s rights to have a say. In that case, according to the Court’s recent case-law, ( ) the maintenance of the effects of the contested decision would not be granted indefinitely, but only for the period within which the Council can reasonably expect to remedy the unlawfulness established in respect of the choice of the legal basis, and properly involve the Parliament in so doing. A time-limit of 10 months would seem reasonable in this case to allow the Council to obtain the consent of the Parliament pursuant to point (a)(v) of the second subparagraph of Article 218(6) TFEU and to adopt a new decision on the correct legal bases.
VII – Costs
109.
Under Article 138(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since, according to my proposed solution, the Council has been unsuccessful and the Parliament has applied for costs, the Council must be ordered to pay the costs. On the other hand, the Czech Republic, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland and the European Commission, as interveners, must each bear their own costs in accordance with Article 140(1) of the Rules of Procedure.
VIII – Conclusion
110.
In the light of the foregoing considerations, I propose that the Court should:
(1)
annul Council Decision 2014/198/CFSP of 10 March 2014;
(2)
order that the effects of the annulled decision be maintained;
(3)
order the Council of the European Union to bear its own costs and to pay the costs incurred by the European Parliament;
(4)
order the Czech Republic, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland and the European Commission each to bear their own costs.
( ) Original language: German.
( ) Judgment in Parliament v Council (C‑658/11, EU:C:2014:2025).
( ) Council Decision 2014/198/CFSP of 10 March 2014 on the signing and conclusion of the Agreement between the European Union and the United Republic of Tanzania on the conditions of transfer of suspected pirates and associated seized property from the European Union-led naval force to the United Republic of Tanzania (OJ 2014 L 108, p. 1), also ‘the contested decision’.
( ) OJ 2014 L 108, p. 3; also ‘the disputed agreement’.
( ) I am thinking in particular of the stories about the character of Long John Silver in ‘Treasure Island’ (Robert Louis Stevenson) and of ‘El Trato de Argel’ (Miguel de Cervantes), but also of children’s stories like ‘Pippi Langstrumpf in Taka-Tuka-Land’ (Astrid Lindgren) and ‘Jim Button and the Wild 13’ (Michael Ende).
( ) See also Opinion of Advocate General Bot in Parliament v Council (C‑658/11, EU:C:2014:41, points 4 and 5).
( ) Council Joint Action 2008/851/CFSP of 10 November 2008 on a European Union military operation to contribute to the deterrence, prevention and repression of acts of piracy and armed robbery off the Somali coast (OJ 2008 L 301, p. 33), as amended by Joint Action 2010/766/CFSP (OJ 2010 L 327, p. 49) and Joint Action 2012/174/CFSP (OJ 2012 L 89, p. 69); ‘the Joint Action’.
( ) Treaty on European Union as amended by the Treaty of Nice.
( ) The United Nations Convention on the Law of the Sea was signed in Montego Bay on 10 December 1982. The European Union and all its Member States are Contracting Parties to the Convention. Under Article 100 of the Convention on the Law of the Sea, all States are to cooperate to the fullest possible extent in the repression of piracy on the high seas or in any other place outside the jurisdiction of any State. Article 105 of the Convention on the Law of the Sea permits the seizure of pirate ships or aircraft and the arrest of persons and seizure of property on board; that provision also allows penalties to be imposed by the courts of the State which seized a pirate ship or aircraft. Lastly, Article 107 of the Convention on the Law of the Sea regulates which State ships and aircraft are entitled to seize ships and aircraft on account of piracy.
( ) Alongside the negotiations with Tanzania negotiations were also opened with Mauritius, Mozambique, South Africa and Uganda.
( ) See the first citation in the preamble to the contested decision.
( ) The Kingdom of Sweden does not expressly request that the effects of the contested decision be maintained but it can be inferred from its statements that it supports the Council’s claim to that effect.
( ) Whilst most of the parties make observations in their written pleadings on both pleas in law, the Czech Republic confines its observations to the second plea, whereas the Kingdom of Sweden and the Commission concentrate on the first plea.
( ) Judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, paragraphs 72 and 73); see also the Opinion of Advocate General Bot in that case (EU:C:2014:41, points 137 and 138).
( ) Only in respect of reviewing the legality of decisions providing for restrictive measures is the Court’s jurisdiction expressly limited under the second alternative in the second paragraph of Article 275 TFEU to proceedings brought in accordance with the fourth paragraph of Article 263 TFEU.
( ) See also the judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, in particular paragraph 87).
( ) Further still, the Commission takes the view that the contested decision falls exclusively in the field of judicial cooperation in criminal matters, with the result that Article 82 TFEU alone is a possible enabling provision.
( ) See in particular the judgments in Commission v Council (C‑94/03, EU:C:2006:2, paragraphs 55 and 56) and United Kingdom v Council (C‑81/13, EU:C:2014:2449, paragraph 35).
( ) Judgments in Parliament v Council (C‑130/10, EU:C:2012:472, paragraphs 43 and 44); Commission v Council (C‑377/12, EU:C:2014:1903, paragraph 34), and Parliament v Council (C‑658/11, EU:C:2014:2025, paragraph 43).
( ) See the Court’s statements on the submissions of the parties in the judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, paragraphs 44 and 45).
( ) The Council and its interveners rely in this regard in particular on paragraphs 58, 59 and 62 of the judgment in Parliament v Council (C‑658/11, EU:C:2014:2025).
( ) Judgments in Commission v Council (C‑94/03, EU:C:2006:2, paragraph 50); Parliament v Council (C‑658/11, EU:C:2014:2025, paragraph 48); and United Kingdom v Council (C‑81/13, EU:C:2014:2449, paragraph 36); see also the judgment in United Kingdom v Council (C‑431/11, EU:C:2013:589, paragraph 66).
( ) One exception, which is not relevant here, is Article 79(3) TFEU, which contains an express legal basis for the conclusion of agreements for the readmission of illegally resident third-country nationals to their countries of origin or provenance.
( ) The ERTA principle stems from the judgment in Commission v Council (‘ERTA’, 22/70, EU:C:1971:32, paragraphs 15 to 19); a recent overview can be found, for example, in Opinion 1/03 (EU:C:2006:81, paragraphs 114 to 133).
( ) See my Opinion in United Kingdom v Council (C‑81/13, EU:C:2014:2114, point 104); earlier, to the same effect, my Opinion in United Kingdom v Council (C‑431/11, EU:C:2013:187, points 64 to 70).
( ) Judgments in Commission v Council (C‑300/89, EU:C:1991:244, paragraph 10); Parliament v Council (C‑130/10, EU:C:2012:472, paragraph 42); and United Kingdom v Council (C‑81/13, EU:C:2014:2449, paragraph 35).
( ) Judgments in United Kingdom v Council (C‑431/11, EU:C:2013:589, paragraph 48); United Kingdom v Council (C‑656/11, EU:C:2014:97, paragraph 50); and United Kingdom v Council (C‑81/13, EU:C:2014:2449, paragraph 38).
( ) Article 3(1) and (2) of the disputed agreement.
( ) Articles 3(3), 4 and 5 of the disputed agreement.
( ) Article 6 of the disputed agreement.
( ) Article 7 of the disputed agreement.
( ) See the judgment in Commission v Parliament and Council (C‑43/12, EU:C:2014:298, paragraphs 45 to 50); to the same effect — in relation to the definition of the rights of third-country nationals within the Union — judgments in United Kingdom v Council (C‑431/11, EU:C:2013:589, paragraphs 62 to 67) and United Kingdom v Council (C‑81/13, EU:C:2014:2449, paragraphs 40 to 46).
( ) They refer to ‘judicial cooperation in criminal matters in the Union’ (Article 82(1) TFEU) and ‘police cooperation involving all the Member States’ competent authorities’ (Article 87(1) TFEU); my emphasis.
( ) See the second indent of Article 12(1) of the Joint Action.
( ) See to this effect the case-law of the European Court of Human Rights, in particular the judgments of 4 December 2014, Samatar and Others v France (Applications No 17110/10 and 17301/10, ECLI:CE:ECHR:2014:1204JUD001711010, paragraphs 41 to 59) and Hassan and Others v France (Applications No 46695/10 and 54588/10, ECLI:CE:ECHR:2014:1204JUD004669510, paragraphs 60 to 72 and 86 to 104), which each concern Article 5 ECHR.
( ) See in particular Articles 10(6) and 12(3) of the Joint Action.
( ) To this effect, Opinion of Advocate General Bot in Parliament v Council (C‑130/10, EU:C:2012:50, point 64), in relation to the objectives of preserving international peace and security.
( ) See also the detailed analysis of the EU/Mauritius Agreement by Advocate General Bot in his Opinion in Parliament v Council (C‑658/11, EU:C:2014:41, points 68 to 121), in which he reaches the same conclusion based on essentially similar arguments (see in particular points 83 and 109 to 115).
( ) Judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, in particular paragraph 85).
( ) Judgments in Roquette Frères v Council (138/79, EU:C:1980:249, paragraph 33); Parliament v Council (C‑130/10, EU:C:2012:472, paragraph 81); and Parliament v Council (C‑658/11, EU:C:2014:2025, paragraph 81).
( ) Opinion of Advocate General Bot in Parliament v Council (C‑658/11, EU:C:2014:41, in particular points 142 to 144).
( ) For example, the Parliament could, in a case like the present one, be interested in whether sufficient consideration has been given to the prohibition of the death penalty which applies in the Union (Article 2(2) of the Charter of Fundamental Rights). What if the Council had failed to take appropriate steps in the disputed agreement? Is it sufficient to lay down in the disputed agreement, not an express prohibition of the death penalty, but merely a hedged one? I would point out that, in Article 12(3), the Joint Action expressly makes the risk of being subjected to the death penalty an obstacle to the transfer of suspected pirates to third States, whereas Article 5 of the disputed agreement addresses this point only indirectly and with less symbolic force, stating that no transferred person is to be ‘tried for an offence which has a maximum punishment that is more severe than imprisonment for life’.
( ) I am thinking in particular of the planned ‘TTIP’ free-trade agreement with the United States of America, the SWIFT agreement and the Passenger Name Records agreement, but also the Union’s accession to the European Convention for the Protection of Human Rights and Fundamental Freedoms, provided for in Article 6(2) TEU and in Article 218(6) and (8) TFEU.
( ) Declaration No 14 annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, signed on 13 December 2007 (OJ 2008 C 115, p. 343), states in its second paragraph that the provisions covering the common foreign and security policy in the Treaty of Lisbon do not ‘increase the role of the European Parliament’.
( ) See in particular the second paragraph of Article 1 EU and Article 21 EU.
( ) Judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, paragraph 86).
( ) As is expressly stated in the letter of 22 March 2010.
( ) See also Opinion of Advocate General Bot in Parliament v Council (C‑658/11, EU:C:2014:41, point 155).
( ) Judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, paragraph 79).
( ) In German law it is assumed that the word ‘unverzüglich’ requires action ‘without culpable delay’ (see the first sentence of Paragraph 121(1) of the Bürgerliches Gesetzbuch (German Civil Code)).
( ) See the judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, paragraph 77 and paragraphs 15 to 17).
( ) In particular, the Council has not claimed translation problems. If an international agreement or the Council decision approving it are not immediately available in all the EU official languages, the Council must first communicate the available language versions to the Parliament and subsequently send outstanding translations without delay.
( ) See the judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, in particular paragraphs 80, 86 and 87).
( ) As we know, under those two provisions the transfer of persons to a third State requires the prior conclusion of an agreement with that third State in which the conditions for the transfer are established.
( ) See the judgment in Parliament v Council (C‑658/11, EU:C:2014:2025, in particular paragraph 91).
( ) Judgments in Parliament v Council (C‑355/10, EU:C:2012:516, paragraph 90); Commission v Council (C‑137/12, EU:C:2013:675, in particular paragraph 81); and Commission v Parliament and Council (C‑43/12, EU:C:2014:298, paragraph 56). |
OPINION OF ADVOCATE GENERAL
JÄÄSKINEN
delivered on 7 July 2015 ( )
Case C‑203/14
Consorci Sanitari del Maresme
v
Corporació de Salut del Maresme i la Selva
(Request for a preliminary ruling from the Tribunal Català de Contractes del Sector Públic (Spain))
‛Reference for a preliminary ruling — Jurisdiction of the Court — Concept of ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU — Tribunal Català de Contractes del Sector Públic — Compulsory jurisdiction of the referring body — Directive 89/665/EEC — Effect on the interpretation of Article 267 TFEU’
I – Introduction
1.
The present case arises from a request for a preliminary ruling made by the Tribunal Català de Contractes del Sector Públic (Spain) (Catalan Public Sector Contracts Board) in the context of a special administrative appeal relating to public procurement.
2.
In the course of the proceedings before the Court of Justice, doubts arose concerning the Court’s jurisdiction in light of the characteristics of the Tribunal Català de Contractes del Sector Públic. Of the criteria established in the Court’s case-law for deciding whether a body making a reference is a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU, the criterion of the ‘compulsory jurisdiction’ of the referring body aroused the Court’s concern in particular.
3.
The Tribunal Català de Contractes del Sector Públic is in fact a specialised collegiate administrative body with jurisdiction to hear special appeals relating to public procurement matters. Being a specialised body, it is not a court stricto sensu under national law, although its decisions are final in so far as concerns administrative remedies. Moreover, bringing an appeal before that body is optional, which raises the question of whether it may be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. That question requires the Court to interpret, in particular, its complex case-law relating to the ‘compulsory jurisdiction’ of the referring body.
4.
In accordance with the request made by the Court following its decision to open the oral procedure and the reallocation of the case, this Opinion will specifically address this criterion of the ‘compulsory jurisdiction’ of the referring body, which the Court wishes to consider in particular, and briefly examine the remaining criteria. I shall therefore not deal with the substantive questions asked by the referring body.
II – Facts and procedure before the Court
5.
The Consorci Sanitari del Maresme wished to participate in the tendering procedure relating to nuclear magnetic resonance services organised by the Corporació de Salut del Maresme i la Selva. On 10 December 2013, it brought a special appeal before the Tribunal Català de Contractes del Sector Públic challenging the decision of the assessment board of the contracting authority, so that it might be admitted to the tendering procedure. ( )
6.
In the context of that special appeal, the Tribunal Català de Contractes del Sector Públic decided to refer five questions to the Court of Justice for a preliminary ruling. ( )
7.
By decision of 13 January 2015, the Court referred the case to the Sixth Chamber and decided, pursuant to Article 76(2) of its Rules of Procedure, not to hold a hearing. The Court also decided that the case would be determined without the Opinion of an Advocate General.
8.
However, the judicial status of the body making the request for a preliminary ruling gave rise to uncertainty regarding the Court’s jurisdiction.
9.
Accordingly, on 9 February 2015, the Court requested clarification from the Tribunal Català de Contractes del Sector Públic, which replied by letter of 12 February 2015, received at the Court on 17 February 2015.
10.
The Court took the view that it was necessary for it to hear detailed argument on whether the Tribunal Català de Contractes del Sector Públic could be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU and reallocated the case to the Grand Chamber. The Court decided that it was necessary to organise a hearing in order to permit the parties to express their views, if any, on the admissibility of the request for a preliminary ruling made by the Tribunal Català de Contractes del Sector Públic and consequently ordered the reopening of the oral procedure for the purpose of examining its jurisdiction in this case.
11.
The hearing was held on 12 May 2015 in the presence of the Spanish Government and the European Commission. The Italian Government, which had submitted written observations on the substantive questions, was not represented at the hearing.
III – The Court’s jurisdiction to give a ruling on the questions referred for a preliminary ruling
A – Observations on the legal framework
12.
According to the settled case-law of the Court, in order to determine whether a body making a reference is a ‘court or tribunal’ within the meaning of Article 267 TFEU, the Court takes account of a number of factors, such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and whether it is independent. ( ) Moreover, a national court may refer a question to the Court only if there is a case pending before it and if it is called upon to give judgment in proceedings intended to lead to a decision of a judicial nature. ( )
13.
It must be emphasised in this connection that the fact that a national body is not described as a court or tribunal stricto sensu under national law is not in itself conclusive, since the notion of a ‘court or tribunal’ within the meaning of Article 267 TFEU is an autonomous concept of EU law. Indeed, the Court has held that that concept may also include bodies that are not courts or tribunals under national law ( ) and are not part of the judicial system of a Member State. ( ) Thus, the Court attaches importance not to the formal designation of the body in question, but rather to its substantive characteristics, ( ) and this calls for an assessment of the structural and functional characteristics of the referring body.
14.
At the hearing, the Spanish Government confirmed that the Tribunal Català de Contractes del Sector Públic is a ‘review body’ within the meaning of the first subparagraph of Article 2(9) of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, ( ) which may, according to that provision, be non-judicial in character. ( ) It is also clear from the information provided to the Court that decisions of the Tribunal Català de Contractes del Sector Públic conclude the ‘administrative proceedings’.
15.
In my view, those aspects derived from national law are not conclusive if the characteristics of the referring body demonstrate that it fulfils the criteria established in the case-law of the Court in order to be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU, that is to say, the criteria which I mentioned in point 12 of this Opinion.
16.
In so far as concerns the particular legal framework for public procurement, in view of the importance of this area for the internal market, and in particular for the observance of the fundamental freedoms of movement, the EU legislature has harmonised national law in this field to a large extent. Exceptionally, the judicial protection afforded to individuals has also been substantially harmonised by the provisions of Directive 89/665 and consequently that is no longer a matter solely for the procedural autonomy of the Member States, as limited by the principles of effectiveness and equivalence. ( )
17.
Accordingly, the third subparagraph of Article 1(1) of Directive 89/665 provides that the Member States are to take the measures necessary to ensure that, as regards contracts falling within the scope of Directive 2004/18, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in Articles 2 to 2f of Directive 89/665 where such decisions have infringed EU law in the field of public procurement or national rules transposing that law. Such remedies may include actions before national courts as well as applications to quasi-judicial bodies as referred to in the first subparagraph of Article 2(9) of Directive 89/665.
18.
Given that, the question arises of whether account must be taken, when interpreting the concept of a ‘court or tribunal’ for the purposes of Article 267 TFEU, of the fact that the body in question has been established in order to enable the Member State to fulfil its obligations under Directive 89/665. In fact, it is often such bodies of a quasi-judicial nature that are called upon to interpret EU public procurement law, often almost exclusively so, where their decisions are not in practice appealed before an ordinary court.
19.
It should be noted that, in its case-law on the interpretation of Article 267 TFEU, which has been established in judgments for the most part handed down after the adoption of Directive 89/665, the Court has already applied the criteria for defining a ‘court or tribunal’ within the meaning of Article 267 TFEU in a flexible fashion. ( ) This has enabled a variety of review bodies, including bodies created by the Member States in the public procurement sector, to refer questions to the Court for a preliminary ruling. ( ) Adopting this flexible approach to its requirements for considering a body to be a ‘court or tribunal’, the Court has also held to be a court or tribunal for the purposes of Article 267 TFEU administrative bodies that act at last instance in various fields of EU law. ( )
20.
Since the Court has, it seems to me, already adopted in this area an interpretation of Article 267 TFEU that is sufficiently flexible to ensure that provisions of EU law are interpreted uniformly at national level, I take the view that the provisions of Directive 89/665 and the fact that the Tribunal Català de Contractes del Sector Públic has express jurisdiction in public procurement matters have no particular bearing on the application of Article 267 TFEU to the present case.
B – The recognised criteria, other than the ‘compulsory jurisdiction ’ of the referring body, for determining whether a referring body is a ‘court or tribunal of a Member State ’ within the meaning of Article 267 TFEU
1. The establishment by law and the permanence of the body
21.
As regards the question whether the Tribunal Català de Contractes del Sector Públic was established by law, it is clear both from the reply which that body gave to the Court’s request for information and from the submissions made by the Spanish Government at the hearing that the Tribunal Català de Contractes del Sector Públic was created by the Autonomous Community of Catalonia in the exercise of the special legislative competence provided for under Spanish law. ( )
22.
The Tribunal Català de Contractes del Sector Públic was originally established as a single-member body named the ‘Órgano Administrativo de Recursos Contractuales de Cataluña’ (the Administrative Body for Contractual Appeals of Catalonia) by the fourth additional provision of Law 7/2011 of 27 July 2011 on fiscal and financial measures. ( ) Because of the increasing volume and special nature of the cases falling within the competence of the Órgano Administrativo de Recursos Contractuales de Cataluña, it was transformed into a collegiate body, named the Tribunal Català de Contractes del Sector Públic, by Decree 221/2013 of 3 September 2013. ( ) That decree contains provisions concerning, in particular, the establishment, jurisdiction and composition of the Tribunal Català de Contractes del Sector Públic. Thus, the criterion of the body’s establishment by law is clearly satisfied.
23.
Moreover, as a component in the system for judicial resolution of disputes in the area of public procurement, the Tribunal Català de Contractes del Sector Públic satisfies the requirement for permanence. ( ) Indeed, although the members of that body are appointed for a renewable term of five years, ( ) it is nevertheless permanent as a body governed by public law and therefore not an ad hoc body convened for the purposes of an individual dispute.
2. Inter partes procedure and the application of rules of law
24.
As regards, first of all, the inter partes nature of the procedure initiated by special application to the Tribunal Català de Contractes del Sector Públic, it must be recalled at the outset that the requirement that the procedure be inter partes is not an absolute requirement. ( ) However, in accordance with Article 46 of Royal Legislative Decree 3/2011, the parties do have the opportunity to make submissions and present evidence to the body having jurisdiction to settle the dispute. In so far as the Tribunal Català de Contractes del Sector Públic is concerned, in accordance with Article 14 of Decree 221/2013, the procedure applicable to special appeals in public procurement matters is governed by the basic rules of the legislation relating to public procurement, by the rules implementing that legislation, by the procedural rules set out in Decree 221/2013 and by the legal rules governing public authorities and general administrative procedure.
25.
Moreover, since in special appeals in public procurement matters the Tribunal Català de Contractes del Sector Públic clearly has before it cases involving a contracting authority as respondent and a tenderer as appellant, I consider that the requirement that the procedure be inter partes is satisfied in this case.
26.
Secondly according to the information provided by the referring body itself, it carries out reviews of the legality of decisions in public procurement matters. It must be borne in mind that bodies such as the Tribunal Català de Contractes del Sector Públic have been established in Spain in order to fulfil the obligations arising under Directive 89/665, in particular the obligation to ensure that decisions taken by contracting authorities in procedures for the award of public contracts are amenable to effective review on the ground of infringement of EU public procurement law or national rules transposing that law. Thus, the Tribunal Català de Contractes del Sector Públic, as a body having jurisdiction to hear such actions, clearly applies rules of law.
3. Independence
27.
In accordance with the case-law of the Court, the concept of independence, which is inherent in the task of adjudication, implies above all that the body in question acts as a third party in relation to the authority which adopted the contested decision. ( ) There are two aspects to that concept. The first aspect, which is external, entails the body being protected against external intervention or pressure liable to jeopardise the independent judgment of its members as regards proceedings before them. The second aspect, which is internal, is linked to impartiality and seeks to ensure a level playing field for the parties to the proceedings and their respective interests with regard to the subject-matter of those proceedings. That aspect requires objectivity and the absence of any interest in the outcome of the proceedings apart from the strict application of the rule of law. ( )
28.
Those guarantees of independence and impartiality require rules — particularly as regards the composition of the body and the appointment and length of service of its members and the grounds for the withdrawal, rejection and removal of its members — in order to dismiss any reasonable doubt in the minds of individuals as regards the imperviousness of that body to external factors and its neutrality with respect to the interests before it. ( ) The condition regarding the independence of the body making the reference is regarded, in case-law, as being met only if the grounds for the removal of members of that body are determined by express legislative provisions. ( )
29.
It seems to me that the requirements for the independence of the referring body are satisfied in this case. Indeed, Article 2 of Decree 221/2013, which is entitled ‘Legal nature’ and concerns the establishment of the Tribunal Català de Contractes del Sector Públic, provides that ‘[t]he Tribunal is a specialised collegiate administrative body. In exercising its powers it shall act in a wholly independent manner and with complete objectivity and impartiality. It shall have no hierarchical superiors and shall not receive instructions from any relevant public authorities’.
30.
As regards the composition of the referring body, Article 5 of Decree 221/2013 provides that it is to be composed of a chairman and two persons sitting as assessors, who are appointed by the person responsible for the competent service for establishing the criteria for, and directing and monitoring the award of public contracts. The requirements which must be satisfied in order to be a member are listed in Article 6 of Decree 221/2013. I would point out that members are appointed for a renewable term of five years, ( ) during which period the officials appointed as members of the Tribunal remain on secondment, that is to say, they devote themselves entirely to their duties within the Tribunal Català de Contractes del Sector Públic. ( ) Under Article 8(4) of Decree 221/2013, the members of the Tribunal are appointed on a permanent basis. However, they may be dismissed or have their appointment revoked on certain grounds expressly set out in Article 8. ( ) Article 11 of Decree 221/2013 contains the specific rules governing the reasons for the withdrawal or rejection of members.
31.
Although there is a connection between the Tribunal Català de Contractes del Sector Públic and ‘the competent service for establishing the criteria for, and directing and monitoring the award of public contracts’, it has no hierarchical superiors and does not receive instructions from any relevant public authorities. ( ) When reaching decisions, the Tribunal Català de Contractes del Sector Públic acts as a third party in relation to the interests at stake and possesses the necessary impartiality. ( )
32.
Lastly, it must be observed that the Tribunal Català de Contractes del Sector Públic does not have the status of defendant in the event that its decisions are challenged. ( ) Admittedly, the decisions and acts of the Tribunal may form the subject-matter of an administrative-law action, but that is a case of judicial protection at second instance and does not deprive the decisions of that body of their judicial nature for the purposes of Article 267 TFEU. The decisions of the referring body cannot be the subject of administrative review. ( )
33.
In my view, the referring body thus fulfils the criterion of independence as established in the case-law of the Court.
C – The ‘compulsory jurisdiction ’ of the referring body
34.
It was the issue of the ‘compulsory jurisdiction’ of the referring body, within the meaning of the case-law on Article 267 TFEU, that first aroused the Court’s concern regarding the status of the Tribunal Català de Contractes del Sector Públic as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. I would point out that the essential question in this regard is whether the fact that an appeal to the referring body is not the only available remedy means that, notwithstanding the legally binding force of its decisions, that body cannot be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU.
35.
It is in fact clear from the information before the Court that an appeal to the Tribunal Català de Contractes del Sector Públic is an alternative remedy. According to that body, an applicant may choose ( ) between bringing a special appeal before the Tribunal Català de Contractes del Sector Públic and commencing an administrative-law action. That decision will bind the authority, which has no power to override it. ( ) On the other hand, in the particular sectors governed by Law 31/2007 of 30 October 2007 on procurement procedures in the water, energy, transport and postal services sectors, ( ) the option of directly initiating an administrative-law action does not exist. In those sectors, therefore, the special appeal is not an alternative, since it is necessary for a dispute to be brought before a review body, such as the Tribunal Català de Contractes del Sector Públic, before proceedings may be commenced before the ordinary administrative court having jurisdiction.
36.
In the present case, the dispute in the main proceedings does not relate to one of the particular sectors governed by Law 31/2007, which I mentioned in point 35 of this Opinion, and it therefore seems to me that the normal regime must apply.
37.
It is important to bear in mind that the question whether a body is entitled to refer a question to the Court of Justice is determined on the basis of criteria relating both to the constitution of that body and to its function. In that connection, a national body may be classified as ‘a court or tribunal of a Member State’, within the meaning of Article 267 TFEU, when it is performing judicial functions, but when it is exercising other functions, of an administrative nature, for example, it cannot be recognised as such. ( ) It follows that, in order to establish whether a national body that is entrusted by law with functions of a different nature is to be regarded as a ‘court or tribunal of a Member State’, within the meaning of Article 267 TFEU, it is necessary to determine in what specific capacity it is acting within the particular legal context in which it seeks a ruling from the Court. ( )
38.
Like the other criteria for determining whether a body is a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU, the criterion of the ‘compulsory jurisdiction’ of the body has been developed in the Court’s case-law. However, it must be observed that the use of this concept in the Court’s case-law has not always been very consistent. Frequently, the Court has not referred to the criterion expressly and, in the French language at least, the use of this concept is not without its difficulties. I believe that the ‘compulsory jurisdiction’ of the referring body was used for the first time, as a concept, in the judgment in Dorsch Consult, ( ) although similar expressions had been used prior to that in order to support the finding that the referring body was indeed a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. ( )
39.
In its judgment in Dorsch Consult, ( ) the Court identified two aspects of the ‘compulsory’ nature of the body’s jurisdiction: first, the body dealing with the case in fact offered the only remedy available and, secondly, its determinations were binding. ( ) In that case, however, it was unnecessary for the Court to give a clear and precise definition of the criterion or to give preference to one or other meaning, since the jurisdiction of the body in question was ‘compulsory’ in both senses. ( )
40.
Like Advocates General Ruiz-Jarabo Colomer, Kokott and Szpunar, I believe that the word ‘compulsory’ refers more to the fact that the decisions of the referring body have binding force rather than to the fact that the body in question offers the only legal remedy available. ( )
41.
Indeed, in its judgment in Emanuel, ( )the Court regarded as a court or tribunal of a Member State, within the meaning of Article 267 TFEU, the person appointed to hear appeals against trade mark registration decisions, who shared that jurisdiction with an ordinary court and to whom an appeal was referred at the appellant’s discretion, in that he was entitled to choose the jurisdiction before which he brought his appeal. The decisions of the appointed person had binding force. ( )
42.
Similarly, in its judgment in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta, ( ) the Court regarded as ‘compulsory’ the jurisdiction of the Tribunal Arbitral Tributário (Portugal), which offered an alternative means of resolving tax disputes and whose decisions were binding on the parties. In taxation matters, as in the case which gave rise to that judgment, the taxable person could decide either to bring proceedings before an administrative court or to request the constitution of a tax arbitration tribunal, and the tax authorities had to comply with that decision. Therefore, tax arbitration was not an additional legal remedy in the hands of the taxable person, but a genuine alternative to the traditional courts. ( )
43.
It is therefore clear from the abovementioned judgments that, according to the Court, the existence of an alternative remedy to court proceedings stricto sensu does not necessarily mean that the body offering that alternative remedy cannot be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. ( ) The alternative remedy may be different in nature from traditional remedies, just as arbitration in tax matters is different from an action before an administrative court. While the existence of a single remedy has been mentioned in a number of the Court’s judgments, where the remedy at issue was effectively the only remedy available, the Court has never taken the view that a referring body could not be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU solely on the ground that, as regards the matter at issue, various remedies were available. ( )
44.
Moreover, it seems to me that, since the beginning, the Court has relied on this criterion in order to exclude private arbitration tribunals in the usual sense, even if it did not refer to the criterion of ‘compulsory jurisdiction’ as such. ( ) According to the case-law, an arbitration tribunal constituted pursuant to an agreement between the parties is not a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU since the parties are under no obligation, in law or in fact, to refer their disputes to arbitration and the public authorities of the Member State concerned are neither involved in the decision to opt for arbitration nor required to intervene of their own accord in the proceedings before the arbitrator. ( ) However, the Court has held admissible questions referred to it for a preliminary ruling by an arbitration tribunal where that tribunal had been established by law, its decisions were binding on the parties and its jurisdiction did not depend on their agreement. ( )
45.
Consequently, the fact that the decisions of the referring body have binding force is indeed a necessary requirement in order for that body to be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. However, that fact alone does not render the jurisdiction of the referring body ‘compulsory’ within the meaning of the case-law on Article 267 TFEU. For that, it is also necessary for the body in question to be a body established by law whose jurisdiction is independent of the wishes of the parties. ( ) I would reiterate that, in my view, it is not necessary, however, for an action or appeal before such a body to be the only available remedy.
46.
If the converse view were taken, then, in theory, a question could arise as to the ‘compulsory jurisdiction’ of the Spanish administrative courts in the context of administrative-law actions relating to public procurement brought directly before them, as ordinary administrative courts. It seems to me that, in such a situation, it would not then be possible to regard the jurisdiction of an administrative court as ‘compulsory’ because an administrative-law action would not be the only remedy available. ( )
47.
For my part, it seems that the advantages of interpreting Article 267 TFEU in such a way that a referring body such as the Tribunal Català de Contractes del Sector Públic may be regarded as a ‘court or tribunal of a Member State’, despite the availability of alternative remedies, outweigh the possible disadvantages. Indeed, the ability to choose between several legal remedies enables individuals to choose the remedy that seems to them to be the most appropriate in the circumstances. ( ) The bodies responsible for specialised appeals, as is the Tribunal Català de Contractes del Sector Públic in public procurement matters, may have considerable expertise, allowing them to settle disputes brought before them rapidly and expertly. It is possible, however, even in public procurement matters, that certain cases centre upon questions of general administrative law. In such cases an obligation to refer the matter to a specialised body would be unhelpful if the ordinary administrative courts were better qualified to settle the dispute. ( )
48.
It should be noted that the decisions of the Tribunal Català de Contractes del Sector Públic are binding on the parties and enforceable. ( ) They therefore have the same effects as decisions handed down by administrative courts of first instance, even though proceedings are brought before a corresponding higher administrative court. It seems to me that, where no action is brought before an administrative court, a decision of the Tribunal Català de Contractes del Sector Públic will constitute a final and binding solution of a dispute between a contracting authority and a tenderer. ( ) Its decisions therefore have an authority comparable to the effect of the principle of res judicata.
49.
It follows from all the foregoing that the Tribunal Català de Contractes del Sector Públic, a specialised collegiate administrative body created by national legislation, whose statutory jurisdiction is independent of the wishes of the parties and whose decisions are binding, fulfils the criteria laid down in the case-law in order to be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. A case is pending before it and it is called upon to rule in proceedings intended to lead to a decision of a judicial nature. Therefore, the Court has jurisdiction to answer the questions referred to it by that body for a preliminary ruling and the request for a preliminary ruling is admissible.
IV – Conclusion
50.
In the light of the foregoing considerations, I suggest that the Court of Justice declare that it has jurisdiction to answer the questions referred for a preliminary ruling by the Tribunal Català de Contractes del Sector Públic.
( ) Original language: French.
( ) For a brief summary of the facts of the case in the main proceedings, see the order in Consorci Sanitari del Maresme (C‑203/14, EU:C:2015:279, paragraph 2).
( ) The questions concern, inter alia, the issue of whether public authorities must be regarded as economic operators for the purposes of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114), their inclusion in the official lists of approved contractors and their certification by certification bodies established under public or private law.
( ) See, inter alia, judgments in Vaassen-Göbbels (61/65, EU:C:1966:39), Dorsch Consult (C‑54/96, EU:C:1997:413, paragraph 23); Österreichischer Gewerkschaftsbund (C‑195/98, EU:C:2000:655, paragraph 24); Syfait and Others (C‑53/03, EU:C:2005:333, paragraph 29); Emanuel (C‑259/04, EU:C:2006:215, paragraph 19); Forposta and ABC Direct Contact (C‑465/11, EU:C:2012:801, paragraph 17); Belov (C‑394/11, EU:C:2013:48, paragraph 38 and the case-law cited); and Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraph 23).
( ) See, inter alia, judgments in Job Centre (C‑111/94, EU:C:1995:340, paragraph 9); Victoria Film (C‑134/97, EU:C:1998:535, paragraph 14); Österreichischer Gewerkschaftsbund (C‑195/98, EU:C:2000:655, paragraph 25); Syfait and Others (C‑53/03, EU:C:2005:333, paragraph 29); and Belov (C‑394/11, EU:C:2013:48, paragraph 39).
( ) See, inter alia, judgments in Vaassen-Göbbels (61/65, EU:C:1966:39); Broekmeulen (246/80, EU:C:1981:218, paragraphs 11 and 17); Dorsch Consult (C‑54/96, EU:C:1997:413, paragraph 38); Jokela and Pitkäranta (C‑9/97 and C‑118/97, EU:C:1998:497, paragraph 24); and Abrahamsson and Anderson (C‑407/98, EU:C:2000:367, paragraph 38). See also the Opinion of Advocate General Tesauro in Dorsch Consult (C‑54/96, EU:C:1997:245, point 20).
( ) See, in this connection, the Opinion of Advocate General Ruiz-Jarabo Colomer in De Coster (C‑17/00, EU:C:2001:366, points 53 to 57 and the case-law cited).
( ) Opinion of Advocate General Tesauro in Dorsch Consult (C‑54/96, EU:C:1997:245, point 23).
( ) OJ 1989 L 395, p. 33, as amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts (OJ 2007 L 335, p. 31).
( ) The first subparagraph of Article 2(9) provides that, ‘[w]here bodies responsible for review procedures are not judicial in character, written reasons for their decisions shall always be given. Furthermore, in such a case, provision must be made to guarantee procedures whereby any allegedly illegal measure taken by the review body or any alleged defect in the exercise of the powers conferred on it can be the subject of judicial review or review by another body which is a court or tribunal within the meaning of Article [267 TFEU] and independent of both the contracting authority and the review body’.
( ) Regarding the concept of the procedural autonomy of the Member States and the principles of EU law which limit that autonomy, see, in particular, judgments in Club Hotel Loutraki and Others (C‑145/08 and C‑149/08, EU:C:2010:247, paragraph 74 and the case-law cited), and eVigilo (C‑538/13, EU:C:2015:166, paragraph 39). As regards the principles of effectiveness and equivalence in the context of Directive 89/665, see, in particular, my Opinion in Orizzonte Salute (C‑61/14, EU:C:2015:307, points 20 to 26, 33 and 34).
( ) Advocate General Ruiz-Jarabo Colomer strongly criticised this case-law, which he described as ‘too flexible and not sufficiently consistent’, in his Opinions in De Coster (C‑17/00, EU:C:2001:366, points 13, 14 and 58 to 64); Ing. Aigner (C‑393/06, EU:C:2007:706, points 22 to 29); and Österreichischer Rundfunk (C‑195/06, EU:C:2007:303, points 27 to 29).
( ) See, in particular, judgments in Dorsch Consult (C‑54/96, EU:C:1997:413, paragraphs 23 to 38); Mannesmann Anlagenbau Austria and Others (C‑44/96, EU:C:1998:4); HI (C‑258/97, EU:C:1999:118, paragraph 18); Unitron Scandinavia and 3-S (C‑275/98, EU:C:1999:567, paragraph 15); HI (C‑92/00, EU:C:2002:379, paragraphs 26 to 28); Felix Swoboda (C‑411/00, EU:C:2002:660, paragraphs 26 to 28); Ing. Aigner (C‑393/06, EU:C:2008:213); Forposta and ABC Direct Contact (C‑465/11, EU:C:2012:801, paragraph 18); and Bundesdruckerei (C‑549/13, EU:C:2014:2235, paragraph 22). See also the Opinion of Advocate General Léger in Mannesmann Anlagenbau Austria and Others (C‑44/96, EU:C:1997:402, points 34 to 44); the Opinion of Advocate General Saggio in HI (C‑258/97, EU:C:1998:457, points 11 to 15); the Opinion of Advocate General Mischo in Felix Swoboda (C‑411/00, EU:C:2002:238, points 13 to 20); and the Opinion of Advocate General Ruiz-Jarabo Colomer in Ing. Aigner (C‑393/06, EU:C:2007:706, points 22 to 29).
( ) See, to that effect, judgments in Broekmeulen (246/80, EU:C:1981:218, paragraphs 15 and 17), and Handels- og Kontorfunktionærernes Forbund i Danmark (109/88, EU:C:1989:383, paragraphs 7 and 9), and the Opinion of Advocate General Ruiz-Jarabo Colomer in De Coster (C‑17/00, EU:C:2001:366, point 82).
( ) It is clear from the information provided by the referring body that, in Spain, the bodies specialising in matters concerning public procurement were created by Royal Legislative Decree 3/2011 of 14 November 2011 adopting the consolidated text of the Law on Public Sector Contracts (Boletín Oficial del Estado, No 276 of 16 November 2011, p. 117729, hereinafter ‘Royal Legislative Decree 3/2011’). Royal Legislative Decree 3/2011 created the Tribunal Administrativo Central de Recursos Contractuales (the central body) and conferred power on the Autonomous Communities to create corresponding review bodies in the Autonomous Communities.
( ) Diari Oficial de la Generalitat de Catalunya No 5931 of 29 July 2011. In accordance with the first paragraph of the fourth additional provision, ‘[t]his body shall be a specialised administrative body. It shall exercise its powers in a wholly independent manner.’
( ) Decree 221/2013 on the establishment, organisation and functioning of the Tribunal Català de Contractes del Sector Públic (Diari Oficial de la Generalitat de Catalunya No 6454 of 5 September 2013). According to the Spanish Government, these rules govern the organisation and functioning of the Tribunal Català de Contractes del Sector Públic in exactly the same way as the rules which govern the Tribunal Administrativo Central de Recursos Contractuales, laid down in Royal Legislative Decree 3/2011.
( ) Regarding this criterion of permanance, see, in particular, the judgment in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraphs 25 and 26) and the Opinion of Advocate General Léger in Mannesmann Anlagenbau Austria and Others (C‑44/96, EU:C:1997:402, paragraph 38).
( ) Article 7 of Decree 221/2013.
( ) Judgments in Dorsch Consult (C‑54/96, EU:C:1997:413, paragraph 31), and Gabalfrisa and Others (C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 37).
( ) Judgments in Corbiau (C‑24/92, EU:C:1993:118, paragraph 15); Wilson (C‑506/04, EU:C:2006:587, paragraph 49); RTL Belgium (C‑517/09, EU:C:2010:821, paragraph 38); and TDC (C‑222/13, EU:C:2014:2265, paragraph 29).
( ) Judgments in Wilson (C‑506/04, EU:C:2006:587, paragraphs 51 and 52 and the case-law cited); RTL Belgium (C‑517/09, EU:C:2010:821, paragraphs 39 and 40); and TDC (C‑222/13, EU:C:2014:2265, paragraphs 30 and 31).
( ) Judgments in Wilson (C‑506/04, EU:C:2006:587, paragraph 53 and the case-law cited), and TDC (C‑222/13, EU:C:2014:2265, paragraph 32).
( ) Judgment in TDC (C‑222/13, EU:C:2014:2265, paragraph 32), and order in Pilato (C‑109/07, EU:C:2008:274, paragraph 24). However, it should be noted that, in its judgment in Köllensperger and Atzwanger (C‑103/97, EU:C:1999:52, paragraphs 20 to 25), the Court abandoned that requirement and held the body making the reference to be a court or tribunal of a Member State despite the lack of specific provisions on challenges to or withdrawals by members.
( ) See point 23 of this Opinion.
( ) It should be noted that, in its judgment in Dorsch Consult (C‑54/96, EU:C:1997:413), the Court regarded as a court or tribunal of a Member State a Federal Supervisory Board whose ‘civil servant’ members were also members of the national administrative authority responsible for competition matters and simultaneously performed both functions (see the Opinion of Advocate General Tesauro in Dorsch Consult (C‑54/96, EU:C:1997:245, points 33 and 34)).
( ) It also seems to me that the guarantees that the ‘civil servant’ members in the case in Dorsch Consult (C‑54/96, EU:C:1997:413) could not be removed from office were weaker than those in the present case, which are set out in Article 8(4) of Decree 221/2013.
( ) See Articles 1 and 2 of Decree 221/2013.
( ) Judgments in RTL Belgium (C‑517/09, EU:C:2010:821, paragraph 47); Epitropos tou Elegktikou Synedriou (C‑363/11, EU:C:2012:825, paragraph 21); and TDC (C‑222/13, EU:C:2014:2265, paragraph 37).
( ) See judgments in Corbiau (C‑24/92, EU:C:1993:118, paragraphs 16 and 17); Belov (C‑394/11, EU:C:2013:48, paragraphs 49 and 51); and TDC (C‑222/13, EU:C:2014:2265, paragraph 37); and order in MF 7 (C‑49/13, EU:C:2013:767, paragraph 19).
( ) See Article 29 of Decree 221/2013. See also, in this connection, the judgment in Westbahn Management (C‑136/11, EU:C:2012:740, paragraph 30), in which the Court regarded as a court or tribunal of a Member State within the meaning of Article 267 TFEU the Schienen-Control Kommission (Austrian Rail Supervisory Commission), which is governed by the ordinary law of administrative procedure and whose decision cannot be set aside by administrative decisions but may be the subject of proceedings before the Verwaltungsgerichtshof (Higher Administrative Court). The Court adopted a similar approach, inter alia, in its judgment in Österreichischer Rundfunk (C‑195/06, EU:C:2007:613, paragraphs 20 to 22). See, on this point, the Opinion of Advocate General Ruiz-Jarabo Colomer in Österreichischer Rundfunk (C‑195/06, EU:C:2007:303, points 32 and 34).
( ) According to the Spanish Government, a draft law, which has already been made public, removes this option. If the draft law is approved, it will become necessary first to bring a special appeal before a review body, such as the Tribunal Català de Contractes del Sector Públic.
( ) According to the Spanish Government, this option is thus available only to the tenderer and never to the contracting authority, which cannot override the tenderer’s decision. However, that factor is not conclusive, inasmuch as the fact that a defendant (the contracting authority) is obliged to accept the applicant’s (the tenderer’s) choice of forum is an inherent part of jurisdiction (see, to that effect, the Opinion of Advocate General Szpunar in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:246, point 39 and the case-law cited)). On the other hand, it appears to me that the contractor’s entitlement to choose between bringing a special appeal before the referring body and initiating an administrative-law action means that the contractor itself will be bound by that decision as well as the authority, since the special appeal will become compulsory for the parties. It therefore seems to me that the special appeal is a procedure to which lis pendens may apply, even though that has not been expressly stated in the information furnished to the Court. The principle of lis pendens is a general procedural principle according to which proceedings are not admissible if the same matter is also sub judice elsewhere (judgments in France v Parliament (358/85 and 51/86, EU:C:1988:431, paragraph 12); Italy v Commission (C‑138/03, C‑324/03 and C‑431/03, EU:C:2005:714, paragraph 64); and Diputación Foral de Vizcaya and Others v Commission (C‑465/09 P to C‑470/09 P, EU:C:2011:372, paragraph 58); and the Opinion of Advocate General Kokott in Belov (C‑394/11, EU:C:2012:585, point 43)).
( ) Boletín Oficial del Estado, No 276 of 31 October 2007, p. 44436.
( ) Judgments in Epitropos tou Elegktikou Synedriou (C‑363/11, EU:C:2012:825, paragraph 21), and Belov (C‑394/11, EU:C:2013:48, paragraph 40 and the case-law cited).
( ) Judgment in Belov (C‑394/11, EU:C:2013:48, paragraph 41 and the case-law cited).
( ) C‑54/96, EU:C:1997:413.
( ) See, in this connection, the judgment in Almelo (C‑393/92, EU:C:1994:171, paragraph 21) and the Opinion of Advocate General Lenz in X (228/87, EU:C:1988:276, point 6), in which the term used was ‘binding jurisdiction’, the Opinion of Advocate General Lenz in Handels- og Kontorfunktionærernes Forbund i Danmark (109/88, EU:C:1989:228, point 17), in which the term used was ‘mandatory jurisdiction’, and the Opinion of Advocate General Darmon in Almelo (C‑393/92, EU:C:1994:42, points 30 and 32). In the judgment in Vaassen-Göbbels (61/65, EU:C:1966:39), the persons in question were ‘bound to take any disputes ... to the [referring body] as the proper judicial body’. In Advocate General Gand’s Opinion in Vaassen-Göbbels (61/65, EU:C:1966:25), the expression ‘sole tribunal’ was used. See also, in this connection, the Opinion of Advocate General Léger in Mannesmann Anlagenbau Austria and Others (C‑44/96, EU:C:1997:402, points 36, 37 and 40), and also footnote 40 to this Opinion.
( ) C‑54/96, EU:C:1997:413.
( ) The Opinion of Advocate General Léger in Mannesmann Anlagenbau Austria and Others (C‑44/96, EU:C:1997:402, point 36) offers a similar interpretation of the criterion prior to the judgment in Dorsch Consult (C‑54/96, EU:C:1997:413). According to that Opinion, among the criteria to be considered were the existence of a ‘compulsory reference to the body in the event of a dispute’ and of ‘competence to resolve disputes by adopting a binding decision’. In its judgment in Mannesmann Anlagenbau Austria and Others (C‑44/96, EU:C:1998:4), the Court did not address the question of admissibility, but, on examining the questions referred, implicitly regarded the referring body as a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU.
( ) Judgment in Dorsch Consult (C‑54/96, EU:C:1997:413, paragraphs 28 and 29). In its judgment in Gabalfrisa and Others (C‑110/98 to C‑147/98, EU:C:2000:145, paragraphs 35 and 36), the Court again gave consideration to these two aspects of compulsory jurisdiction, both of which were present. Similarly, in its judgment in Torresi (C‑58/13 and C‑59/13, EU:C:2014:2088, paragraph 20), the Court found to be ‘compulsory’ the jurisdiction of a body whose jurisdiction was laid down by statute and was not optional and whose decisions were enforceable. Once again, the two aspects were present. See also, in this connection, the judgment in Almelo (C‑393/92, EU:C:1994:171, paragraph 21), and the Opinion of Advocate General Darmon in Almelo (C‑393/92, EU:C:1994:42, points 30 and 32); the Opinion of Advocate General Kokott in Belov (C‑394/11, EU:C:2012:585, point 47), and the Opinion of Advocate General Bot in TDC (C‑222/13, EU:C:2014:1979, point 31).
( ) See the Opinion of Advocate General Ruiz-Jarabo Colomer in Emanuel (C‑259/04, EU:C:2006:50, point 29); the Opinion of Advocate General Kokott in Belov (C‑394/11, EU:C:2012:585, points 48 and 49); and the Opinion of Advocate General Szpunar in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:246, point 40). The Court regarded as a court or tribunal of a Member State, within the meaning of Article 267 TFEU, the bodies in question in its judgment in Emanuel (C‑259/04, EU:C:2006:215), and Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754). In its judgment in Belov (C‑394/11, EU:C:2013:48, paragraph 54), the question of the ‘compulsory jurisdiction’ of the referring body was not examined because its decision were not judicial in nature.
( ) C‑259/04, EU:C:2006:215.
( ) In addition, the decisions of the appointed person were, in principle, final, subject exceptionally to an application for judicial review (judgment in Emanuel, C‑259/04, EU:C:2006:215, paragraphs 21 to 25).
( ) C‑377/13, EU:C:2014:1754.
( ) Judgment in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraph 29). See also the Opinion of Advocate General Szpunar in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:246, points 38 to 40). Also, in its judgment in Broekmeulen (246/80, EU:C:1981:218), the Court allowed a question referred for a preliminary ruling from a professional body even though the applicant had the alternative possibility of bringing the case before an ordinary court. However, it should be noted that that alternative had never been used in practice (see paragraphs 15 and 17 of that judgment). Moreover, in the case which gave rise to the judgment in TDC (C‑222/13, EU:C:2014:2265), the economic operator was, in theory, free either to appeal to the Teleklagenævnet, a permanent public dispute resolution body, or to bring an action directly before the courts exercising general jurisdiction. According to Advocate General Bot, the existence of that choice did not preclude the Teleklagenævnet from being recognised as exercising compulsory jurisdiction (Opinion of Advocate General Bot in TDC (C‑222/13, EU:C:2014:1979, points 33 and 38)). However, the Court did not examine whether the Teleklagenævnet’s jurisdiction was compulsory because it did not meet the criterion of independence (paragraph 38 of the judgment).
( ) Admittedly, in its recent order in Emmeci (C‑427/13, EU:C:2014:2121, paragraphs 28 to 31), the Court took into account the optional nature of the remedy and held that the referring body could not be regarded as a court or tribunal of a Member State within the meaning of Article 267 TFEU. However, it must be emphasised that, in that case, the decisions of the referring body were not binding and consequently its jurisdiction was in no way compulsory in the sense ascribed to that term in the judgment in Dorsch Consult (C‑54/96, EU:C:1997:413). The same situation pertained in the case which gave rise to the order in Cafom and Samsung (C‑161/03, EU:C:2003:413, paragraphs 14 and 15).
( ) See, in this connection, footnotes 41 and 47 of this Opinion. Nevertheless, at the hearing, the Commission asserted that interpreting this case-law a contrario could result in the conclusion that it is necessary for the legal remedy in question to be the only reasonable remedy. According to the Commission, account would nevertheless have to be taken of the particular legal context in which the referring body sought a ruling from the Court of Justice (judgment in Belov (C‑394/11, EU:C:2013:48, paragraph 41)) in order to avoid such an interpretation. In any event, I do not think that an interpretation a contrario of this point is possible, since the Court has never stated that the list of criteria established in the case-law is exhaustive. It has, on the other hand, already held that the inter partes nature of the procedure is not an absolute requirement (see point 24 of this Opinion).
( ) However, in its judgment in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraph 27), the Court confirmed that this criterion was relied on in its case-law relating to arbitration tribunals appointed by contract.
( ) Judgments in Nordsee (102/81, EU:C:1982:107, paragraphs 10 to 12); Denuit and Cordenier (C‑125/04, EU:C:2005:69, paragraphs 13 and 16 and the case-law cited); and Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraph 27). See also the order in Merck Canada (C‑555/13, EU:C:2014:92, paragraph 17).
( ) Judgments in Handels- og Kontorfunktionærernes Forbund i Danmark (109/88, EU:C:1989:383, paragraphs 7 to 9) and Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraphs 28 and 29). See also the order in Merck Canada (C‑555/13, EU:C:2014:92, paragraphs 18 and 19).
( ) See, to that effect, the judgment in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraph 29).
( ) See, to that effect, the Opinion of Advocate General Kokott in Belov (C‑394/11, EU:C:2012:585, point 48). On the other hand, if an administrative-law action were brought only after a decision had been given by a special body, such as the Tribunal Català de Contractes del Sector Públic, the problem would not arise because, at that stage, the action before the ordinary administrative courts would unquestionably be compulsory. Nevertheless, it should be noted that, according to the Spanish Government, the decisions of review bodies such as the Tribunal Català de Contractes del Sector Públic are rarely appealed before the administrative courts and thus the decisions of such review bodies are often final.
( ) It should not be forgotten that, in civil matters, alternative jurisdictions may exist. See, for examples, Articles 7 and 8 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2012 L 351, p.1), which list a number of alternative fora in civil matters.
( ) On the specialisation of courts, see the Opinion of Advocate General Szpunar in Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:246, point 50).
( ) In accordance with Article 26 of Decree 221/2013, the Tribunal Català de Contractes del Sector Públic may find that a determination made by a contracting authority is unlawful and, where appropriate, annul it and also order the contracting authority to pay compensation to the party concerned for damage suffered. It also has substantive jurisdiction to decide on the adoption of provisional measures before a special appeal in a public procurement matter is lodged and to resolve questions relating to invalidity that are based on specific cases in which contracts are null and void.
( ) I would reiterate that, according to the Spanish Government, such decisions are rarely appealed (see point 53 of this Opinion). |
JUDGMENT OF THE COURT (Fifth Chamber)
9 November 2016 ( *1 )
‛Reference for a preliminary ruling — Novel foods and novel food ingredients — Regulation (EC) No 258/97 — Article 1(2)(c) — Concept of foods and food ingredients with a new primary molecular structure’
In Case C‑448/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Bayerischer Verwaltungsgerichtshof (Higher Administrative Court of Bavaria, Germany), made by decision of 15 September 2014, received at the Court on 26 September 2014, in the proceedings
Davitas GmbH
v
Stadt Aschaffenburg,
intervener:
Landesanwaltschaft Bayern,
THE COURT (Fifth Chamber),
composed of J.L. da Cruz Vilaça, President of the Chamber, A. Tizzano (Rapporteur), Vice-President of the Court, A. Borg Barthet, E. Levits and F. Biltgen, Judges,
Advocate General: M. Szpunar,
Registrar: K. Malacek, Administrator,
having regard to the written procedure and further to the hearing on 29 October 2015,
after considering the observations submitted on behalf of:
—
Davitas GmbH, by C. Sachs, Rechtsanwältin,
—
Stadt Aschaffenburg, by A. Schellenberg, Rechtsanwältin,
—
Landesanwaltschaft Bayern, by R. Käß, acting as Agent,
—
the Greek Government, by I. Chalkias, O. Tsirkinidou and A. Vasilopoulou, acting as Agents,
—
the European Commission, by S. Grünheid and K.A. Herbout-Borczak, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 21 January 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 1(2)(c) of Regulation (EC) No 258/97 of the European Parliament and of the Council of 27 January 1997 concerning novel foods and novel food ingredients (OJ 1997 L 43, p. 1), as amended by Regulation (EC) No 596/2009 of the European Parliament and of the Council of 18 June 2009 (OJ 2009 L 188, p. 14) (‘Regulation No 258/97’).
The request has been made in proceedings between Davitas GmbH and Stadt Aschaffenburg (municipality of Aschaffenburg, Germany) concerning a decision of Stadt Aschaffenburg prohibiting the marketing of a food product called ‘De Tox Forte’.
Legal context
EU law
According to recitals 1 and 2 of Regulation No 258/97:
‘(1)
[D]ifferences between national laws relating to novel foods or food ingredients may hinder the free movement of foodstuffs; … they may create conditions of unfair competition, thereby directly affecting the functioning of the internal market;
(2)
[I]n order to protect public health, it is necessary to ensure that novel foods and novel food ingredients are subject to a single safety assessment through a Community procedure before they are placed on the market within the [European Union] …’
Article 1 of Regulation No 258/97 reads as follows:
‘1. This Regulation concerns the placing on the market within the [Union] of novel foods or novel food ingredients.
2. This Regulation shall apply to the placing on the market within the [Union] of foods and food ingredients which have not hitherto been used for human consumption to a significant degree within the [Union] and which fall under the following categories:
(c)
foods and food ingredients with a new or intentionally modified primary molecular structure;
(d)
foods and food ingredients consisting of or isolated from micro-organisms, fungi or algae;
(e)
foods and food ingredients consisting of or isolated from plants and food ingredients isolated from animals, except for foods and food ingredients obtained by traditional propagating or breeding practices and having a history of safe food use;
(f)
foods and food ingredients to which has been applied a production process not currently used, where that process gives rise to significant changes in the composition or structure of the foods or food ingredients which affect their nutritional value, metabolism or level of undesirable substances.
…’
German law
Paragraph 39(2) of the Lebensmittel-, Bedarfsgegenstände- und Futtermittelgesetzbuch (Code on foodstuffs, consumer items and animal feed), in the version published on 3 June 2013 (BGBl 2013 I, p. 1426), as amended by the Law of 7 August 2013 (BGBl 2013 I, p. 3154), provides:
‘The competent authorities shall give the instructions and take the measures necessary to confirm or dispel a sufficient suspicion of infringement, to eliminate infringements which have been established, to prevent future infringements and to protect against health risks and deception. They may in particular
…
3.
prohibit or restrict the production, handling or placing on the market of products …’
In accordance with Paragraph 3(1) of the Verordnung zur Durchführung gemeinschaftsrechtlicher Vorschriften über neuartige Lebensmittel und Lebensmittelzutaten (Regulation on the implementation of the provisions of Community law on novel foods and novel food ingredients), in the version published on 14 February 2000 (BGBl. 2000 I, p. 123), as amended by the notice of 27 May 2008 (BGBl. 2008 I, p. 919):
‘Foods and food ingredients within the meaning of Article 1 of Regulation No 258/97 shall not, subject to subparagraph 2, be placed on the market by the person responsible for placing on the market without an authorisation granted in accordance with the procedures referred to in Article 3(2) of Regulation No 258/97.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
From 1 August 2012 Davitas marketed De Tox Forte, a food product whose sole ingredient is clinoptilolite, a mineral substance of volcanic origin, in Germany.
In January 2013 the municipality of Aschaffenburg requested the Bayerisches Landesamt für Gesundheit und Lebensmittelsicherheit (Office of the State of Bavaria for Health and Food Safety, Germany) to analyse a sample of the product.
In its expert report of 1 March 2013 that office found that clinoptilolite should be regarded as a ‘novel food ingredient’ within the meaning of Regulation No 258/97, as no evidence had been produced of significant consumption of that ingredient within the EU before 15 May 1997.
On the basis of the expert report, by decision of 6 June 2013 the municipality of Aschaffenburg classified De Tox Forte as a ‘novel food’ within the meaning of that regulation, in that it consisted solely of clinoptilolite. On that ground, it prohibited Davitas from marketing it until the grant of an authorisation to place it on the market pursuant to the provisions of the regulation.
Davitas brought an action for the annulment of that decision before the Bayerisches Verwaltungsgericht Würzburg (Bavarian Administrative Court, Würzburg, Germany). In that action, Davitas conceded that clinoptilolite had not been used for human consumption ‘to a significant degree’ in the EU before 15 May 1997. It nonetheless submitted that, in any event, that ingredient could not be categorised as ‘novel’, because it did not satisfy the second condition in Article 1(2) of Regulation No 258/97 in that it did not fall under any of the categories defined in Article 1(2)(c) to (f).
In particular, as regards the category referred to in Article 1(2)(c), Davitas argued that clinoptilolite did not have a ‘new primary molecular structure’ within the meaning of that provision, since that ingredient was present in nature before 15 May 1997 with the same molecular structure as that used for the preparation of De Tox Forte.
By judgment of 23 April 2014, the Bayerisches Verwaltungsgericht Würzburg (Bavarian Administrative Court, Würzburg) dismissed Davitas’s action on the ground that, for the purposes of the application of Article 1(2)(c) of Regulation No 258/97, it was immaterial that clinoptilolite existed in nature before 15 May 1997 with a similar molecular structure to that used for the preparation of De Tox Forte, since it had been shown that that ingredient was not at that time consumed as a food.
The Bayerischer Verwaltungsgerichtshof (Higher Administrative Court of Bavaria, Germany), to which Davitas appealed against that judgment, entertains doubts as to the interpretation of Article 1(2)(c) of that regulation.
In those circumstances, the Bayerischer Verwaltungsgerichtshof (Higher Administrative Court of Bavaria) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘1.
Is the product “De Tox Forte” marketed by the appellant a food or food ingredient with a new molecular structure within the meaning of Article 1(2)(c) of Regulation No 258/97?
2.
In particular, does it suffice, in order to be able to answer this question in the affirmative, that that product, which contains the substance clinoptilolite in its particular primary molecular structure, was not yet being used as a food prior to 15 May 1997, or is it also necessary that that product is produced by means of a production process which results in a new or intentionally modified molecular structure, that is, it must be a substance which did not previously exist in nature in that form?’
Consideration of the questions referred
By its questions, which should be considered together, the referring court essentially asks whether Article 1(2)(c) of Regulation No 258/97 must be interpreted as meaning that the expression ‘new primary molecular structure’ relates to foods or food ingredients which were not used for human consumption in the territory of the EU before 15 May 1997, or to those whose molecular structure did not exist as such in nature before that date.
To answer that question, it should be noted as a preliminary point that the subject of the regulation is the placing on the market of novel foods and novel food ingredients (judgment of 9 June 2005, HLH Warenvertrieb and Orthica, C‑211/03, C‑299/03 and C‑316/03 to C‑318/03, EU:C:2005:370, paragraph 81).
Article 1(2) of the regulation seeks to delimit the scope of the regulation, in particular by defining what is to be understood by novel foods and food ingredients (judgments of 9 June 2005, HLH Warenvertrieb and Orthica, C‑211/03, C‑299/03 and C‑316/03 to C‑318/03, EU:C:2005:370, paragraph 82, and 15 January 2009, M-K Europa, C‑383/07, EU:C:2009:8, paragraph 15).
It is apparent from the very wording of that provision that, to be categorised as ‘novel’ within the meaning of Regulation No 258/97, foods or food ingredients must satisfy two cumulative conditions.
First, it is necessary that human consumption of those substances was not ‘significant’ within the EU before 15 May 1997, the date of entry into force of that regulation (see, to that effect, judgment of 9 June 2005, HLH Warenvertrieb and Orthica, C‑211/03, C‑299/03 and C‑316/03 to C‑318/03, EU:C:2005:370, paragraphs 82 and 87).
Secondly, it is necessary that the substances also fall within one of the categories expressly described in Article 1(2)(c) to (f) of the regulation.
In this respect, it should be noted that the category defined in Article 1(2)(c), which is the subject of the questions referred, includes in particular foods and food ingredients ‘with a new … primary molecular structure’.
That wording shows that the category defined by that provision differs from the other categories in Article 1(2) of Regulation No 258/97 in its generic reference to the ‘primary molecular structure’ of a food or food ingredient, whereas Article 1(2)(d) and (e) relate more specifically to organic substances of a particular composition and Article 1(2)(f) of the regulation refers to substances to which a new production process has been applied giving rise to significant changes in their composition or structure.
It follows that the category mentioned in Article 1(2)(c) of the regulation may include different substances, regardless of their composition or production process, in so far as they have a ‘new primary molecular structure’.
However, those words are not defined in Regulation No 258/97, which thus contains no indications from which it can be determined whether the category in Article 1(2)(c) of the regulation includes foods or food ingredients which were not used for human consumption in the EU before 15 May 1997, or whether it only covers foods or food ingredients whose primary molecular structure was created ex novo or modified compared to that already existing in nature before that date.
According to settled case-law, the meaning and scope of terms for which EU law provides no definition must be determined by reference to their usual meaning in everyday language, while account is also taken of the context in which they occur and the purposes of the rules of which they form part (judgment of 24 June 2015, Hotel Sava Rogaška, C‑207/14, EU:C:2015:414, paragraph 25 and the case-law cited).
In the present case, the ordinary meaning of ‘new primary molecular structure’ does not in itself enable an unequivocal interpretation of the expression to be given. As the Advocate General observes in point 30 of his Opinion, the expression can equally well refer in ordinary language to a primary molecular structure newly used in human food or to such a structure newly created or modified by man.
To interpret that expression, both the context in which the words in Article 1(2)(c) of Regulation No 258/97 are used and, more broadly, the purpose of the regulation must therefore be considered.
As regards, first, the context of that provision, it must be stated that, as the Advocate General observes in point 39 of his Opinion, the regulation is an instrument of a general nature, in that it covers all novel foods or food ingredients irrespective of their nature, with the exception of certain areas regulated by sector-specific legislation.
The interpretation of Article 1(2)(c) of Regulation No 258/97 to the effect that the expression ‘new primary molecular structure’ relates to foods or food ingredients not used for human consumption in the EU before 15 May 1997 is the only interpretation compatible with that context. To interpret those words differently would deprive the regulation of its general nature, in that such an interpretation would amount to excluding from its scope all foods or food ingredients, in particular those of mineral origin, that already existed in nature in their primary molecular structure before 15 May 1997 and are not composed of the organic substances referred to in Article 1(2)(d) and (e) of the regulation or are not subject to a new production process within the meaning of Article 1(2)(f) of the regulation.
As regards, secondly, the objectives pursued by Regulation No 258/97, it should be recalled that the regulation has a twofold objective not only of ensuring the functioning of the internal market in novel foods but also of protecting public health against the risks to which they may give rise (see, to that effect, judgment of 15 January 2009, M-K Europa, C‑383/07, EU:C:2009:8, paragraph 22 and the case-law cited).
For those purposes, the regulation aims to establish common standards within the EU in the field of novel foods and novel food ingredients, in particular, as stated in recital 2, by introducing a single safety assessment of those foods and food ingredients through a Community procedure before they are placed on the EU market (judgment of 15 January 2009, M-K Europa, C‑383/07, EU:C:2009:8, paragraph 23).
Only an interpretation of Article 1(2)(c) of Regulation No 258/97 as meaning that the expression ‘new primary molecular structure’ covers foods or food ingredients which were not used for human consumption in the EU before 15 May 1997 is consistent with the pursuit of those objectives. That interpretation makes it possible to ensure the effective protection of public health against potential risks produced by novel foods and food ingredients, in that a single safety assessment will be required whenever it is proposed to use for human consumption a substance which has not hitherto been consumed by man as a food.
Conversely, if the concept of foods or food ingredients with a ‘new primary molecular structure’ covered only substances which did not exist in nature with the same primary molecular structure before 15 May 1997, any substance existing on that date which has not yet been used for human consumption and does not fall within any of the specific categories in Article 1(2)(d) to (f) of Regulation No 258/97 would be automatically exempted from the safety assessment laid down by that regulation before being put on the market in the EU, without it being possible to evaluate the possibility of a risk to health.
It is for the referring court to ascertain, in the light of those factors, in the main proceedings whether the competent national authorities applied Article 1(2)(c) of the regulation correctly when they categorised De Tox Forte as a ‘novel food’.
Having regard to all the above considerations, the answer to the questions is that Article 1(2)(c) of Regulation No 258/97 must be interpreted as meaning that the expression ‘new primary molecular structure’ relates to foods or food ingredients which were not used for human consumption in the territory of the EU before 15 May 1997.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
Article 1(2)(c) of Regulation (EC) No 258/97 of the European Parliament and of the Council of 27 January 1997 concerning novel foods and novel food ingredients, as amended by Regulation (EC) No 596/2009 of the European Parliament and of the Council of 18 June 2009, must be interpreted as meaning that the expression ‘new primary molecular structure’ relates to foods or food ingredients which were not used for human consumption in the territory of the European Union before 15 May 1997.
[Signatures]
( *1 ) Language of the case: German. |
OPINION OF ADVOCATE GENERAL
BOT
delivered on 25 November 2015 ( )
Case C‑441/14
Dansk Industri (DI), acting on behalf of Ajos A/S
v
Estate of Karsten Eigil Rasmussen
(Request for a preliminary ruling
from the Højesteret (Supreme Court, Denmark))
‛Request for a preliminary ruling — Social policy — Directive 2000/78/EC — Principle of non-discrimination on grounds of age — Principles of legal certainty and of the protection of legitimate expectations — Dispute between individuals — Role of the national courts — Obligation to interpret national law in conformity with EU law — Interpretation contra legem’
1.
This request for a preliminary ruling concerns the interpretation of the principles of non-discrimination on grounds of age, legal certainty and the protection of legitimate expectations.
2.
It has arisen after the Court delivered its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), in which it held that Articles 2 and 6(1) of Council Directive 2000/78 of 27 November 2000 establishing a general framework for equal treatment in employment and occupation ( ) must be interpreted as precluding national legislation pursuant to which workers eligible for an old-age pension from their employer under a pension scheme they have joined before attaining the age of 50 years may not, on that ground alone, claim a severance allowance aimed at assisting workers with more than 12 years of service in the undertaking in finding new employment.
3.
The dispute which gave rise to that judgment was between an employee and a public-sector employer. In the present case the dispute is between two private persons, who disagree on the matter of the payment of a severance allowance. Consequently, the Court is once again asked to address the issue of how EU law is to be applied by national courts in the context of disputes between private persons.
4.
The dispute in the present case is between Dansk Industri (DI), acting on behalf of Ajos A/S, ( ) and the legal heirs of Mr Rasmussen and it concerns Ajos’s refusal to pay Mr Rasmussen a severance allowance.
5.
In this Opinion I shall set out the reasons for which, in the context of the present case, it is for the national court before which a dispute between individuals falling within the scope of Directive 2000/78 has been brought, when applying provisions of national law, to interpret those provisions in such a way that they can be applied in a manner which is consistent with the wording and objective of that directive. I shall also explain why I believe that the existence of national case-law which is inconsistent with Directive 2000/78 presents no obstacle to the national court’s fulfilment of its obligation to interpret national law in conformity with EU law. I shall also suggest that, in circumstances such as those of the case in the main proceedings, neither the principle of legal certainty nor the principle of the protection of legitimate expectations militates against the fulfilment of that obligation.
I – Legal framework
A – Directive 2000/78
6.
According to Article 1 thereof, the purpose of Directive 2000/78 is ‘to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment.
7.
Article 2 of the directive states:
‘1. For the purposes of this directive, the “principle of equal treatment” shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1.
2. For the purposes of paragraph 1:
(a)
direct discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated in a comparable situation, on any of the grounds referred to in Article 1;
...’
8.
Article 6 of the directive is worded as follows:
‘1. Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.
Such differences of treatment may include, among others:
(a)
the setting of special conditions on access to employment and vocational training, employment and occupation, including dismissal and remuneration conditions, for young people, older workers and persons with caring responsibilities in order to promote their vocational integration or ensure their protection;
(b)
the fixing of minimum conditions of age, professional experience or seniority in service for access to employment or to certain advantages linked to employment;
...’
B – Danish law
9.
Paragraph 2a of the Law on salaried employees (Lov om retsforholdet mellem arbejdsgivere og funktionærer (funktionærloven)) contains the following provisions on severance allowances:
‘1. In the event of the dismissal of a salaried employee who has been continuously employed in the same undertaking for 12, 15 or 18 years, the employer shall, on termination of the employment relationship, pay a sum to the employee corresponding to, respectively, one, two or three months’ salary.
2. The provisions of subparagraph (1) shall not apply if the employee will receive a State retirement pension on termination of the employment relationship.[ ( )]
3. No severance allowance shall be payable if, on termination of the employment relationship, the employee will receive an old-age pension from the employer and the employee joined the pension scheme in question before reaching 50 years of age.
...’
10.
The Højesteret (Supreme Court) states that the Kingdom of Denmark transposed Directive 2000/78 by adopting Law No 1417 amending the Law on the principle of non-discrimination on the labour market (Lov nr. 1417 om ændring af lov om forbud mod forskelsbehandling på arbejdsmarkedet m.v.) of 22 December 2004. ( )
11.
The national court also indicates that, since the introduction in 1971 of Article 2a of the Law on salaried employees, it has given a number of rulings on the interpretation of Article 2a(3), in particular, following the amendment of the anti-discrimination law in 2004. In a judgment handed down on 17 January 2014, ( ) in which it expressed its position on the consequences of the Court’s judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) for the application by public-sector employers of Article 2a(3), the national court made the following statement with regard to the case-law on that provision and the consequences of the Court of Justice’s ruling:
‘In the case-law (most recently, the judgment of the Supreme Court published in UfR 2008.1892), Article 2a(3) of the Law on salaried employees has consistently been interpreted as meaning that an employee is not entitled to a severance allowance if he is entitled to an old-age pension … regardless of whether or not he has temporarily waived his right to that pension in order to continue with his career. The legislative provision in question was not amended following the judgment in Ingeniørforeningen i Danmark ((C‑499/08, EU:C:2010:600)). However, following that judgment, it can no longer be applied by public-sector employers where the employee demonstrates an intention temporarily to waive his right to an old-age pension in order to continue with his career.’
II – The dispute in the main proceedings and the questions referred for a preliminary ruling
12.
Mr Rasmussen was dismissed from Ajos and his employment relationship terminated at the end of June 2009. Having been with the company since 1 June 1984, he was, in principle, entitled to a severance allowance equal to three months’ salary, pursuant to Article 2a(1) of the Law on salaried employees. However, since he had reached 60 years of age on the date of his departure and was entitled to an old-age pension payable by the employer under a scheme which he had joined before reaching 50 years of age, Article 2a(3) of the said law, as interpreted in consistent national case-law, barred his entitlement to the severance allowance, even though he remained on the employment market after his departure.
13.
In March 2012, the Dansk Formands Forening brought an action on Mr Rasmussen’s behalf against Ajos claiming the payment of a severance allowance equal to three months’ salary as provided for in Article 2a(1) of the Law on salaried employees. The Dansk Formands Forening relied in this connection on the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600).
14.
On 14 January 2014, the Sø- og Handelsretten (Maritime and Commercial Court) upheld the claim brought by the legal heirs of Mr Rasmussen, since deceased, for payment of the severance allowance. That court held that it was clear from the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) that Article 2a(3) of the Law on salaried employees was contrary to Directive 2000/78 and that the previous national interpretation of that provision was inconsistent with the general principle, enshrined in EU law, prohibiting discrimination on grounds of age.
15.
Ajos brought an appeal against that judgment before the Højesteret (Supreme Court). In support of its appeal, it argues that any interpretation of Article 2a(3) of the Law on salaried employees that was consistent with the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) would be contra legem. It also argues that the application of a rule as clear and unambiguous as Article 2a(3) of the Law on salaried employees could not be precluded on the basis of the general principle of EU law prohibiting discrimination on grounds of age without jeopardising the principles of legal certainty and the protection of legitimate expectations.
16.
The legal heirs of Mr Rasmussen maintain their claim for the payment of a severance allowance pursuant to Article 2a(1) of the Law on salaried employees and claim compensation pursuant to Article 7 of the anti-discrimination law.
17.
In its order for reference, the Højesteret points out that it is apparent from the judgment in Dominguez (C‑282/10, EU:C:2012:33) that, in relationships between private persons, it is not possible to give direct effect to the provisions of a directive. In the context of a dispute between private persons, any conflict between a provision of domestic law and a directive must be resolved by interpreting the provision of domestic law in conformity with EU law. However, there are certain limits on the principle of consistent interpretation, and it cannot serve as the basis for an interpretation of domestic law contra legem. In the present case, in accordance with consistent national case-law, interpreting Article 2a(3) of the Law on salaried employees in a manner consistent with EU law would be contra legem.
18.
According to the Højesteret, it thus becomes necessary to examine whether a general principle of EU law, such as the principle prohibiting discrimination on grounds of age, may be invoked against a private-sector employer in order to compel that employer to pay a severance allowance provided for under Danish law even when, under Danish law, the employer is relieved of any such obligation. The present case thus also raises the question of the extent to which an unwritten principle of EU law can prevent a private party from relying on a provision of national law.
19.
In order to address these questions, the national court regards it as necessary to know whether the principle prohibiting discrimination on grounds of age has the same content and scope in this regard as Directive 2000/78 or whether the directive affords broader protection against discrimination on grounds of age than the aforementioned principle.
20.
The national court also queries whether the principle prohibiting discrimination on grounds of age may, as appears from the judgments in Mangold (C‑144/04, EU:C:2005:709) and Kücükdeveci (C‑555/07, EU:C:2010:21), be directly applied in relationships between private persons and how the direct application of that principle is to be weighed against the principle of legal certainty and its corollary, the principle of the protection of legitimate interests.
21.
The national court also questions whether, in a situation such as that in the case in the main proceedings, EU law permits a national court to weigh the principle prohibiting discrimination on grounds of age against the principles of legal certainty and the protection of legitimate interests and to conclude that the principle of legal certainty must take precedence over the principle prohibiting discrimination on grounds of age, such that an employer would, in accordance with national law, be relieved of its obligation to pay a severance allowance.
22.
In this connection, the national court also questions whether the fact that employees can, in appropriate cases, claim compensation from the Danish State on account of the incompatibility of Danish law with EU law may be taken into account when that balancing exercise is carried out.
23.
It was in those circumstances that the Højesteret decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘1.
Does the general principle of EU law prohibiting discrimination on grounds of age preclude legislation, such as the Danish legislation, which deprives an employee of entitlement to a severance allowance where the employee is entitled to claim an old-age pension from the employer under a pension scheme which the employee joined before reaching 50 years of age, regardless of whether the employee chooses to remain on the employment market or take his retirement?
2)
Is it consistent with EU law for a Danish court hearing an action in which an employee seeks from a private-sector employer the payment of a severance allowance which, under the Danish law described in question 1, the employer is not bound to pay, even though that is contrary to the principle prohibiting discrimination on grounds of old age, to weigh that principle and the issue of its direct effect against the principle of legal certainty and the related principle of the protection of legitimate expectations and to conclude that the principle of legal certainty must take precedence over the principle prohibiting discrimination on grounds of age, such that the employer would, in accordance with national law, be relieved of its obligation to pay the severance allowance and, in order to determine whether such a balancing exercise may be carried out, is it necessary to take into consideration the fact that the employee may, in appropriate cases, claim compensation from the Danish State on account of the incompatibility of Danish law with EU law?’
III – My analysis
24.
Before proceeding to analyse the questions referred by the national court, it is appropriate that I set out the Court’s findings in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600).
25.
In that case, the Court was called upon to determine whether Articles 2 and 6(1) of Directive 2000/78 were to be interpreted as precluding national legislation pursuant to which employees who are eligible for an old-age pension from their employer under a pension scheme which they joined before reaching 50 years of age cannot, on that ground alone, claim a severance allowance aimed at assisting workers with more than 12 years of service in the undertaking in finding new employment.
26.
I would reiterate that, under Article 2a(1) of the Law on salaried employees, an employee that has been with the same company for an uninterrupted period of 12, 15 or 18 years is entitled to a severance allowance. By way of exception, Article 2a(3) of that law provides that, if the employee will, on termination of the employment relationship, receive an old-age pension from the employer and the employee joined the pension scheme in question before reaching 50 years of age, the severance allowance is not payable.
27.
I would note that, in its presentation of the Danish legislation, the Court mentioned a clarification offered by the Vestre Landsret (Western Regional Court): ‘according to settled national case-law, there is no entitlement to a severance allowance where a private pension scheme to which the employer has contributed allows payment of an old-age pension on termination of the employment relationship, even if the employee does not wish to exercise his right to retirement’. ( )
28.
The Court of Justice found that the national legislation at issue provided for a difference in treatment based directly on grounds of age for the purposes of Article 1 of Directive 2000/78 in conjunction with Article 2(2)(a) thereof. ( ) It considered that the aim of the severance allowance of protecting employees with many years of service in an undertaking and helping them to find new employment could, in principle be regarded as justifying a difference in treatment on grounds of age. ( )
29.
The Court also held that ‘[r]estricting the severance allowance to only those workers who, on termination of the employment relationship, are not entitled to an old-age pension to which their employer has contributed [did] not appear unreasonable in the light of the objective pursued by the legislature of providing increased protection for workers for whom it is very difficult to find new employment as a result of their length of service for an undertaking’. ( ) It added that ‘Article 2a(3) of the Law on salaried employees also [made] it possible to limit the scope for abuse by preventing workers who intend to retire from claiming a severance allowance which is intended to support them while seeking new employment’. ( ) The Court concluded from that that the provision ‘[did] not appear to be manifestly inappropriate for attaining the legitimate employment policy objective pursued by the legislature’. ( )
30.
The Court then went on to ascertain whether the measure at issue went beyond what was necessary to attain the objective pursued by the legislature and drew the following distinction.
31.
First, strictly on the basis of the wording of Article 2a(3) of the Law on salaried employees, the Court concluded that that provision, ‘in so far as it [excluded] from entitlement to the severance allowance workers who [would] receive, on termination of the employment relationship, an old-age pension from their employer, [did] not go beyond what [was] necessary to attain the objectives which it [pursued]. ( )
32.
Secondly, the Court took account of the clarification provided by the Vestre Landsret concerning the scope of Article 2a(3) of the Law on salaried employees as established in consistent national case-law, which treated those who would actually receive an old-age pension from their employer in the same way as those who were merely eligible for such a pension. It found, in that regard, that, ‘by not permitting payment of the severance allowance to workers who, although eligible for an old-age pension from their employer, none the less [wished] to waive their right to such a pension temporarily in order to continue with their career, Article 2a(3) of the Law on salaried employees unduly [prejudiced] the legitimate interests of workers in such a situation and thus [went] beyond what [was] necessary to attain the social policy aims pursued by that provision’. ( ) Therefore, the difference in treatment resulting from that provision could not, according to the Court, be justified under Article 6(1) of Directive 2000/78. ( )
33.
In its observations, the Danish Government points out that the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) concerned an employment relationship between an employee and a public-sector employer, that is to say, a ‘vertical’ relationship. It infers from that that the Court gave no ruling in its judgment on the question whether, in the light of EU law, Article 2a(3) of the Law on salaried employees could, despite the fact that it could not apply to relationships between employees and public-sector employers, nevertheless continue to apply to purely ‘horizontal’ relationships between employees and private-sector employers.
34.
In my view, it may be inferred in a general fashion from the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) that Article 2a(3) of the Law on salaried employees, as interpreted by the national courts, is incompatible with Articles 2 and 6(1) of Directive 2000/78. While the dispute which gave rise to that judgment was between an employee and a public-sector employer, it nevertheless follows from that judgment that the provision of national law in question quite simply cannot be applied to relationships between employees and employers, whether the relationship is governed by public law or by private law. The contrary view would result in restricting the scope of the Court’s judgment to a single category of legal relationship, that is to say, relationships governed by public law.
35.
Indeed, the interpretation of Directive 2000/78 which the Court gave in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) highlighted the reasons for which Article 2a(3) of the Law on salaried employees, as interpreted by the national courts, must be regarded as incompatible with that directive. Those reasons hold true regardless of the nature of the legal relationship at issue, whether it is governed by public law or by private law.
36.
However, in the view of the referring court, giving effect to the solution identified by the Court in that judgment in disputes between private persons raises certain difficulties, and these difficulties led it to make the present request for a preliminary ruling.
37.
According to the referring court, giving effect to that solution poses no problem where the employer is a public-sector body. In such a case, the inconsistency of Article 2a(3) of the Law on salaried employees with Directive 2000/78 may, in its view, be resolved by the employee’s invoking the directive and relying on its provisions, provided that they appear to be unconditional and sufficiently precise, with the result that the application of Article 2a(3) of the Law on salaried employees may be precluded in specific cases.
38.
The national court points out that, in relationships between private persons, on the other hand, the provisions of a directive may not be given direct effect. It states that, in such a situation, any inconsistency between a provision of national law and a directive may be resolved, in so far as is possible, by interpreting the provision of national law at issue in a manner consistent with the directive concerned, in such a way as to attenuate the apparent contradiction between the two. The national court states, however, that the principle of consistent interpretation is subject to certain limits and, in particular, that it cannot serve as the basis for a contra legem interpretation of national law.
39.
According to the Højesteret, a limitation of that kind does present itself in this case and it is necessary, in accordance with the case-law in Mangold (C‑144/04, EU:C:2005:709) and Kücükdeveci (C‑555/07, EU:C:2010:21), to have recourse to the principle prohibiting discrimination on grounds of age in order to resolve the dispute between the two private parties to the main proceedings. Having recourse to that principle would then present the referring court with the problem of weighing the principle of non-discrimination against the principles of legal certainty and the protection of legitimate expectations.
40.
The reasoning followed by the national court in formulating its questions appears to me to accord, at least in part, with the latest developments in the Court’s case-law on the application of the principle prohibiting discrimination on grounds of age in disputes between private parties. Indeed, it is consistent with that case-law for recourse to be had to a general principle of law, given the Court’s consistent refusal to extend the direct effect of directives ‘horizontally’. I would recall in this connection that, in disputes between individuals, the Court has consistently held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied on as such against an individual. ( )
41.
Be that as it may, it is also clear from the case-law of the Court that directives are not entirely devoid of any effect in the context of disputes between individuals. The obligation upon national courts to interpret national law in conformity with the content and objectives of directives means that directives may have an indirect effect in such disputes.
42.
With regard to the role of the national court when called on to give judgment in proceedings between individuals in which it is apparent that the national legislation at issue is contrary to EU law, the Court has held that ‘it is for the national courts to provide the legal protection which individuals derive from the rules of EU law and to ensure that those rules are fully effective’. ( ) Moreover, ‘the Member States’ obligation arising from a directive to achieve the result envisaged by that directive and their duty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation are binding on all the authorities of the Member State, including, for matters within their jurisdiction, the courts’. ( )
43.
It follows that, ‘when national courts apply domestic law, they are bound to interpret it, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and consequently comply with the third paragraph of Article 288 TFEU. This obligation to interpret national law in conformity with EU law is inherent in the system of the TFEU, since it permits national courts, for the matters within their jurisdiction, to ensure the full effectiveness of EU law when they determine the disputes before them.’ ( )
44.
The obligation of consistent interpretation relates to the whole body of rules of national law, ( ) including national case-law. ( )
45.
The Court has also made clear that, ‘if the application of interpretative methods recognised by national law enables, in certain circumstances, a provision of domestic law to be construed in such a way as to avoid conflict with another rule of domestic law or the scope of that provision to be restricted to that end by applying it only in so far as it is compatible with the rule concerned, the national court is bound to use those methods in order to achieve the result sought by the directive at issue’. ( )
46.
The requirement to interpret national law in conformity with EU law thus requires ‘national courts to do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law, with a view to ensuring that the directive in question is fully effective and achieving an outcome consistent with the objective pursued by it’. ( )
47.
It is only when it proves impossible for the national courts to give effect to an interpretation of domestic law in conformity with Directive 2000/78 that the principle prohibiting discrimination on grounds of age becomes the rule of reference enabling the court to resolve disputes between individuals by neutralising the application of the domestic law that is inconsistent with EU law. This principle then acts as a palliative for the lack of horizontal direct effect of Directive 2000/78 and for the inability of national courts to interpret national law in conformity with that directive. I would also note that, in the most recent case-law, the Court has clearly emphasised the primary role which it intends to ascribe to the obligation to interpret national provisions in a manner consistent with EU law. ( )
48.
Before resorting to the principle prohibiting discrimination on grounds of age as the ultimate solution for resolving inconsistencies between national law and EU law, national courts must, therefore, duly ascertain that their national law is incapable of being interpreted in conformity with Directive 2000/78.
49.
The Court has stated in this connection that the requirement to interpret national law in conformity with EU law is subject to certain limits. Thus, the obligation on a national court to refer to the content and purpose of a directive when interpreting and applying the relevant rules of domestic law ‘is limited by the general principles of law, particularly [that] of legal certainty … and that obligation cannot serve as the basis for an interpretation of national law contra legem’. ( )
50.
Consequently, it is only where the Court recognises, on the basis of the observations submitted to it, that the national court has actually encountered such a limitation that it will proceed, as it did in its judgment in Kücükdeveci (C‑555/07, EU:C:2010:21), to interpret the general principle of law which the provision of secondary law is intended to put into specific terms. In the event of a conflict between the principle and the national law, the Court will then indicate to the national court that the principle can be invoked in a dispute between individuals in order to preclude the application of the national provision which is contrary to EU law.
51.
In the present case, the national court states that it cannot give an interpretation of national law in conformity with Directive 2000/78 other than one which is contra legem.
52.
Of course, in accordance with consistent case-law, the interpretation of domestic law is a task that falls exclusively to national courts. ( ) It is therefore for that court to decide, ultimately, whether their domestic law can be interpreted in conformity with EU law.
53.
Having said that, I take the view that, if it is apparent from the information provided to the Court with a request for a preliminary ruling that the only reason for which it is impossible to interpret a national provision in conformity with EU law is that national case-law exists which conflicts with EU law, it then falls to the Court of Justice to inform the national court whether or not it may take that factor into account. In other words, it falls squarely within the jurisdiction of the Court of Justice, in my opinion, for it to clarify the precise parameters of a limit on the obligation of consistent interpretation which it has itself identified, in this case the limit being the interpretation of national law contra legem. The spirit of cooperation between the Court of Justice and national courts which governs the preliminary ruling mechanism under Article 267 TFEU, the effectiveness of that procedure and the effective application of EU law thus demand that the Court of Justice indicate to the national court how it should proceed, in order to avoid improper reliance on the limit on the obligation of consistent interpretation represented by the contra legem interpretation of national law.
54.
It is for that reason that I recommend that the Court should consider very carefully the reasons for which the referring court considers that it cannot give an interpretation of national law in conformity with Directive 2000/78.
55.
I would recall in this connection that, as the referring court has expressly stated, it is clear from consistent national case-law, the most recent illustration of which is a judgment delivered on 17 January 2014, ( ) that Article 2a(3) of the Law on salaried employees is interpreted as meaning that an employee is not entitled to a severance allowance if he is entitled to an old-age pension paid by the employer under a pension scheme which the employee joined before reaching 50 years of age, regardless of whether or not the employee has chosen to waive his right to that pension in order to continue with his career. The referring court considers that, in that context, any interpretation of Article 2a(3) of the Law on salaried employees that might render the provision consistent with Directive 2000/78, as interpreted by the Court of Justice in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), would be contra legem.
56.
It is on the basis of that premiss that the national court then proceeded to focus its attention, in the formulation of its questions, on the effect of the principle prohibiting discrimination on grounds of age in disputes between individuals.
57.
It is therefore necessary to ascertain whether the premiss thus adopted by the national court is valid.
58.
In their observations, the legal heirs of Mr Rasmussen argue, primarily, that it is actually possible, in keeping with consistent interpretation, for Article 2a(3) of the Law on salaried employees to co-exist with the prohibition of discrimination on grounds of age laid down in Directive 2000/78.
59.
The legal heirs of Mr Rasmussen state in this connection that, in the national case-law, Article 2a(3) of the Law on salaried employees has been interpreted in the sense that the words ‘will receive’ (vil oppebære’) in fact mean ‘can receive’ (‘kan oppebære’). Underlying that interpretation is the idea that it cannot depend solely on the decision of the dismissed employee either to activate, if he so wishes, his retirement pension and thus lose his entitlement to a severance allowance or to defer his retirement pension and thus preserve his entitlement to the severance allowance. The courts have therefore taken into consideration the presumed intention of the national legislature to take as an objective criterion the moment when liability to pay the severance allowance falls away as a result of the employee’s entitlement to receive a retirement pension on termination of the employment relationship.
60.
The legal heirs of Mr Rasmussen dispute the national court’s conclusion that an interpretation of Article 2a(3) of the Law on salaried employees according to which that provision might be consistent with Directive 2000/78, as interpreted by the Court in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), would be contra legem, inasmuch as, in their view, such an interpretation in conformity with EU law could only be given in the context of the wording of Article 2a(3).
61.
The legal heirs of Mr Rasmussen refer in this connection to the Opinion of Advocate General Kokott in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:248). In point 84 of that Opinion, after mentioning the rule that the national court alone has jurisdiction to interpret national law, Advocate General Kokott stated that ‘it [seemed] to [her] to be perfectly possible to interpret [Article 2a(3)] in conformity with [Directive 2000/78]’. In support of that view, she pointed out that ‘the current strict application of the derogatory provision contained in [Article 2a(3) was] based only on its interpretation by the Danish courts. Its wording … could also be interpreted as meaning that it covers only persons who will actually receive their old-age pension, without necessarily also including persons who merely may receive an old-age pension’.
62.
To precisely the same effect, the European Commission stated in its observations, albeit without discussing the solution in detail, that the interpretation which emerged from the national case-law did not necessarily follow from the wording of Article 2a(3) of the Law on salaried employees, inasmuch as the words ‘will receive’ could, it seemed, equally well be understood as meaning that the employee lost his entitlement to a severance allowance only if he actually exercised his right to receive an old-age pension.
63.
Lastly, I would point out that, in the observations which it lodged in the case which gave rise to the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), the Danish Government itself appeared to take the view that it was not impossible to interpret Article 2a(3) of the Law on salaried employees in a way that was consistent with Directive 2000/78. It stated that, in the event that the Court should not agree with its view that its national law was compatible with the directive, ‘the national court would then have to see whether, in the context of interpreting Article 2a(3) of the Law on salaried employees in conformity with [Directive 2000/78], it was able to achieve an outcome that fitted within the framework of the directive and avoid the necessity of declaring [that provision] inapplicable to relationships between public-sector employers and their employees’. ( )
64.
That suggestion appears to me to be particularly appropriate, since the technique of consistent interpretation makes it possible in the context of this case, as it did in the context of the case which gave rise to the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), to restrict the scope of Article 2a(3) of the Law on salaried employees to what is absolutely clear from the wording of that provision. The alternative solution of disapplying that provision entirely would not be appropriate, inasmuch as, in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), the Court merely pointed up the incompatibility with Directive 2000/78 of the interpretation which the national courts had given to Article 2a(3) of the Law on salaried employees.
65.
As we have seen, it does not follow from the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) that the very wording of Article 2a(3) of the Law on salaried employees is inconsistent with Directive 2000/78. On the contrary, in that judgment, the Court acknowledged that the provision, read literally, could be justified by the objective of protecting employment. It was the extension of that rule in the case-law to employees who were merely entitled to receive an old-age pension, without ascertaining whether they actually did, that the Court regarded as being contrary to Directive 2000/78. By implication, the Court’s reasoning also called into question the logical coherence of the provision of national law as interpreted by the national courts: why indeed should employees who defer their old-age pension in order to continue their careers be deprived of the benefit of a measure whose very purpose is to help them find employment?
66.
Against that background, the implementation by the referring court of an interpretation of its national law that is in conformity with Directive 2000/78 is the most appropriate means of resolving the conflict between its national law and EU law, since it makes it possible to neutralise the meaning given in the national case-law to Article 2a(3) of the Law on salaried employees, which has proved to be inconsistent with the directive, and to give that provision of national law a meaning which not only accords with its wording but is also in conformity with the directive.
67.
In this connection, it is important to circumscribe the situations in which a consistent interpretation is impossible and, more specifically, to define what contra legem interpretation actually means.
68.
The Latin expression ‘contra legem’ literally means ‘against the law’. A contra legem interpretation must, to my mind, be understood as being an interpretation that contradicts the very wording of the national provision at issue. In other words, a national court is confronted by the obstacle of contra legem interpretation when the clear, unequivocal wording of a provision of national law appears to be irreconcilable with the wording of a directive. The Court has acknowledged that contra legem interpretation represents a limit on the obligation of consistent interpretation, since it cannot require national courts to exercise their interpretative competence to such a point that they substitute for the legislative authority.
69.
As we have seen, the referring court is very clearly not in that sort of situation. Indeed, were it to interpret Article 2a(3) of the Law on salaried employees in conformity with Directive 2000/78, that would in no way compel it to re-write that provision of national law. The national court would not, therefore, be making any incursion into the sphere of competence of the national legislature.
70.
The implementation by the national court of an interpretation in conformity with EU law would merely require it to change its case-law so that the interpretation which the Court gave of Directive 2000/78 in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) is given full effect in the national legal system, not only in relationships between employers and employees that are governed by public law, but also in such relationships governed by private law.
71.
By calling on the referring court to effect a change in its case-law the Court is in no way obliging it to overstep the bounds of its jurisdiction. It is, instead, reminding that court of the essential role it plays in ‘[providing] the legal protection which individuals derive from the rules of EU law and [ensuring] that those rules are fully effective’. ( ) The Court will also be reminding the national court that ‘the Member States’ obligation arising from a directive to achieve the result envisaged by that directive and their duty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, are binding on all the authorities of the Member States including, for matters within their jurisdiction, the courts. ( )
72.
An obstacle that is presented by the case-law is thus not comparable to an obstacle consisting in the existence of a provision of national law whose very wording is irreconcilable with a rule of EU law. In the latter case, the obstacle cannot be overcome by the national courts without their substituting themselves for the legislative authority and re-writing the provision in question.
73.
I would add that to recognise the existence of national case-law that is contrary to EU law as an obstacle to the interpretation by national courts of a provision of national law in conformity with EU law would greatly diminish the potential of the technique of consistent interpretation in resolving conflicts between EU law and national law.
74.
I also believe that, in a situation such as that in the main proceedings, neither the principle of legal certainty nor the principle of the protection of legitimate interests militates against the national court’s giving effect to an interpretation of Article 2a(3) of the Law on salaried employees that is consistent with Directive 2000/78.
75.
More specifically, the fact that a consistent interpretation of national law given by the referring court would result in an obligation upon the employer to pay the severance allowance which was the source of the dispute in the main proceedings does not alter my analysis.
76.
Admittedly, it is clear from the case-law that the ‘obligation of the national court to refer to the content of the directive when interpreting the relevant rules of its national law reaches a limit where such an interpretation leads to the imposition on an individual of an obligation laid down by a directive which has not been transposed or, more especially, where it has the effect of determining or aggravating, on the basis of the directive and in the absence of a law enacted for its implementation, the liability in criminal law of persons who act in contravention of that directive’s provisions’. ( ) However, that case-law concerns, first and foremost, the limits on the obligation of consistent interpretation in criminal matters ( ) and it should not, it seems to me, be understood as precluding an interpretation of national law in conformity with a directive which would result in imposing on an employer an obligation to pay a severance allowance such as that at issue in the main proceedings.
77.
If it were to be construed strictly, the formulation that the ‘obligation of the national court to refer to the content of the directive when interpreting the relevant rules of its own national law reaches a limit where such an interpretation leads to the imposition on an individual of an obligation laid down by a directive which has not been transposed’ would impose drastic limitations on the principle of interpretation of national law in accordance with EU directives. ( ) I do not think, therefore, that that limitation on the obligation of consistent interpretation can apply outside the context of criminal proceedings, which indeed was the context in which the Court made that statement. ( )
78.
Moreover, in a situation such as that in the main proceedings, an obligation on the employer to pay a severance allowance would flow not from Directive 2000/78 but from the national law itself, which, as a result of consistent interpretation, would be given a scope of application commensurate with its wording. In other words, the situation is not one where consistent interpretation would result in imposing on an individual an obligation that is laid down by a directive but for which there is no basis in existing national law. It is the provision of national law, expunged of its meaning contrary to EU law, that would place an obligation on the employer to pay a severance allowance.
79.
Lastly, it should be borne in mind that, in accordance with settled case-law, ‘[t]he interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the Court gives to a rule of EU law clarifies and defines, where required, the meaning and scope of that rule as it must be, or ought to have been understood and applied from the time of its entry into force. In other words, a preliminary ruling does not create or alter the law, but is purely declaratory, with the consequence that in principle it takes effect from the date on which the rule interpreted entered into force.’ ( ) According to the Court, ‘[i]t follows that the rule as thus interpreted may, and must be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied’. ( )
80.
Moreover, the Court has consistently held that ‘it is only exceptionally that, in application of a general principle of legal certainty which is inherent in the … legal order [of the European Union], [it] may decide to restrict the right to rely upon a provision it has interpreted with a view to calling in question legal relations established in good faith’. ( ) In addition, ‘as the Court has consistently held, such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought’. ( ) Indeed, according to the Court, ‘there must necessarily be a single occasion when a decision is made on the temporal effects of the requested interpretation which the Court gives of a provision of [European Union] law. In that regard, the principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees the equal treatment of the Member States and of other persons subject to [European Union] law under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty’. ( )
81.
However, in its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), the Court did not restrict the temporal effects of the interpretation which it gave of Directive 2000/78 in relation to Article 2a(3) of the Law on salaried employees. In the context of the present request for a preliminary ruling, the Court is not called upon to give a fresh ruling on that provision’s consistency with Directive 2000/78; it is simply asked to clarify how an inconsistency between EU law and national law is to be resolved in a dispute between individuals. The Court could not therefore, in the context of this request for a preliminary ruling, restrict the temporal effects of its judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600) even if it had been asked to do so, which it has not.
82.
If the referring court were authorised, in the circumstances of the present case, to limit its obligation of consistent interpretation on the ground of the principle of legal certainty, that would amount to limiting the temporal effects of the judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600), even though the Court had not taken the view that that principle justified such a limitation. However, as may be seen from the abovementioned case-law on the effects ratione temporis of judgments given on references for a preliminary ruling, it is for the Court of Justice alone to decide upon any temporal restrictions to be imposed on the interpretation which it provides. ( )
83.
It follows from the foregoing reasoning that it is for the national court before which a dispute between individuals falling within the scope of Directive 2000/78 has been brought, when applying provisions of national law, to interpret those provisions in such a way that they can be applied in a manner which is consistent with the wording and objective of that directive. The existence of national case-law which is inconsistent with Directive 2000/78 presents no obstacle to the national court’s fulfilment of its obligation to interpret national law in conformity with EU law. Moreover, in circumstances such as those of the case in the main proceedings, neither the principle of legal certainty nor the principle of the protection of legitimate expectations militates against the fulfilment of that obligation.
IV – Conclusion
84.
In the light of the foregoing considerations, I propose that the Court should answer the questions raised by the Højesteret (Supreme Court) as follows:
It is for the national court before which a dispute between individuals falling within the scope of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation has been brought, when applying provisions of national law, to interpret those provisions in such a way that they can be applied in a manner which is consistent with the wording and objective of that directive. The existence of national case-law which is inconsistent with Directive 2000/78 presents no obstacle to the national court’s fulfilment of its obligation to interpret national law in conformity with EU law. Moreover, in circumstances such as those of the case in the main proceedings, neither the principle of legal certainty nor the principle of the protection of legitimate expectations militates against the fulfilment of that obligation.
( ) Original language: French.
( ) OJ 2000 L 303, p. 16.
( ) Hereafter ‘Ajos’.
( ) For an interpretation by the Court of Directive 2000/78 in relation to Article 2a(2) of the Law on salaried employees, see the judgment in Ingeniørforeningen i Danmark (C‑515/13, EU:C:2015:115).
( ) Hereafter ‘the anti-discrimination law’.
( ) Case 96/2013 e.a. (UfR 2014.1119).
( ) Judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600, paragraph 9).
( ) Ibidem (paragraph 24).
( ) Ibidem (paragraph 31).
( ) Ibidem (paragraph 34).
( ) Idem.
( ) Judgment in Ingeniørforeningen i Danmark (C‑499/08, EU:C:2010:600, paragraph 35).
( ) Ibidem (point 40).
( ) Ibidem (paragraph 47).
( ) Ibidem (paragraph 48).
( ) See, in particular, the judgment in Dominguez (C‑282/10, EU:C:2012:33, paragraph 37 and the case-law cited). See also, to that effect, the judgment in Association de médiation sociale (C‑176/12, EU:C:2014:2, paragraph 36 and the case-law cited).
( ) See, in particular, the judgment in Kücükdeveci (C‑555/07, EU:C:2010:21, paragraph 45 and the case-law cited).
( ) Ibid. (paragraph 47 and the case-law cited).
( ) See, in particular, the judgment in Dominguez (C‑282/10, EU:C:2012:33, paragraph 24 and the case-law cited).
( ) See, in particular, the judgment in Association de médiation sociale (C‑176/12, EU:C:2014:2, paragraph 38 and the case-law cited).
( ) Judgment in Centrosteel (C‑456/98, EU:C:2000:402, paragraph 17).
( ) See, in particular, the judgment in Mono Car Styling (C‑12/08, EU:C:2009:466, paragraph 63 and the case-law cited).
( ) See, in particular, the judgment in Dominguez (C‑282/10, EU:C:2012:33, paragraph 27 and the case-law cited).
( ) Ibidem (paragraph 23, in which the Court began by pointing out that ‘the question whether a national provision must be disapplied inasmuch as it conflicts with EU law arises only if no compatible interpretation of that provision proves possible’). See, on this subject, Simon, D., ‘La panacée de l’interprétation conforme: injection homéopathique ou thérapie palliative?’ in De Rome à Lisbonne: les juridictions de l’Union européenne à la croisée des chemins — Mélanges en l’honneur de Paolo Mengozzi, Bruylant, Brussels, p. 279. According to this author, ‘the Court is ever more clearly ascribing to this method of consistent interpretation a sort of technical priority over other implications of precedence’ (p. 298).
( ) See, in particular, the judgment in Mono Car Styling (C‑12/08, EU:C:2009:466, paragraph 61 and the case-law cited). See also, to that effect, the judgment in Association de médiation sociale (C‑176/12, EU:C:2014:2, paragraph 39 and the case-law cited).
( ) See, inter alia, the judgments in Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 103) and Wilson (C‑506/04, EU:C:2006:587, paragraph 34).
( ) See footnote 6 to this Opinion.
( ) Paragraph 42.
( ) See, in particular, the judgment in Kücükdeveci (C‑555/07, EU:C:2010:21, paragraph 45 and the case-law cited).
( ) Ibid. (paragraph 47 and the case-law cited).
( ) See, in particular, the judgment in Arcaro (C‑168/95, EU:C:1996:363, paragraph 42 and the case-law cited).
( ) See, in particular, the judgment in Caronna (C‑7/11, EU:C:2012:396, paragraphs 51 and 52 and the case-law cited).
( ) See the Opinion of Advocate General Jacobs in Centrosteel (C‑456/98, EU:C:2000:137, point 34).
( ) Idem. See, in particular, on this point, Lenaerts, K., and Corthaut, T., ‘Of birds and hedges: the role of primacy in invoking norms of EU law’ in European Law Review, 2006, vol. 31, no 3, p. 287, especially pp. 295 and 296, and the commentary on the judgment in Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584) by Prechal, S. in Common Market Law Review, 2005, vol. 42, p. 1445, especially paragraph 6.4.
( ) See, in particular, the judgment in Pohl (C‑429/12, EU:C:2014:12, paragraph 30 and the case-law cited).
( ) See, in particular, the judgment in Meilicke and Others (C‑292/04, EU:C:2007:132, paragraph 34 and the case-law cited).
( ) Ibidem (paragraph 35 and the case-law cited).
( ) Ibidem (paragraph 36 and the case-law cited).
( ) Ibidem (paragraph 37).
( ) See the judgment in Barra and Others (309/85, EU:C:1988:42, paragraph 13). |
JUDGMENT OF THE COURT (Grand Chamber)
16 July 2015 ( *1 )
‛Appeal — Dumping — Imports of certain aluminium foil originating in Armenia, Brazil and China — Accession of the Republic of Armenia to the World Trade Organisation (WTO) — Article 2(7) of Regulation (EC) No 384/96 — Whether compatible with the Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT)’
In Case C‑21/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 16 January 2014,
European Commission, represented by J.-F. Brakeland, M. França and T. Maxian Rusche, acting as Agents, with an address for service in Luxembourg,
appellant,
supported by:
European Parliament, represented by D. Warin and A. Auersperger Matić, acting as Agents, with an address for service in Luxembourg,
intervener,
the other parties to the proceedings being:
Rusal Armenal ZAO, established in Yerevan (Armenia), represented by B. Evtimov, lawyer,
applicant at first instance,
Council of the European Union, represented by S. Boelaert and J.‑P. Hix, acting as Agents, and by B. O’Connor, solicitor, and S. Gubel, avocat, with an address for service in Luxembourg,
defendant at first instance,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts, Vice-President, R. Silva de Lapuerta, M. Ilešič, L. Bay Larsen and K. Jürimäe, Presidents of Chambers, A. Rosas, E. Juhász, A. Borg Barthet, M. Safjan, D. Šváby, M. Berger, A. Prechal, J.L. da Cruz Vilaça (Rapporteur) and C. Lycourgos, Judges,
Advocate General: J. Kokott,
Registrar: L. Hewlett, Principal Administrator,
having regard to the written procedure and further to the hearing on 10 February 2015,
after hearing the Opinion of the Advocate General at the sitting on 23 April 2015,
gives the following
Judgment
By its appeal, the European Commission asks the Court to set aside the judgment of the General Court of the European Union of 5 November 2013 in Rusal Armenal v Council (T‑512/09, EU:T:2013:571, ‘the judgment under appeal’), by which the General Court annulled Council Regulation (EC) No 925/2009 of 24 September 2009 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain aluminium foil originating in Armenia, Brazil and the People’s Republic of China (OJ 2009 L 262, p. 1, ‘the contested regulation’) in so far as that regulation concerns Rusal Armenal ZAO (‘Rusal Armenal’).
Legal context
WTO rules
By Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1), the Council of the European Union approved the Agreement establishing the World Trade Organisation (WTO), signed in Marrakesh on 15 April 1994, as well as the agreements in Annexes 1, 2 and 3 to that Agreement (together ‘the WTO agreements’), which include the General Agreement on Tariffs and Trade 1994 (OJ 1994 L 336, p. 11, ‘GATT 1994’) and the Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (OJ 1994 L 336, p. 103, ‘the Anti-Dumping Agreement’).
GATT 1994
Article VI(1) of GATT 1994 provides:
‘The contracting parties recognise that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry. For the purposes of this Article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another
(a)
is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, …
...’
The second supplementary provision to Article VI(1) of GATT 1994, in Annex I to GATT, states:
‘It is recognised that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, and in such cases importing contracting parties may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate.’
The Anti-Dumping Agreement
Article 2 of the Anti-Dumping Agreement, entitled ‘Determination of dumping’, provides:
‘2.1 For the purpose of this Agreement, a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.
2.2 When there are no sales of the like product in the ordinary course of trade in the domestic market of the exporting country or when, because of the particular market situation or the low volume of the sales in the domestic market of the exporting country …, such sales do not permit a proper comparison, the margin of dumping shall be determined by comparison with a comparable price of the like product when exported to an appropriate third country, provided that this price is representative, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and general costs and for profits.
...
2.7 This Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I to GATT 1994.’
EU law
Basic regulation
At the time of the facts underlying the dispute in the main proceedings, the provisions governing the adoption of anti-dumping measures by the European Union were laid down in Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (OJ 1996 L 56, p. 1), as most recently amended by Council Regulation (EC) No 2117/2005 of 21 December 2005 (OJ 2005 L 340, p. 17, ‘the basic regulation’). The basic regulation was repealed by Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (OJ 2009 L 343, p. 51).
Recitals 5 and 7 in the preamble to the basic regulation were worded as follows:
‘(5)
Whereas the new agreement on dumping, namely, the [Anti-Dumping Agreement], contains new and detailed rules, relating in particular to the calculation of dumping, procedures for initiating and pursuing an investigation, including the establishment and treatment of the facts, the imposition of provisional measures, the imposition and collection of anti-dumping duties, the duration and review of anti-dumping measures and the public disclosure of information relating to anti-dumping investigations; whereas, in view of the extent of the changes and to ensure a proper and transparent application of the new rules, the language of the new agreements should be brought into Community legislation as far as possible;
...
(7)
Whereas when determining normal value for non-market economy countries, it appears prudent to set out rules for choosing the appropriate market-economy third country that is to be used for such purpose and, where it is not possible to find a suitable third country, to provide that normal value may be established on any other reasonable basis.’
Article 1(2) of that regulation provided that a product ‘is to be considered as being dumped if its export price to the Community is less than a comparable price for the like product, in the ordinary course of trade, as established for the exporting country’.
For the purposes of determining dumping, Article 2(1) to (7) of the basic regulation laid down rules concerning the calculation of normal value. Whereas, in accordance with Article 2(1) of that regulation, normal value was normally to be based on the prices paid in the exporting country, Article 2(7) provided, in the case of imports from non-market economy countries, for recourse to the ‘analogue country’ method. Article 2(7) stated:
‘(a)
In the case of imports from non-market economy countries [(Albania, Armenia, Azerbaijan, Belarus, Georgia, North Korea, Kyrgyzstan, Moldova, Mongolia, Tajikistan, Turkmenistan and Uzbekistan)], normal value shall be determined on the basis of the price or constructed value in a market economy third country, or the price from such a third country to other countries, including the Community, or where those are not possible, on any other reasonable basis, including the price actually paid or payable in the Community for the like product, duly adjusted if necessary to include a reasonable profit margin.
...
(b)
In anti-dumping investigations concerning imports from the People’s Republic of China, the Ukraine, Vietnam and Kazakhstan and any non-market-economy country which is a member of the WTO at the date of the initiation of the investigation, normal value will be determined in accordance with paragraphs 1 to 6, if it is shown, on the basis of properly substantiated claims by one or more producers subject to the investigation and in accordance with the criteria and procedures set out in subparagraph (c) that market economy conditions prevail for this producer or producers in respect of the manufacture and sale of the like product concerned. When this is not the case, the rules set out under subparagraph (a) shall apply.
(c)
A claim under subparagraph (b) must … contain sufficient evidence that the producer operates under market economy conditions, that is if:
—
decisions of firms regarding prices, costs and inputs, including for instance raw materials, cost of technology and labour, output, sales and investment, are made in response to market signals reflecting supply and demand, and without significant State interference in this regard, and costs of major inputs substantially reflect market values,
—
firms have one clear set of basic accounting records which are independently audited in line with international accounting standards and are applied for all purposes,
—
the production costs and financial situation of firms are not subject to significant distortions carried over from the former non-market economy system, in particular in relation to depreciation of assets, other write-offs, barter trade and payment via compensation of debts,
—
the firms concerned are subject to bankruptcy and property laws which guarantee legal certainty and stability for the operation of firms, and
—
exchange rate conversions are carried out at the market rate.
...’
Where Article 2(7)(a) of the basic regulation applied, an individual duty could be specified, in accordance with Article 9(5) of the basic regulation, for the exporters which met certain conditions laid down by that provision.
Regulation (EC) No 2238/2000
Recitals 3 to 6 of Council Regulation (EC) No 2238/2000 of 9 October 2000, amending Regulation No 384/96 (OJ 2000 L 257, p. 2), stated:
‘(3)
Article 2(7) of [the basic regulation] … lays down that … normal value may be determined in accordance with the rules applicable to market-economy countries in cases where it can be shown that market conditions prevail for one or more producers subject to investigation in relation to the manufacture and sale of the product concerned.
(4)
The process of reform in … Vietnam and Kazakhstan has fundamentally altered the economies of those countries and has led to the emergence of firms for which market-economy conditions prevail. These … countries have as a result moved away from the economic circumstances which inspired the use of the analogue-country method.
(5)
It is appropriate to revise the Community’s anti-dumping practice in order to be able to take account of the changed economic conditions ...
(6)
It is also appropriate to grant similar treatment to imports from such countries which are members of the [WTO] at the date of the initiation of the relevant anti-dumping investigation.’
Background to the dispute
Rusal Armenal is a manufacturer and exporter of aluminium products and has been established in Armenia since 2000.
Following a complaint lodged on 28 May 2008, the Commission initiated an anti‑dumping proceeding concerning imports of certain aluminium foil originating in Armenia, Brazil and China. Rusal Armenal disputed whether Article 2(7) of the basic regulation was applicable in the present case, having regard in particular to the accession, on 5 February 2003, of the Republic of Armenia to the Agreement establishing the World Trade Organisation (WTO), signed in Marrakesh on 15 April 1994. In addition, Rusal Armenal submitted a claim to be granted market economy treatment (‘MET treatment’) or individual treatment for the purposes of Article 9(5) of the basic regulation.
On 7 April 2009, the Commission adopted Commission Regulation (EC) No 287/2009 imposing a provisional anti-dumping duty on imports of certain aluminium foil originating in Armenia, Brazil and the People’s Republic of China (OJ 2009 L 94, p. 17). Turkey was designated as an analogue country for the purposes of calculating a normal value for exporting producers to which MET treatment would not be granted.
As regards the grant of MET treatment to Rusal Armenal, the Commission noted that the Republic of Armenia could not be regarded as a market economy country, since it was mentioned in the footnote referred to in Article 2(7)(a) of the basic regulation. In addition, the Commission found that Rusal Armenal did not meet the criteria relating to accounting records and production costs referred to in the second and third indents of Article 2(7)(c) of the basic regulation. As far as the calculation of the dumping margin is concerned, the Commission found that Rusal Armenal satisfied the conditions to be granted individual treatment.
On 24 September 2009, the Council adopted the contested regulation in which it confirmed the Commission’s assessment. In particular, as regards the conclusion that Rusal Armenal should be refused MET treatment, recital 20 of that regulation states that ‘Armenia is specifically mentioned in the footnote to Article 2(7)(a) of the basic Regulation as being included among non-market economy countries’, that ‘treatment of exporting producers in non-market economy countries which are WTO members is set out in Article 2(7)(b)’, and that ‘[t]hese provisions have been fully complied with in the current investigation’.
In those circumstances, in accordance with Article 1(2) of the contested regulation, the Council imposed a definitive anti-dumping duty of 13.4% on the imports of certain aluminium products manufactured by Rusal Armenal.
The proceedings before the General Court and the judgment under appeal
By an application lodged at the General Court Registry on 21 December 2009, Rusal Armenal sought the annulment of the contested regulation.
In support of its action, Rusal Armenal put forward five pleas in law. Only the first plea in law, a plea of illegality raised under Article 277 TFEU, which is based on the infringement, by the application of Article 2(7) of the basic regulation, of Article 2(1) to (6) of that regulation and of Article 2.1 and 2.2 of the Anti-Dumping Agreement, was examined by the General Court, and is therefore of interest for the purposes of the present appeal.
In the context of that first plea in law, in order to establish that the EU Courts are able to review legality in the light of Article 2 of the Anti‑Dumping Agreement, Rusal Armenal argued that recital 5 of the basic regulation referred to the Anti‑Dumping Agreement and that that regulation had been adopted with the aim of transposing into EU law the international obligations of the EU institutions pursuant Article 2 of the Anti-Dumping Agreement; it stressed that, according to the case-law of the Court, the possibility of such review exists when the EU measure refers expressly to specific WTO provisions or when the European Union intended to implement a particular obligation assumed by it in the context of the WTO.
In essence, Rusal Armenal stated that the exception in Article 2(7) of the basic regulation did not apply to it, since that exception was not consistent with Article 2.7 of the Anti-Dumping Agreement, read in conjunction with the second supplementary provision to paragraph 1 of Article VI of GATT 1994, set out in Annex I thereto. In establishing an exception not provided for by those provisions for imports from Armenia, Article 2(7) of the basic regulation infringes the general scheme of Articles 2.1 and 2.2 of the Anti-Dumping Agreement as regards the determination of dumping.
By the judgment under appeal, the General Court upheld the first plea in law in the action and therefore annulled the contested regulation in so far as it concerned Rusal Armenal.
The proceedings before the Court and the forms of order sought by the parties
By decision of the President of the Court of 24 April 2014, the European Parliament was granted leave to intervene in support of the form of order sought by the Commission.
The Commission and the Council claim that the Court should:
—
set aside the judgment under appeal;
—
reject the first plea in the action before the General Court;
—
refer the case back to the General Court to rule on the second to fifth pleas in that action;
—
reserve the costs.
Rusal Armenal contends that the appeal should be dismissed and the Commission and the Council ordered to pay the costs.
The appeal
The Commission relies on three grounds in support of its appeal.
The first ground, alleging that the General Court ruled ultra petita
Arguments of the parties
By its first ground, the Commission submits that the judgment under appeal is vitiated by an error of law in that the General Court ruled on the plea of illegality directed at Article 2(7) of the basic regulation, raised by Rusal Armenal in its application at first instance.
The Commission contends that Rusal Armenal withdrew that plea of illegality in the reply at first instance, so that the content of the first plea in its action before the General Court was then limited solely to the Council’s failure to have regard to the principle of consistent interpretation.
Rusal Armenal contests the Commission’s arguments.
Findings of the Court
It must be pointed out that it cannot be concluded from an examination of all the considerations relied on by Rusal Armenal in its pleadings before the General Court that, in the course of the proceedings, it withdrew the plea alleging illegality in respect of Article 2(7) of the basic regulation, raised under Article 277 TFEU.
It is apparent from those considerations, first, that Rusal Armenal sought a declaration from the General Court that Article 2(7) of the basic regulation was inapplicable in the present case, since the calculation of normal value in relation to it, in accordance with the rules relating to imports from non-market economy countries, infringed Article 2(1) to (6) of that regulation and Articles 2.1 and 2.2 of the Anti-Dumping Agreement and, secondly, that in its reply at first instance, Rusal Armenal continued to rely expressly on Article 277 TFEU and merely clarified its arguments on that point.
In those circumstances, the first ground of the present appeal must be rejected as unfounded.
The second ground of appeal, alleging that the General Court erred in law in holding that Article 2(7) of the basic regulation is intended to implement the particular obligations assumed in the context of the WTO
Arguments of the parties
By its second ground of appeal, the Commission complains essentially that the General Court misconstrued the judgment in Nakajima v Council (C‑69/89, EU:C:1991:186) when it held, on the basis of the considerations set out in paragraphs 36 and 53 to 55 of the judgment under appeal, that the EU legislature intended, in adopting Article 2(7) of the basic regulation, to implement particular obligations created by Article 2 of the Anti-Dumping Agreement and the second supplementary provision to paragraph 1 of Article VI of GATT 1994, in Annex I thereto. In so doing, the General Court wrongly held that it was tasked with reviewing the legality of Article 2(7) of the basic regulation in the light of the rules of the WTO agreements.
In that regard, the Commission contends that Article 2(7) is intended to implement a ‘special market economy regime’ applicable to economies in transition towards a market economy. Instead of taking the text of the rules of the WTO agreements as a basis, that special regime forms part of a political strategy of the European Union intended to provide incentives for former State-trading countries and to encourage the pursuit of economic reforms by economies in transition as well as trade liberalisation.
Rusal Armenal contends that the criterion put forward by the Commission to determine the scope of review by the EU Courts in the light of the rules of the WTO agreements is incorrectly based solely on whether the EU legislature intended to implement particular obligations assumed in the context of the WTO. It is apparent from the case-law of the Court that it is appropriate to examine also whether the EU measure at issue refers expressly to specific provisions of WTO law, the text of recital 5 of the basic regulation supporting the conclusion that there is such a reference.
In any event, Rusal Armenal contends that in adopting the provisions of Article 2 of that regulation concerning the calculation of normal value, the EU legislature essentially intended to implement, in identical terms, the provisions in Article 2 of the Anti-Dumping Agreement and the second supplementary provision to paragraph 1 of Article VI of GATT 1994, in Annex I thereto to which Article 2.7 of the Anti-Dumping Agreement refers. That conclusion follows essentially, first, from recital 5 of that regulation, secondly, from the absence of EU law criteria concerning the grant of MET treatment which derogate from that second supplementary provision and, thirdly, from the fact that the instruments of accession of the Republic of Armenia to the WTO do not provide for any possibility of derogating from Articles 2.1 and 2.2 of the Anti-Dumping Agreement.
Findings of the Court
First of all, it must be noted that the provisions of an international agreement to which the European Union is a party can be relied on in support of an action for annulment of an act of secondary EU legislation or an exception based on the illegality of such an act only where, first, the nature and the broad logic of that agreement do not preclude it and, secondly, those provisions appear, as regards their content, to be unconditional and sufficiently precise (see, in particular, the judgment in Council and Others v Vereniging Milieudefensie and Stichting Stop Luchtverontreiniging Utrecht, C‑401/12 P to C‑403/12 P, EU:C:2015:4, paragraph 54 and the case-law cited). It is therefore only when both those conditions are met that such provisions may be relied upon before the EU Courts as a criterion in order to assess the legality of an EU act.
As regards the WTO agreements, it is the settled case-law of the Court that, given their nature and purpose, those agreements are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the EU institutions (see, in particular, judgments in Portugal v Council, C‑149/96, EU:C:1999:574, paragraph 47; Van Parys, C‑377/02, EU:C:2005:121, paragraph 39; and LVP, C‑306/13, EU:C:2014:2465, paragraph 44).
In that regard, the Court has held, in particular, that to accept that the Courts of the European Union have the direct responsibility for ensuring that EU law complies with the WTO rules would deprive the European Union’s legislative or executive bodies of the discretion which the equivalent bodies of the European Union’s commercial partners enjoy. It is not in dispute that some of the contracting parties, which are amongst the most important commercial partners of the European Union, have concluded from the subject-matter and purpose of the WTO agreements that they are not among the rules applicable by their courts when reviewing the legality of their rules of domestic law. Such lack of reciprocity, if accepted, would risk introducing an anomaly in the application of the WTO rules (see, in particular, judgments in Portugal v Council, C‑149/96, EU:C:1999:574, paragraphs 43 to 46; FIAMM and Others v Council and Commission, C‑120/06 P and C‑121/06 P, EU:C:2008:476, paragraph 119; and LVP, C‑306/13, EU:C:2014:2465, paragraph 46).
However, in two exceptional situations, which are the result of the EU legislature’s own intention to limit its discretion in the application of the WTO rules, the Court has accepted that it is for the Courts of the European Union, if necessary, to review the legality of an EU measure and of the measures adopted for its application in the light of the WTO agreements.
The first such situation is where the European Union intends to implement a particular obligation assumed in the context of those WTO agreements and the second where the EU act at issue refers explicitly to specific provisions of those agreements (see, to that effect, in particular judgments in Fediol v Commission, 70/87, EU:C:1989:254, paragraphs 19 to 22; Nakajima v Council, C‑69/89, EU:C:1991:186, paragraphs 29 to 32; Biret et Cie v Council, C‑94/02 P, EU:C:2003:518, paragraph 73; and Council and Others v Vereniging Milieudefensie and Stichting Stop Luchtverontreiniging Utrecht, C‑401/12 P to C‑403/12 P, EU:C:2015:4, paragraph 56).
In the present case, it must be noted that the General Court held, in paragraph 36 of the judgment under appeal, as regards the examination of the position of the Anti-Dumping Agreement in the EU legal order, and after finding that it was clear from recital 5 of the basic regulation that the European Union had adopted that regulation in order to satisfy its international obligations, that by Article 2 of that regulation, entitled ‘Determination of dumping’, the European Union had intended to implement particular obligations created by Article 2 of the Anti-Dumping Agreement, which also relates to the determination of whether there is dumping.
In those circumstances, it is necessary to ascertain whether, as the Commission maintains, the judgment under appeal is vitiated by an error of law in so far as it reaches the conclusion in question as regards Article 2(7) of the basic regulation.
It must first of all be noted, in that regard, that the Court has in certain cases acknowledged that the WTO’s anti-dumping system could constitute an exception to the general principle that the EU Courts cannot review the legality of the acts of the EU institutions in light of whether they are consistent with the rules of the WTO agreements (see, to that effect, judgments in Nakajima v Council, C‑69/89, EU:C:1991:186, paragraphs 29 to 32; Petrotub and Republica v Council, C‑76/00 P, EU:C:2003:4, paragraphs 55 and 56; and Council and Others v Vereniging Milieudefensie and Stichting Stop Luchtverontreiniging Utrecht, C‑401/12 P to C‑403/12 P, EU:C:2015:4, paragraph 59).
However, in order for such an exception to be allowed in a specific case, it must also be established, to the requisite legal standard, that the legislature has shown the intention to implement in EU law a particular obligation assumed in the context of the WTO agreements.
To that end, it is not sufficient, as the Advocate General observed in point 42 of her Opinion, for the preamble to an EU act to support only a general inference that the legal act in question was to be adopted with due regard for international obligations entered into by the European Union. It is, on the other hand, necessary to be able to deduce from the specific provision of EU law contested that it seeks to implement into EU law a particular obligation stemming from the WTO agreements.
As regards Article 2(7) of the basic regulation, it must be pointed out at the outset that that provision, following on from recital 7 of that regulation, introduces a special regime laying down detailed rules for the calculation of normal value for imports from non-market economy countries, including Armenia. As regards those imports, Article 2(7)(a) provides that normal value must be determined on the basis of the price or constructed value in a market economy third country, or the price from such a third country to other countries, including the European Union, or where those are not possible, on any other reasonable basis, including the price actually paid or payable in the European Union for the like product, duly adjusted if necessary to include a reasonable profit margin. In addition, Article 2(7)(b) stipulates that in anti-dumping investigations concerning imports from any non-market economy country which is a member of the WTO at the date of the initiation of the investigation, normal value is to be determined in accordance with Article 2(1) to (6), if it is shown that the market economy conditions, set out in Article 2(7)(c), prevail for this producer or producers in respect of the manufacture and sale of the like product concerned.
In that regard, it must be found that Article 2(7) of the basic regulation is the expression of the EU legislature’s intention to adopt in that sphere an approach specific to the EU legal order.
As is apparent from the preamble to Regulation No 2238/2000, amending the basic regulation, the rules laid down in Article 2(7) of the basic regulation and applicable to imports from non-market economy countries which are members of the WTO are based on the emergence, in those countries, following the economic reforms adopted, of firms for which market-economy conditions prevail.
Since there are no specific rules relating to such a category of countries in the Anti-Dumping Agreement, a correlation cannot be established between, on the one hand, the rules in Article 2(7) of the basic regulation directed at the imports from non-market economy WTO member countries and, on the other, the rules set out in Article 2 of the Anti-Dumping Agreement. It follows that that provision of the basic regulation cannot be considered to be a measure intended to ensure the implementation in the EU legal order of a particular obligation assumed in the context of the WTO.
Article 2.7 of the Anti-Dumping Agreement, read in conjunction with the second supplementary provision to paragraph 1 of Article VI of GATT 1994, in Annex I thereto, to which Article 2.7 refers, cannot call such a finding into question. In addition to the fact that that second supplementary provision does not lay down any specific rule governing the calculation of normal value, it is directed only at cases where a country has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State.
Nor is the finding called in question by the fact that recital 5 of the basic regulation states that the rules of the Anti-Dumping Agreement should be brought into EU legislation ‘as far as possible’. As the Advocate General observed in points 44 and 46 of her Opinion, that expression must be understood as meaning that even if the EU legislature intended to take into account the rules of the Anti-Dumping Agreement when adopting the basic regulation, it did not, however, show the intention of transposing all those rules in that regulation. The conclusion that the purpose of Article 2(7) of the basic regulation is to implement the particular obligations created by Article 2 of the Anti-Dumping Agreement can therefore in no case be based in isolation on the wording of recital 5 of the basic regulation.
In such circumstances, it must be found that, as the Advocate General observed in paragraphs 50 and 51 of her Opinion, the EU legislature exercised its regulatory competence, as regards the calculation of normal value in respect of imports from non-market economy countries members of the WTO, by taking an approach specific to the EU legal order and, therefore, it cannot be established that it was the EU legislature’s intention, by the adoption of Article 2(7) of the basic regulation, to implement the particular obligations created by Article 2 of the Anti-Dumping Agreement.
It follows from all the foregoing that, having reached a different finding in its judgment, the General Court erred in law.
In those circumstances, the second ground of appeal must be upheld.
Accordingly, the judgment under appeal must be set aside in its entirety, and there is no need to examine the third ground relied on by the Commission in support of its appeal, relating to the infringement of the general principle of institutional balance.
The action before the General Court
In accordance with Article 61 of the Statute of the Court of Justice of the European Union, if the appeal is well founded, the Court of Justice is to quash the decision of the General Court and may itself give final judgment in the matter, where the state of the proceedings so permits, or refer the case back to the General Court for judgment.
In the present case, the Court considers that final judgment must be given on the first plea in law in the action brought by Rusal Armenal for the annulment of the contested regulation.
In that regard, it must be noted that none of the two exceptional situations set out in paragraph 41 above is established in the present case. First, as has been found in paragraph 53 above, the intention of the EU legislature to implement, by the adoption of Article 2(7) of the basic regulation, the particular obligations created by Article 2 of the Anti-Dumping Agreement, is not established. Secondly, Article 2(7) of the basic regulation does not refer expressly to a specific provision of the Anti-Dumping Agreement, the general reference to the provisions of that agreement in recital 5 of that regulation being insufficient in itself to conclude that there is such a reference (see, to that effect, the judgments in Van Parys, C‑377/02, EU:C:2005:121, paragraph 52; FIAMM and Others v Council and Commission, C‑120/06 P and C‑121/06 P, EU:C:2008:476, paragraphs 113 and 114; and Council and Others v Vereniging Milieudefensie and Stichting Stop Luchtverontreiniging Utrecht, C‑401/12 P to C‑403/12 P, EU:C:2015:4, paragraph 58).
In those circumstances, the first plea in law in the action brought by Rusal Armenal for the annulment of the contested regulation must be rejected, since the EU Courts are called upon by the legislature to review the legality of the calculation of normal value as regards the products manufactured by Rusal Armenal solely in the light of Article 2(7) of the basic regulation.
However, as the General Court did not examine the second to fifth pleas in law relied on by Rusal Armenal in support of its action for annulment, the Court considers that the state of the proceedings does not permit judgment to be given.
Consequently, the case must be referred back to the General Court for judgment on the second to the fifth pleas in law.
Costs
Since the case is being referred back to the General Court, it is appropriate to reserve the costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Sets aside the judgment of the General Court of the European Union in Rusal Armenal v Council (T‑512/09, EU:T:2013:571);
2.
Refers the case back to the General Court of the European Union for it to rule on the pleas in law on which it did not adjudicate;
3.
Reserves the costs.
[Signatures]
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Second Chamber)
7 April 2016 ( *1 )
‛Appeal — Dumping — Regulation (EC) No 384/96 — Article 3(5), (7) and (9) — Article 6(1) — Regulation (EC) No 926/2009 — Imports of certain seamless pipes and tubes of iron or steel originating in China — Definitive anti-dumping duty — Determination of a threat of injury — Taking into account of post-investigation period data’
In Joined Cases C‑186/14 P and C‑193/14 P,
TWO APPEALS under Article 56 of the Statute of the Court of Justice of the European Union, lodged on 14 April 2014 (C‑186/14 P) and 15 April 2014 (C‑193/14 P),
ArcelorMittal Tubular Products Ostrava a.s., established in Ostrava-Kunčice (Czech Republic),
ArcelorMittal Tubular Products Roman SA, established in Roman (Romania),
Benteler Deutschland GmbH, formerly Benteler Stahl/Rohr GmbH, established in Paderborn (Germany),
Ovako Tube & Ring AB, established in Hofors (Sweden),
Rohrwerk Maxhütte GmbH, established in Sulzbach-Rosenberg (Germany),
Dalmine SpA, established in Dalmine (Italy),
Silcotub SA, established in Zalău (Romania),
TMK-Artrom SA, established in Slatina (Romania),
Tubos Reunidos SA, established in Amurrio (Spain),
Vallourec Oil and Gas France SAS, formerly Vallourec Mannesmann Oil & Gas France SAS, established in Aulnoye-Aymeries (France),
Vallourec Tubes France SAS, formerly V & M France SAS, established in Boulogne-Billancourt (France),
Vallourec Deutschland GmbH, formerly V & M Deutschland GmbH, established in Düsseldorf (Germany),
Voestalpine Tubulars GmbH & Co. KG, established in Kindberg (Austria),
Železiarne Podbrezová a.s., established in Podbrezová (Slovakia),
represented by G. Berrisch, Rechtsanwalt, and B. Byrne, Solicitor,
appellants,
the other parties to the proceedings being:
Hubei Xinyegang Steel Co. Ltd, established in Huang Shi (China), represented by N. Niejahr, Rechtsanwältin, Q. Azau and H. Wiame, avocats, and by F. Carlin, Barrister,
applicant at first instance,
Council of the European Union, represented by J.-P. Hix, acting as Agent, and by B. O’Connor, Solicitor, and S. Gubel, avocat,
defendant at first instance,
European Commission, represented by J.-F. Brakeland and M. França, acting as Agents, with an address for service in Luxembourg,
intervener at first instance (C‑186/14 P),
and
Council of the European Union, represented by J.-P. Hix, acting as Agent, and by B. O’Connor, Solicitor, and S. Gubel, avocat,
appellant,
supported by
Italian Republic, represented by G. Palmieri, acting as Agent, and by A. Collabolletta, avvocato dello Stato,
the other parties to the proceedings being:
Hubei Xinyegang Steel Co. Ltd, established in Huang Shi (China), represented by F. Carlin, Barrister, M. Healy, Solicitor, N. Niejahr, Rechtsanwältin, and Q. Azau and H. Wiame, avocats,
applicant at first instance,
European Commission, represented by J.-F. Brakeland and M. França, acting as Agents, with an address for service in Luxembourg,
ArcelorMittal Tubular Products Ostrava a.s., established in Ostrava-Kunčice,
ArcelorMittal Tubular Products Roman SA, established in Roman,
Benteler Deutschland GmbH, formerly Benteler Stahl/Rohr GmbH, established in Paderborn,
Ovako Tube & Ring AB, established in Hofors,
Rohrwerk Maxhütte GmbH, established in Sulzbach-Rosenberg,
Dalmine SpA, established in Dalmine,
Silcotub SA, established in Zalău,
TMK-Artrom SA, established in Slatina,
Tubos Reunidos SA, established in Amurrio,
Vallourec Oil and Gas France SAS, formerly Vallourec Mannesmann Oil & Gas France SAS, established in Aulnoye-Aymeries,
Vallourec Tubes France SAS, formerly V & M France SAS, established in Boulogne-Billancourt,
Vallourec Deutschland GmbH, formerly V & M Deutschland GmbH, established in Düsseldorf,
Voestalpine Tubulars GmbH & Co. KG, established in Kindberg,
Železiarne Podbrezová a.s., established in Podbrezová,
represented by G. Berrisch, Rechtsanwalt, and B. Byrne, Solicitor,
interveners at first instance (C‑193/14 P),
THE COURT (Second Chamber),
composed of R. Silva de Lapuerta, President of the First Chamber, acting as President of the Second Chamber, J.L. da Cruz Vilaça (Rapporteur), A. Arabadjiev, C. Lycourgos and J.-C. Bonichot, Judges,
Advocate General: P. Mengozzi,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 10 June 2015,
after hearing the Opinion of the Advocate General at the sitting on 19 November 2015,
gives the following
Judgment
By their appeals, ArcelorMittal Tubular Products Ostrava a.s., ArcelorMittal Tubular Products Roman SA, Benteler Deutschland GmbH, formerly Benteler Stahl/Rohr GmbH, Ovako Tube & Ring AB, Rohrwerk Maxhütte GmbH, Dalmine SpA, Silcotub SA, TMK-Artrom SA, Tubos Reunidos SA, Vallourec Oil and Gas France SAS, formerly Vallourec Mannesmann Oil & Gas France SAS, Vallourec Tubes France SAS, formerly V & M France SAS, Vallourec Deutschland GmbH, formerly V & M Deutschland GmbH, Voestalpine Tubulars GmbH & Co. KG, Železiarne Podbrezová a.s. (together, ‘ArcelorMittal and Others’) and the Council of the European Union ask the Court to set aside the judgment of the General Court of 29 January 2014 in Hubei Xinyegang Steel v Council (T‑528/09, EU:T:2014:35, ‘the judgment under appeal’), whereby the General Court upheld the application of Hubei Xinyegang Steel Co. Ltd (‘Hubei’) for annulment of Council Regulation (EC) No 926/2009 of 24 September 2009 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain seamless pipes and tubes of iron or steel originating in the People’s Republic of China (OJ 2009 L 262, p. 19, ‘the regulation at issue’).
Legal context
Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (OJ 1996 L 56, p. 1) was replaced and codified by Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (OJ 2009 L 343, p. 51, and corrigendum OJ 2010 L 7, p. 22). However, in view of the date on which the regulation at issue was adopted, the appeals must be examined on the basis of Regulation No 384/96, as amended by Council Regulation (EC) No 2117/2005 of 21 December 2005 (OJ 2005 L 340, p. 17; ‘the basic regulation’).
The basic regulation provides, in Article 3(1), (5), (7) and (9) thereof:
‘1. Pursuant to this Regulation, the term “injury” shall, unless otherwise specified, be taken to mean material injury to the Community industry, threat of material injury to the Community industry or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of this Article.
…
5. The examination of the impact of the dumped imports on the Community industry concerned shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including the fact that an industry is still in the process of recovering from the effects of past dumping or subsidisation, the magnitude of the actual margin of dumping, actual and potential decline in sales, profits, output, market share, productivity, return on investments, utilisation of capacity; factors affecting Community prices; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments. This list is not exhaustive, nor can any one or more of these factors necessarily give decisive guidance.
…
7. Known factors other than the dumped imports which at the same time are injuring the Community industry shall also be examined to ensure that injury caused by these other factors is not attributed to the dumped imports under paragraph 6. Factors which may be considered in this respect include the volume and prices of imports not sold at dumping prices, contraction in demand or changes in the patterns of consumption, restrictive trade practices of, and competition between, third country and Community producers, developments in technology and the export performance and productivity of the Community industry.
…
9. A determination of a threat of material injury shall be based on facts and not merely on an allegation, conjecture or remote possibility. The change in circumstances which would create a situation in which the dumping would cause injury must be clearly foreseen and imminent.
In making a determination regarding the existence of a threat of material injury, consideration should be given to, inter alia, such factors as:
(a)
a significant rate of increase of dumped imports into the Community market indicating the likelihood of substantially increased imports;
(b)
sufficient freely disposable capacity of the exporter or an imminent and substantial increase in such capacity indicating the likelihood of substantially increased dumped exports to the Community, account being taken of the availability of other export markets to absorb any additional exports;
(c)
whether imports are entering at prices that would, to a significant degree, depress prices or prevent price increases which otherwise would have occurred, and would probably increase demand for further imports;
and
(d)
inventories of the product being investigated.
No one of the factors listed above by itself can necessarily give decisive guidance but the totality of the factors considered must lead to the conclusion that further dumped exports are imminent and that, unless protective action is taken, material injury would occur.’
Article 6(1) of the basic regulation provides:
‘Following the initiation of the proceedings, the Commission, acting in cooperation with the Member States, shall commence an investigation at Community level. Such investigation shall cover both dumping and injury and these shall be investigated simultaneously. For the purpose of a representative finding, an investigation period shall be selected which, in the case of dumping shall, normally, cover a period of no less than six months immediately prior to the initiation of the proceeding. Information relating to a period subsequent to the investigation period shall not, normally, be taken into account.’
Background to the dispute
On 9 July 2008, following a complaint lodged by the Defence Committee of the Seamless Steel Tube Industry of the European Union, the Commission published a notice of initiation of an anti-dumping proceeding concerning imports of seamless pipes and tubes, of iron or steel, originating in the People’s Republic of China (OJ 2008 C 174, p. 7).
In accordance with Article 17 of the basic regulation, the Commission decided to limit its investigation to one sample. In that context, it selected four Chinese exporting producers representing 70% of the total volume of exports of the product concerned to the European Union. Those exporting producers included Hubei.
On 7 April 2009 the Commission adopted Regulation (EC) No 289/2009 imposing a provisional anti-dumping duty on imports of certain seamless pipes and tubes of iron or steel originating in China (OJ 2009 L 94, p. 48; ‘the provisional regulation’).
In recital 13 of the provisional regulation, the Commission pointed out that the investigation of dumping and injury had covered the period from 1 July 2007 to 30 June 2008 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2005 to the end of the investigation period.
In recitals 89 and 126 of the provisional regulation, the Commission concluded, respectively, that there was no injury to the EU industry but that there was a threat of injury to that industry.
On 24 September 2009, the Council adopted the regulation at issue.
In recitals 35 to 81 of that regulation, the Council confirmed the Commission’s findings set out in the provisional regulation relating to the absence of injury and the existence of a threat of injury to the EU industry. In that regard, the Council took into account data relating to a period after the investigation period, namely the period from July 2008 to March 2009.
The procedure before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 30 December 2009, Hubei sought the annulment of the regulation at issue. The Commission and ArcelorMittal and Others intervened in support of the form of order sought by the Council.
In support of its action, Hubei raised three pleas in law. Among those pleas, the third alleged infringement of Articles 3(9), 9(4) and 10(2) of the basic regulation, on the ground that the regulation at issue was based on manifest errors of assessment as to the existence of a threat of material injury.
The General Court examined only the third plea raised by Hubei, and upheld it, considering, in essence, that the Council had made a manifest error of assessment (i) in confirming the Commission’s finding that the EU industry was in a vulnerable state at the end of the investigation period and (ii) in holding that in this case there was a threat of injury.
The General Court therefore annulled the regulation at issue.
Procedure before the Court and forms of order sought
ArcelorMittal and Others and the Council claim that the Court should:
—
set aside the judgment under appeal,
—
remit the case to the General Court and
—
order Hubei to pay the costs relating to the appeals and to the proceedings at first instance.
Hubei contends that the Court should:
—
dismiss the appeals, and
—
order the appellants to pay the costs.
Under Article 172 of the Rules of Procedure of the Court of Justice, the Commission lodged a response in which it asked the Court to:
—
set aside the judgment under appeal,
—
remit the case to the General Court and
—
order Hubei to pay the costs.
By order of the President of the Court of 28 July 2014, Cases C‑186/14 P and C‑193/14 P were joined for the purposes of the oral part of the procedure and the judgment.
By decision of the President of the Court of 21 August 2014, the Italian Republic was given leave to intervene in support of the form of order sought by the Council in Case C‑193/14 P.
The appeals
The first part of the third ground of appeal in Case C‑186/14 P, and the first and fourth grounds of appeal in Case C‑193/14 P
Arguments of the parties
ArcelorMittal and Others submit that, in paragraphs 61 and 63 of the judgment under appeal, the General Court erred in law by ascribing to the concept of ‘vulnerability’ an independent meaning and importance that it does not have. The basic regulation does not mention the terms ‘vulnerable’ or ‘vulnerability’, let alone require that the EU industry must be in a ‘vulnerable’ state at the end of the investigation period as a condition for finding a threat of injury.
ArcelorMittal and Others add that the grounds set out in paragraphs 64 and 65 of the judgment under appeal, concerning, first, the EU industry’s inclination to invest in and expand production capacity and, secondly, its failure to recover following dumping practices prior to those addressed by the regulation at issue are incorrect.
The Council, supported by the Italian Republic, submits that, although Article 3 of the basic regulation does not mention the concept of ‘vulnerability’, that concept may none the less, as in the present case, be used in order to establish the existence of a threat of injury. Thus, the examination of the situation of the EU industry in view of the factors set out in Article 3(5) of the basic regulation began by the assessment of that industry’s vulnerability.
The Council also maintains that the General Court, in the judgment under appeal, made an incomplete and selective assessment of the relevant economic factors and indices, such as the level of stocks, sales volume, the market share of the EU industry, employment levels, sales prices, returns on investments and the profitability of that industry. According to the Council, the General Court’s failure to take account of all those factors means that it distorted the evidence submitted to it and did not examine the issue of vulnerability in its entirety.
In addition, the Council, supported by the Commission, submits that the examination of the situation of the EU industry and the subsequent analysis relating to the existence of a threat of injury are complex operations of an economic nature. It follows, according to settled case-law of the Court, that the EU institutions have a broad margin of discretion in that respect, the judicial review of which has to be limited to the verification whether the procedural rules have been complied with, whether the facts on which the contested choice is based have been accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers. In the judgment under appeal, the General Court did not limit itself to carrying out such a review; it substituted its own assessment of complex economic factors for that of the Council and the Commission.
The Commission adds that the General Court committed an error of law by making the concept of ‘vulnerability’ a new legal criterion under the basic regulation.
Hubei disputes the arguments put forward by ArcelorMittal and Others and the Council.
Assessment of the Court
The General Court held, in paragraph 66 of the judgment under appeal, that the Council had made a manifest error of assessment in confirming the Commission’s conclusion in the provisional regulation that the EU industry was in a vulnerable situation at the end of the investigation period.
In reaching that conclusion, the General Court found, in paragraph 61 of the judgment under appeal, that the economic data on which the Council and the Commission had relied did not support their conclusion, but, on the contrary, as a whole, painted a picture of an industry in a situation of strength, not of fragility or vulnerability.
It must be pointed out, at the outset, that the General Court did not regard the vulnerability of the EU industry as a condition enabling a threat of injury to be found.
In that respect, it must be noted that, as the Advocate General indicated in paragraph 48 of his Opinion, in order for the EU institutions to be able to determine whether there is a threat of material injury to the EU industry, it is necessary to know the present situation of that industry. It is only in view of that situation that the institutions can determine whether the imminent increase in future dumped imports will cause material injury to the EU industry if no trade defence measure is taken.
Moreover, in recital 126 of the provisional regulation, the Commission found that, in the absence of trade defence measures, the Chinese dumped imports would imminently cause material injury to an already vulnerable EU industry. That provisional conclusion was confirmed by the Council in recital 81 of the regulation at issue. It is therefore apparent that the EU institutions took into consideration the alleged situation of vulnerability of the EU industry in their assessment of the threat of harm.
In addition, in its appeal, the Council stated that the assessment of vulnerability concerned the situation of the EU industry and constituted the first step of the assessment enabling a finding of a threat of harm.
It should be observed, in that respect, that, according to settled case-law, in the sphere of the common commercial policy and, most particularly, in the realm of measures to protect trade, the EU institutions enjoy a broad discretion by reason of the complexity of the economic, political and legal situations which they have to examine. The judicial review of such an appraisal must therefore be limited to verifying whether the procedural rules have been complied with, whether the facts on which the contested choice is based have been accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers (see, inter alia, judgments in Simon, Evers & Co., C‑21/13, EU:C:2014:2154, paragraph 29, and Fliesen-Zentrum Deutschland, C‑687/13, EU:C:2015:573, paragraph 44).
The Court has also held that the General Court’s review of the evidence on which the EU institutions based their findings does not constitute a new assessment of the facts replacing that made by the institutions. That review does not encroach on the broad discretion of the institutions in the field of commercial policy, but is restricted to showing whether that evidence was able to support the conclusions reached by the institutions (see, to that effect, judgment in Council and Commission v Interpipe Niko Tube and Interpipe NTRP, C‑191/09 P and C‑200/09 P, EU:C:2012:78, paragraph 68).
It follows that, in paragraph 53 of the judgment under appeal, the General Court could consider, without committing an error of law, that it had not only to establish whether the evidence relied on was factually accurate, reliable and consistent, but also to ascertain whether that evidence contained all the relevant information which had to be taken into account in order to assess a complex situation and whether it was capable of substantiating the conclusion in recital 89 of the provisional regulation and recital 49 of the regulation at issue, according to which the EU industry was in a vulnerable situation at the end of the investigation period.
However, it must be assessed whether, in carrying out that review, the General Court distorted that evidence.
It should be noted in that regard that a distortion must be obvious from the documents in the Court’s file, without there being any need to carry out a new assessment of the facts and the evidence (judgment in Europäisch-Iranische Handelsbank v Council, C‑585/13 P, EU:C:2015:145, paragraph 49 and the case-law cited). Such an assessment falls outwith the scope of the Court’s powers of review in an appeal.
The Council maintains that the General Court carried out a selective examination of the evidence that the Council was required to evaluate under Article 3(5) of the basic regulation in order to determine whether the EU industry was in a vulnerable situation. It submits that the General Court committed an error of law by failing to take into account all the factors that had to be considered in order to establish the existence, not only of an injury, but also of a situation of vulnerability.
In that regard, it must be recalled that the General Court is not required to provide reasons for each of its choices where it relies on one item of evidence as opposed to another in support of its decision (see, to that effect, judgment in Council and Commission v Interpipe Niko Tube and Interpipe NTRP, C‑191/09 P and C‑200/09 P, EU:C:2012:78, paragraph 161).
In the present case, in order to show the development of the EU industry during the investigation period, the General Court noted, in paragraph 59 of the judgment under appeal, the relevant economic factors identified, pursuant to Article 3(5) of the basic regulation, by the Commission in the provisional regulation and confirmed by the Council in the regulation at issue.
In paragraph 61 of the judgment under appeal, the General Court considered that, besides the decrease of the EU industry’s market share, the 12 other economic factors identified were all positive and, on the whole, painted a picture of an industry in a situation of strength, not of fragility or vulnerability.
Since the General Court merely referred to those factors as identified by the Commission in the provisional regulation, it cannot be claimed that it committed a manifest error in assessing the evidence.
It follows that the General Court did not substitute its own assessment for that of the EU institutions and that the Council’s claim alleging distortion of the evidence is unfounded.
Furthermore, as regards the argument of the EU institutions that the increase in imports originating in China had limited the EU industry’s inclination to invest and develop its production capacities in order to follow the expansion of the market, repeated by ArcelorMittal and Others, the General Court held, in paragraph 64 of the judgment under appeal, that that argument was not supported by the relevant evidence in the present case.
As to the assertions of those institutions that the EU industry had not fully recovered from the dumping carried out before 2006, the General Court considered, in paragraph 65 of the judgment under appeal, that those assertions were not based on any concrete evidence.
As the Advocate General pointed out in paragraph 112 of his Opinion, the claims of those institutions, concerning paragraphs 64 and 65 of the judgment under appeal, seek — without identifying any distortion of the evidence — to obtain from the Court of Justice a reassessment of the facts, which falls outside the jurisdiction of the Court in an appeal.
Accordingly, those claims must be rejected.
Having regard to the foregoing, the first part of the third ground of appeal in Case C‑186/14 P, and the first and fourth grounds of appeal in Case C‑193/14 P must be rejected.
The first ground of appeal in Case C‑186/14 P and the second ground of appeal in Case C‑193/14 P
Arguments of the parties
ArcelorMittal and Others and the Council take issue with the General Court for having held, at paragraph 63 of the judgment under appeal, that the consideration, in order to determine whether there was a threat of injury, of the deterioration of the economic context was based on an error of law, in so far as, according to Article 3(7) of the basic regulation, factors such as the contraction in demand must not be attributed to the dumped imports
In that regard, the appellants maintain that the General Court misinterpreted that provision and that it was wrong to rely on the judgment in Commission v NTN and Koyo Seiko (C‑245/95 P, EU:C:1998:46). Although, in the case that gave rise to that judgment, the EU institutions regarded the existence of an economic recession as a relevant factor for the purposes of examining injury to the EU industry, in the present case they did not invoke such a situation in order to support the finding of a threat of injury. Nor did they attribute the effects of a recession to the dumped imports. On the contrary, the institutions found that exceptionally high demand had disguised the true injurious effect of the dumped imports and that those effects would be revealed if demand returned to normal levels.
The Commission submits that the General Court committed an error of law by wrongly merging the analysis of the ‘threat of injury’ with that of the ‘causal link’, even though those two concepts are clearly distinguished in the basic regulation.
Hubei disputes the arguments put forward by ArcelorMittal and Others and the Council.
Assessment of the Court
In accordance with Article 3(7) of the basic regulation, known factors other than the dumped imports which at the same time are injuring the EU industry are to be examined to ensure that injury caused by these other factors is not attributed to the dumped imports. One of those factors mentioned in that provision is the contraction in demand.
The EU institutions are thus under an obligation to consider whether the injury on which they intend to base their conclusions does in fact derive from the dumped imports and must disregard any injury deriving from other factors, particularly from the contraction in demand (see judgment in Transnational Company Kazchrome and ENRC Marketing v Council, C‑10/12 P, EU:C:2013:865, paragraph 23, and TMK Europe, C‑143/14, EU:C:2015:236, paragraph 35).
Unless the effectiveness of Article 3(7) of the basic regulation is to be compromised, the application of the Court’s case-law resulting from the judgment in Commission v NTN and Koyo Seiko (C‑245/95 P, EU:C:1998:46, paragraph 43), cited in point 63 of the judgment under appeal cannot be excluded solely because, unlike in the present case, the case which gave rise to the judgment in Commission v NTN and Koyo Seiko (C‑245/95 P, EU:C:1998:46) arose in the context of a recession of the EU industry.
Furthermore, the appellants’ argument that, contrary to what the General Court held, the foreseeable contraction in demand was examined by the EU institutions, not in the context of the analysis of the causal link between the dumped imports and the injury, but in the analysis of the threat of injury, is based on a misreading of the judgment under appeal.
In paragraph 63 of the judgment under appeal, the General Court considered that the finding, relied on by the EU institutions, that the EU industry would be exposed to the possible injurious effects deriving from the dumped imports if the economic trend were to reverse, would allow the determination, if necessary, of a situation of vulnerability in the future. The General Court added that that finding was irrelevant for the purposes of concluding that the EU industry was in a vulnerable situation at the end of the investigation period.
It follows that the grounds set out in paragraph 63 of the judgment under appeal are not vitiated by any error of law.
It follows from the foregoing that the first ground of appeal in Case C‑186/14 P and the second ground of appeal in Case C‑193/14 P must be rejected.
The second ground of appeal and the second branch of the third ground of appeal in Case C‑186/14 P and the third ground of appeal in Case C‑193/14 P
Arguments of the parties
ArcelorMittal and Others maintain that the General Court infringed both Article 3(9) of the basic regulation and Article 6(1) of that regulation in basing its reasoning on the inconsistencies between the post-investigation period data and the data gathered during the investigation period. They submit that the use of such post-investigation period data in the examination of the threat of injury is not reliable, since those data reflect the conduct of the producers concerned subsequent to the opening of the anti-dumping procedure. Those data should be used only if they show that the imposition of anti-dumping duties was manifestly inappropriate. However, that is not the case here.
In those circumstances, ArcelorMittal and Others submit that it is not necessary to determine whether the Council was entitled to analyse the post-investigation period data. It is immaterial whether those data confirm the forecasts made by the Commission in the provisional regulation on the basis of the investigation period data. Consequently, even if the Council had been wrong to conclude that the post-investigation period data confirmed the conclusions in the provisional regulation, that error could not entail the annulment of the regulation at issue.
The Council submits that, in paragraph 92 of the judgment under appeal, the General Court infringed Article 3(9) of the basic regulation by holding that the EU institutions had committed, in the present case, a manifest error of assessment in finding a threat of injury.
In that respect, the Council submits that, although the analysis of a threat of injury must be based on facts and on the imminence of a change in circumstances, that analysis is necessarily prospective. Accordingly, the projections of the EU institutions may not come about, without those institutions thereby having committed an error of law in the exercise of their competence to evaluate complex economic situations. It is essential, in the Council’s submission, that the competent authorities be allowed a wide discretion in the complex evaluation of future events in the context of the trade protection policy.
The Council observes that examination of the four factors set out in Article 3(9) of the basic regulation revealed ‘a mixed picture’ as regards the existence of a threat of injury. In view of the clear wording of that provision and of the wide discretion enjoyed by the EU institutions in trade defence matters, the EU institutions were entitled to use their discretion to conclude that there was a threat of injury on the basis of that ‘mixed picture’.
In that regard, the Council explains that it is because of the ‘mixed’ nature of the situation in question at the end of the investigation period that, unusually, but with the aim of ensuring sound administration, the institutions continued in the present case to monitor the situation in the EU market during a period following the end of the investigation period from July 2008 to March 2009, focusing their attention on the change in circumstances and the principal economic indicators. That monitoring allowed those institutions to avoid erring as regards the development of those markets.
Hubei disputes the arguments put forward by ArcelorMittal and Others and the Council.
Assessment of the Court
It is appropriate, in the first place, to assess the claim that the General Court infringed Articles 3(9) and 6(1) of the basic regulation, in that it relied, in paragraph 91 of the judgment under appeal, on the inconsistencies between the estimates in the provisional regulation and the post-investigation period data.
It must be recalled that Article 6(1) of the basic regulation provides: ‘following the initiation of the proceeding, the Commission, acting in cooperation with the Member States, shall commence an investigation at [EU] level. Such investigation shall cover both dumping and injury and these shall be investigated simultaneously. For the purpose of a representative finding, an investigation period shall be selected which, in the case of dumping shall, normally, cover a period of no less than six months immediately prior to the initiation of the proceeding. Information relating to a period subsequent to the investigation period shall not, normally, be taken into account.’
Although it follows from that provision that, as a rule, post-investigation period data are not to be taken into account for the purpose of the investigation of the dumping and the injury, nevertheless, by using the adverb ‘normally’, the EU legislature did not intend to exclude entirely the consideration of such data.
The EU institutions are therefore entitled, in certain circumstances, to take post-investigation period data into consideration. That is particularly so in investigations intended, not to find an injury, but to determine whether there is a threat of injury which, by its very nature, requires a prospective analysis. The existence of a threat of injury, like that of an injury, must be established as at the date of the adoption of the anti-dumping measure. In addition, Article 3(9) of the basic regulation requires that the finding of a threat of material injury is to be based on facts and not merely allegation, conjecture or remote possibility and that the change in circumstances which would create a situation in which the dumping would cause injury must be clearly foreseen and imminent.
In those circumstances, the post-investigation period data may be used to confirm or invalidate the forecasts in the provisional regulation and allows, in the former case, the imposition of a definitive anti-dumping measure.
However, the EU institutions’ use of those post-investigation period data cannot escape review by the EU judicature.
In that respect, it must be recalled that although, in accordance with the case-law cited in paragraphs 34 and 35 of the present judgment, that review must not encroach on the broad discretion of the institutions in the realm of trade defence measures, the General Court does not go beyond the limits of that review by examining whether the evidence on which those institutions based their findings support the conclusions that they reached.
It follows that, in the present case, the General Court was entitled to verify whether the post-investigation period data, since they were invoked by the EU institutions, confirmed the forecasts in the provisional regulation and, consequently, justified the imposition of a definitive anti-dumping measure.
It is necessary, in the second place, to examine whether the General Court committed an error of law in reviewing the assessment by the EU institutions of the four factors set out in Article 3(9) of the basic regulation to be taken into consideration in determining whether there is a threat of injury.
In that respect, it must be noted that, in the context of that review, the General Court merely examined the post-investigation period data relied on by those institutions in the provisional regulation and subsequently in the regulation at issue, without distorting those data.
On that basis, the General Court found that the post-investigation period evidence relied on by the EU institutions were not capable of supporting the conclusion that there was a threat of injury and that, consequently, the Council had committed a manifest error of assessment in that regard.
Accordingly, the General Court did not ignore the limits of the judicial review which apply in relation to trade defence measures in holding, in paragraph 92 of the judgment under appeal, that the Council had infringed Article 3(9) of the basic regulation in finding that there was a risk of injury.
It follows that the second ground of appeal and the second part of the third ground of appeal in Case C‑186/14 P and the third ground of appeal in Case C‑193/14 P must be rejected.
In the light of all the foregoing considerations, the appeals brought by the appellants in Cases C‑186/14 P and C‑193/14 P must be dismissed in their entirety.
Costs
In accordance with Article 184(2) of the Rules of Procedure, where the appeal is unfounded, the Court is to make a decision as to costs.
Under Article 138(1) of the Rules of Procedure, which applies to the procedure on appeal by virtue of Article 184(1) of those rules, the unsuccessful party must be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since ArcelorMittal and Others and the Council have been unsuccessful and Hubei has applied for costs to be awarded against them, ArcelorMittal and Others and the Council must be ordered to pay the costs.
Since the Commission has also been unsuccessful, it must be ordered to bear its own costs.
Pursuant to Article 140(1) of the Rules of Procedure, also applicable to appeal proceedings by virtue of Article 184(1) of those rules, the Member States and institutions which intervene in the proceedings are to bear their own costs. Consequently, the Italian Republic is to bear its own costs.
On those grounds, the Court (Second Chamber) hereby:
1.
Dismisses the appeals brought in Cases C‑186/14 P and C‑193/14 P;
2.
Orders ArcelorMittal Tubular Products Ostrava a.s., ArcelorMittal Tubular Products Roman SA, Benteler Deutschland GmbH, Ovako Tube & Ring AB, Rohrwerk Maxhütte GmbH, Dalmine SpA, Silcotub SA, TMK-Artrom SA, Tubos Reunidos SA, Vallourec Oil and Gas France SAS, Vallourec Tubes France SAS, Vallourec Deutschland GmbH, Voestalpine Tubulars GmbH & Co. KG, Železiarne Podbrezová a.s. and the Council of the European Union to pay the costs;
3.
Orders the European Commission and the Italian Republic to bear their own costs.
[Signatures]
( *1 ) Language of the case: English. |
ORDER OF THE COURT (Seventh Chamber) 14 January 2015 (*)
(Appeal — Community trade mark — Regulation (EC) No 207/2009 — Articles 15(1) and 51(1)(a) — Word mark RECARO — Application for revocation — Partial refusal by the Board of Appeal of OHIM) In Case C‑57/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 31 January 2014, Recaro Holding GmbH, formerly Recaro Beteiligungs-GmbH, established in Stuttgart (Germany), represented by J. Weiser, Rechtsanwalt,
applicant, the other party to the proceedings being: Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), defendant at first instance, THE COURT (Seventh Chamber), composed of J.-C. Bonichot, President of the Chamber, A. Arabadjiev and J.L. da Cruz Vilaça (Rapporteur), Judges, Advocate General: E. Sharpston, Registrar: A. Calot Escobar, having decided, after hearing the Advocate General, to give a ruling by reasoned order, pursuant to Article 181 of the Rules of Procedure of the Court of Justice,
makes the following Order 1 By its appeal, Recaro Holding GmbH (‘Recaro’), formerly Recaro Beteiligungs-GmbH, asks the Court to set aside the judgment in Recaro v OHIM — Certino Mode (RECARO) (T‑524/12, EU:T:2013:604; ‘the judgment under appeal’) by which the General Court of the European Union dismissed its action for annulment of the decision of the First Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 6 September 2012 (Case R 1761/2011-1; ‘the contested decision’), made following revocation proceedings between Recaro and Certino Mode SL (‘Certino’), a company established in Spain.
Legal context 2 Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1) was repealed and replaced by Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1).
3 Article 15(1) of Regulation No 207/2009 provides:
‘If, within a period of five years following registration, the proprietor has not put the Community trade mark to genuine use in the Community in connection with the goods or services in respect of which it is registered, or if such use has been suspended during an uninterrupted period of five years, the Community trade mark shall be subject to the sanctions provided for in this Regulation, unless there are proper reasons for non-use.
...’ 4 Article 51(1)(a) of that regulation states:
‘The rights of the proprietor of the Community trade mark shall be declared to be revoked on application to the Office or on the basis of a counterclaim in infringement proceedings:
(a) if, within a continuous period of five years, the trade mark has not been put to genuine use in the Community in connection with the goods or services in respect of which it is registered, and there are no proper reasons for non-use ...’
Background to the dispute 5 On 25 June 1999, Certino obtained from OHIM the registration, under No 73 434, of the word mark RECARO (‘the contested trade mark’) on the basis of Regulation No 40/94.
6 The goods covered by that registration are in Classes 10 and 25 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended (‘the Nice Agreement’), and correspond, for each of those classes, to the following description:
– Class 10: ‘Orthopaedic footwear’; – Class 25: ‘Footwear (except orthopaedic)’. 7 On 16 September 2009, Recaro submitted an application pursuant to Article 51(1)(a) of Regulation No 207/2009 for revocation of Certino’s rights in the contested trade mark, on the ground that the mark in question had not been put to genuine use.
8 By decision of 29 June 2011, the Cancellation Division of OHIM found that the mark in question had not been put to genuine use and revoked all of Certino’s rights in that trade mark.
9 On 25 August 2011, Certino lodged an appeal with OHIM against that decision pursuant to Articles 58 to 64 of Regulation No 207/2009, asserting that it had put the contested trade mark to genuine use and providing additional evidence.
10 By the contested decision, the First Board of Appeal of OHIM (‘the Board of Appeal’) partially upheld Certino’s appeal, restoring its rights in the contested trade mark in respect of the ‘footwear (except orthopaedic)’ in Class 25 of the Nice Agreement, but dismissing the appeal with regard to the ‘orthopaedic footwear’ in Class 10 of that agreement.
11 The Board of Appeal held, in particular, that the orders received from two purchasers and the orders sent to a footwear manufacturer clearly demonstrated significant use of the contested trade mark in connection with the footwear in Class 25 of the Nice Agreement throughout the relevant period. In addition, other evidence, such as Certino’s presence at trade fairs and an article published online concerning that company’s products, were found by the Board to establish use of the contested trade mark. However, the Board of Appeal found, in common with the Cancellation Division, that no evidence had been produced demonstrating use of the contested trade mark in connection with the ‘orthopaedic footwear’ in Class 10 of the Nice Agreement.
Procedure before the General Court and the judgment under appeal 12 By application lodged at the Registry of the General Court on 3 December 2012, Recaro brought an action for annulment of the contested decision. In support of its action, Recaro raised three pleas in law, alleging respectively: (i) infringement of Article 51(1)(a) of Regulation No 207/2009, read in conjunction with Article 15 of that regulation, in that the Board of Appeal should not have found that there was genuine use of the contested trade mark in connection with the ‘footwear’ in Class 25 of the Nice Agreement; (ii) infringement of Article 76(2) of Regulation No 207/2009, read in conjunction with Rule 50(1) of Commission Regulation (EC) No 2868/95 of 13 December 1995 implementing Regulation No 40/94 (OJ 1995 L 303, p. 1); and (iii) infringement of Article 75 of Regulation No 207/2009, submitting that, in failing to give a ruling on the relevance of evidence submitted out of time, the Board had failed to fulfil its duty to state reasons.
13 The General Court held that all those pleas in law were unfounded and, accordingly, dismissed the action in its entirety.
Forms of order sought by the appellant before the Court of Justice 14 Recaro claims that the Court should:
– set aside the judgment under appeal and give a definitive ruling on the dispute, amending the contested decision to revoke all of Certino’s rights in the contested trade mark or, in the alternative, refer the case back to the General Court;
– order OHIM — and, if appropriate, Certino — to pay the costs. The appeal 15 Under Article 181 of its Rules of Procedure, where an appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court may, at any time, acting on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide by reasoned order to dismiss that appeal in whole or in part.
16 It is appropriate to apply that provision in the present case.
Recaro’s arguments 17 Recaro relies on a single ground of appeal, alleging infringement of Article 51(1)(a) of Regulation No 207/2009, read in conjunction with Article 15 of that regulation. That ground is divided into three parts.
18 By the first part of its single ground of appeal, Recaro submits that, for the purposes of assessing whether the contested trade mark had been put to genuine use, the General Court referred to certain pictures which were undated or which predated the period from 16 September 2004 to 15 September 2009 (‘the relevant period’) even though, according to the case-law of the Court of Justice, only evidence pertaining to the relevant period may be taken into account (order in La Mer Technology, C‑259/02, EU:C:2004:50, paragraph 30, and judgment in Colloseum Holding, C‑12/12, EU:C:2013:253, paragraph 31).
19 In particular, Recaro argues that the General Court based its assessment on pictures dating from 1998 or 1999 (that is, predating the relevant period), both in the context of demonstrating use of the contested trade mark in connection with the goods covered by that trade mark registration (paragraph 37 of the judgment under appeal) and in the context of assessing the use of that mark as registered (paragraph 43 of that judgment). Regarding the undated pictures, Recaro asserts that they may not be taken into account even to corroborate other evidence which is dated, since there is no connection between them and that evidence.
20 Thus, according to Recaro, the judgment under appeal is vitiated by an error of law, in so far as the General Court used those pictures as the basis for its assessment as to whether there was genuine use, and should therefore be set aside. Recaro relies in that regard on paragraph 75 of the judgment in Il Ponte Finanziaria v OHIM (C‑234/06 P, EU:C:2007:514), arguing that, although the assessment of evidence for the purposes of ascertaining whether there is genuine use is a question of fact which is not open to review by the Court of Justice on appeal, the question of which evidence may be used in that assessment is a question of law and as such is open to review by the Court.
21 By the second part of its single ground of appeal, Recaro alleges distortion of the facts by the General Court. Thus, first, by using the expression ‘some of the pictures are not dated or predate [the relevant period]’ in paragraph 37 of the judgment under appeal, that court implied that there were other pictures which were dated and which pertained to the relevant period, which is not consistent with the actual evidence in the case-file. Second, in paragraph 36 of that judgment, the General Court distorted the meaning of the statement provided by Certino’s sales director, since that person at no time stated that the highest-selling type of rubber-soled sandal was marketed under the contested trade mark.
22 By the third part of its single ground of appeal, Recaro argues that the General Court disregarded the rules regarding the burden of proof. First, as regards demonstrating use of the contested trade mark in connection with the goods in respect of which it was registered and in the form in which it was registered, the General Court disregarded, in paragraphs 32 and 43 of the judgment under appeal, the rule that it is for Certino to prove genuine use of the contested trade mark, rather than for Recaro to prove that the mark in question has been used for other products or in a form other than the form registered. Second, in paragraph 33 of the judgment under appeal, the General Court merely stated that some evidence ‘point[ed] to’ the use of the contested trade mark in connection with the ‘footwear’ in Class 25 of the Nice Agreement, instead of basing its findings on specific evidence produced by Certino demonstrating genuine use of that trade mark.
Findings of the Court 23 As regards the first part of the single ground of appeal, Recaro submits in essence that the General Court erred in law in basing its assessment of whether there was genuine use of the contested trade mark on pictures which were undated or which predated the relevant period.
24 In that regard, it should be noted that, in paragraphs 34 to 37 of the judgment under appeal, the General Court assessed the use of the contested trade mark in connection with the goods in respect of which it was registered, using as its basis, not — as Recaro alleges — evidence which was undated or which predated the relevant period, but a body of evidence.
25 First, the General Court found that the purchase orders considered could be regarded as relating to the marketing of footwear under the contested trade mark. Secondly, it took into account the licensing contract concluded between Certino and a footwear manufacturer. Thirdly, that court analysed a statement provided by Certino’s sales director, according to which that company has commercial relations with partners concerning the sale of footwear under the contested trade mark. Recaro does not dispute that evidence, with the exception of the sales director’s remarks regarding the highest-selling type of footwear, which Recaro argues were distorted.
26 It was solely in order to corroborate the other evidence in the case-file before it that the General Court, acting in accordance with paragraphs 57 and 58 of its judgment in Certmedica International and Lehning entreprise v OHIM — Lehning entreprise and Certmedica International (L112) (T‑77/10 and T‑78/10, EU:T:2012:95), took into consideration evidence which was undated or which predated the relevant period.
27 The same is true of paragraph 43 of the judgment under appeal concerning the use of the contested trade mark as registered. In that regard, the General Court, having observed in paragraph 42 of that judgment that the specific representation of a word mark is not generally of such a nature as to alter the distinctive character of that mark as registered, found in essence that the evidence before it confirmed that the contested trade mark was being used in a form which did not alter its distinctive character. In that context, the General Court made reference to the pictures which were undated or which predated the relevant period only as ‘additional evidence supporting the other evidence’.
28 In the light of the foregoing, the first part of the single ground of appeal must be rejected as manifestly unfounded.
29 As regards the second part of the single ground of appeal, it should be noted that the supposed distortion of facts invoked by Recaro is based on a clear misreading of the judgment under appeal and, in any event, is not obvious from the documents in the case-file (see, to that effect, order in Zoo Sport v OHIM, C‑676/13 P, EU:C:2014:2080, paragraph 22).
30 Indeed, in paragraph 37 of the judgment under appeal, the General Court merely states that some of the pictures referred to in the contested decision were undated or predated the relevant period. It cannot be inferred from that statement that the General Court meant to imply that there are other pictures which are dated or which pertain to the relevant period. Moreover, as that court rightly observed, it is common ground that Certino’s sales director confirmed, by his statements, that Certino’s commercial relations with its partners concerned footwear sold under the contested trade mark. Consequently, the supposed distortion invoked by Recaro of that director’s remarks regarding the highest-selling product would not be of such a nature as to undermine the General Court’s assessment regarding the genuine nature of the use of the contested trade mark.
31 In those circumstances, the second part of the single ground of appeal must be rejected as manifestly unfounded.
32 As regards the third part of the single ground of appeal, it should be observed that, as can be seen from paragraphs 32 and 43 of the judgment under appeal, the General Court is merely stating that there is no evidence to support the arguments put forward by Recaro to challenge the lawfulness of the contested decision and that, consequently, the General Court is in no way reversing the burden of proof.
33 Therefore, that third part must be rejected as manifestly unfounded.
34 In the light of the foregoing, the present appeal must be dismissed in its entirety as manifestly unfounded.
Costs 35 Under Article 137 of the Rules of Procedure, applicable to appeal proceedings by virtue of Article 184(1) of those Rules, a decision as to costs is to be given in the order which closes the proceedings. In the present case, Recaro is to be ordered to bear its own costs.
On those grounds, the Court (Seventh Chamber) hereby: 1. Dismisses the appeal; 2. Orders Recaro Holding GmbH to bear its own costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE COURT (Third Chamber)
17 September 2015 ( *1 )
‛Appeal — State aid — Actions for annulment — Article 263 TFEU — Admissibility — Unlawful and incompatible aid — Obligation to recover — European Commission decision not to extend the recovery obligation to the successor of the aid beneficiary — Interest in bringing proceedings — Action for damages and for the recovery of aid before the national courts — Locus standi — Appellant not individually concerned’
In Case C‑33/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 22 January 2014,
Mory SA, in liquidation, established in Pantin (France),
Mory Team, in liquidation, established in Pantin,
Superga Invest, formerly Compagnie française superga d’investissement dans le service (CFSIS), established in Miraumont (France),
represented by B. Vatier and F. Loubières, avocats, with an address for service in Luxembourg,
appellants,
the other party to the proceedings being:
European Commission, represented by T. Maxian Rusche and B. Stromsky, acting as Agents, with an address for service in Luxembourg,
defendant at first instance,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Chamber, A. Ó Caoimh (Rapporteur), C. Toader, E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: P. Mengozzi,
Registrar: L. Carrasco Marco, Administrator,
having regard to the written procedure and further to the hearing on 27 April 2015,
after hearing the Opinion of the Advocate General at the sitting on 18 June 2015,
gives the following
Judgment
By their appeal, Mory SA, Mory Team and Superga Invest request the Court to set aside the order of the General Court of the European Union in Mory and Others v Commission (T‑545/12, EU:T:2013:607) (‘the order under appeal’), by which the General Court dismissed the action brought by the appellants for annulment of Commission Decision C(2012) 2401 final of 4 April 2012 concerning the takeover of assets of the Sernam group as part of its composition with creditors (‘the decision at issue’).
Background to the dispute
The appellants regard themselves as having been direct competitors of Financière Sernam and of its subsidiaries, Sernam Services and Aster (together, ‘the Sernam group’). Mory SA and Mory Team (together, ‘the Mory companies’) were engaged in the traditional and express mail services sector before they were put into compulsory liquidation. Superga Invest, formerly Compagnie française superga d’investissement dans le service (CFSIS), was the main shareholder of the Mory companies.
By decision of 23 May 2001 concerning State aid NN 122/2000 (ex NJ 140/2000) (OJ 2001 C 199, p. 15), the Commission approved aid for the restructuring of the Sernam group (‘the Sernam 1 Decision’).
By Decision 2006/367/EC of 20 October 2004 on the State aid partly implemented by France for the Sernam company (OJ 2006 L 140, p. 1) (‘the Sernam 2 Decision’), the Commission confirmed that the aid approved by the Sernam 1 Decision was compatible with the internal market under certain conditions. It also established the presence of supplementary aid incompatible with the internal market and which must, consequently, be recovered by the French Republic.
By letter of 16 July 2008, the Commission informed the French Republic of its decision to initiate the formal investigation procedure laid down in Article 108(2) TFEU concerning the application by France of the Sernam 2 Decision. That decision was published in the Official Journal of the European Union on 9 January 2009 (OJ 2009 C 4, p. 5).
On 27 June 2011, the Mory companies were placed in court-supervised administration by the tribunal de commerce de Bobigny (Bobigny Commercial Court, France).
On 31 January 2012, Financière Sernam and Sernam Services were placed in court-supervised administration by the tribunal de commerce de Nanterre (Nanterre Commercial Court, France).
On 3 February 2012, Aster was put into compulsory liquidation with continuation of trading by the tribunal de commerce de Pontoise (Pontoise Commercial Court, France).
On 9 March 2012, the Commission adopted Decision 2012/398/EU on State aid SA.12522 (C 37/08) — France — Enforcing the Sernam 2 Decision (OJ 2012 L 195, p. 19) (‘the Sernam 3 Decision’). Article 1 of the operative part of that decision states that the Sernam group benefited from unlawful State aid which was incompatible with the internal market (‘the aid at issue’). Under Article 2 of the operative part, the French Republic is required to recover the aid at issue from that group.
On the same day, two takeover offers were sent to the administrator of the Sernam group, the first issued by Geodis Calberson (‘Calberson’), a subsidiary of the Geodis group (‘Geodis’) engaged in the mail services sector, and the second by BMV. The takeover offer from Calberson was subject to the condition that ‘no obligation of any type and in particular no recovery charges relating to all or part of the aid [at issue] paid [to the Sernam group] may be transferred with the assets taken over or as a result of the takeover, or be charged to the successor’. The offer submitted by BMV was not subject to such a condition, but was submitted as an integral part of the offer submitted by Calberson and would lapse if Calberson’s bid were rejected.
On 23 March 2012, the French Republic requested the Commission to confirm that the obligation to repay the aid at issue would not be extended to Geodis and BMV, in the event that the latter took over part of the assets of the Sernam group.
By the decision at issue, the Commission informed the French Republic that the recovery obligation imposed on the Sernam group under Article 2 of the Sernam 3 Decision did not require to be extended to Geodis and BMV, due to the lack of economic continuity between the Sernam group and those two potential successors. The Commission stated, in paragraph 54 of the decision at issue, that the latter did not apply to the reasonableness or otherwise of the successors’ investment consisting of the takeover of certain of the assets of the Sernam group and that, consequently, it did not prejudge the assessment of that investment in the light of Article 107(1) TFEU.
On 10 April 2012, Calberson submitted a new takeover offer with the administrator of the Sernam group which did not include the condition attached to its initial takeover offer.
On 13 April 2012, the tribunal de commerce de Nanterre approved the takeover offer submitted by Calberson and by BMV and ordered the transfer in their favour of certain assets of Sernam Services, becoming effective on 7 May 2012.
On 10 July 2012, the Mory companies were put into compulsory liquidation by the tribunal de commerce de Bobigny.
The proceedings before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 17 December 2012, the appellants brought an action for annulment of the decision at issue.
By document lodged at the Registry of the General Court on 25 March 2013, the Commission raised an objection of inadmissibility pursuant to Article 114(1) of the Rules of Procedure of the General Court, alleging, first, that the appellants had failed to establish that they had an interest in bringing proceedings against the decision at issue and, secondly, that they were not individually concerned by that decision, within the meaning of the fourth paragraph of Article 263 TFEU.
In the order under appeal, the General Court decided that the appellants had not substantiated their interest in bringing proceedings against the decision at issue and that, therefore, their action must be declared inadmissible on that sole ground, without it being necessary to examine the plea of inadmissibility raised by the Commission alleging that the appellants were not individually concerned by the decision at issue. In particular, that Court held that neither the action brought by the Mory companies, on 25 April 2007, before the tribunal administratif de Paris (Paris Commercial Court, France) seeking recovery of the aid at issue, nor the action brought by them on 7 May 2013 before the tribunal de commerce de Paris seeking an order that the Sernam group and Geodis were, in particular, jointly and severally liable to compensate for the damage that those companies caused them, were capable of giving them such an interest.
Forms of order sought and the procedure before the Court of Justice
By their appeal, the appellants request the Court to:
—
set aside the order under appeal;
—
refer the case back to the General Court to be considered on its merits, and
—
reserve the costs.
The Commission contends that the appeal should be dismissed and the appellants ordered to pay the costs.
By document lodged with the Court Registry on 19 May 2014, Calberson applied, on the basis of the second subparagraph of Article 40 of the Statute of the Court of Justice of the European Union, for leave to intervene in the present case in support of the form of order sought by the Commission.
That application was rejected by order of the President of the Court of 27 February 2015.
The application for reopening of the oral procedure
Following the delivery of the Opinion of the Advocate General, the appellants, by document lodged at the Court Registry on 29 June 2015, applied for the oral part of the procedure to be reopened. In support of that application, the appellants claimed, in essence, that the new arguments presented by the Advocate General in his Opinion concerning, in particular, the classification of the decision at issue, for the purposes of determining locus standi within the meaning of Article 263 TFEU, and the consequences of those arguments for the consideration of the appeal, required to be debated inter partes, in the event that the Court decides to give a definitive ruling on the dispute.
It must be recalled that the Statute of the Court of Justice and the Rules of Procedure of the Court make no provision for interested parties to submit observations in response to the Advocate General’s Opinion (see judgment in Vnuk, C‑162/13, EU:C:2014:2146, paragraph 30 and the case-law cited).
Pursuant to the second paragraph of Article 252 TFEU, it is the duty of the Advocate General, acting with complete impartiality and independence, to make, in open court, reasoned submissions on cases which, in accordance with the Statute of the Court of Justice, require the Advocate General’s involvement. The Court is not bound either by the Advocate General’s Opinion or by the reasoning on which it is based (see judgment in Commission v Parker Hannifin Manufacturing and Parker-Hannifin, C‑434/13 P, EU:C:2014:2456, paragraph 29 and the case-law cited).
Consequently, a party’s disagreement with the Opinion of the Advocate General, irrespective of the questions that he examines in his Opinion, cannot in itself constitute grounds justifying the reopening of the oral part of the procedure (judgment in E.ON Energie v Commission, C‑89/11 P, EU:C:2012:738, paragraph 62).
However, the Court may at any moment, having heard the Advocate General, order the reopening of the oral part of the procedure under Article 83 of its Rules of Procedure if, inter alia, it considers that it lacks sufficient information or where the case must be decided on the basis of an argument which has not been debated between the parties or the interested persons referred to in Article 23 of the Statute of the Court of Justice (judgment in Nordzucker, C‑148/14, EU:C:2015:287, paragraph 24).
That is not the position in the present case. The appellants and the Commission have presented, both during the written part of the procedure and the oral part thereof, all their arguments of fact and law in support of their claims, including in relation to locus standi within the meaning of Article 263 TFEU. Therefore, the Court considers, after hearing the Advocate General, that it has before it all the necessary information to give judgment and that that information has been the subject of debate before it.
In the light of the foregoing, the Court considers that there is no need to reopen the oral part of the procedure.
The appeal
The appellants put forward two grounds in support of their appeal. The first alleges that the General Court committed several errors of law in its assessment of their interest in bringing an action for annulment of the decision at issue. The second ground of appeal alleges an infringement of the fourth paragraph of Article 263 TFEU in so far as the General Court failed to find that they were directly and individually concerned by that decision.
As a preliminary point, the appellants claim that there is no dividing line between the concepts of an interest in bringing proceedings and ‘direct or individual concern’. Those two concepts merge completely as regards the assessment of the admissibility of an action brought by a party which is not the addressee of a decision, within the meaning of the fourth paragraph of Article 263 TFEU. It is illogical to consider that a person who is directly and individually concerned by a decision does not have an interest in bringing proceedings. Likewise, it is inconceivable that a person could have an interest in bringing proceedings without being directly and individually concerned by a decision. By holding that those two concepts are distinct, the General Court infringed the fourth paragraph of Article 263 TFEU. Merely showing that a person is directly and individually concerned suffices to establish the admissibility of his action.
The first ground of appeal
Arguments of the parties
By their first ground of appeal, the appellants claim that the General Court committed a member of errors of law in the examination which led it to hold that they had not established their interest in bringing proceedings for annulment of the decision at issue.
In the first place, the appellants claim that the General Court’s reasoning is vitiated by a number of contradictions and errors of law where it held, in paragraphs 29 to 35 of the order under appeal, that Mory’s participation in the administrative procedure prior to the adoption of the Sernam 2 Decision was not capable of conferring on it an interest in bringing proceedings.
First of all, the General Court contradicted itself in so far as, having in particular invoked, in paragraph 31 of the order under appeal, in support of its decision that the appellants did not have an interest in bringing proceedings, the case-law concerning State aid according to which an applicant must always show that the decision that aid is compatible with the internal market is capable of affecting its position on the market, it stated, in paragraph 57 of that order, that the Commission did not take a position, in the decision at issue, on the existence and potential compatibility of aid on the basis of Article 108 TFEU.
Next, the General Court’s finding, in paragraph 33 of the order under appeal, that the question of procedures for recovering the aid at issue is a matter solely for the Commission and the Member State concerned, would exclude, in principle, a party, other than that Member State, having an interest in the decision ordering recovery having an interest in bringing proceedings against a decision relating to procedures for recovering that aid. Such an assessment contradicts the fourth paragraph of Article 263 TFEU, in accordance with which an action against such a decision is open to any person directly and individually concerned by that decision.
Finally, the General Court confused, first, the concepts of ‘an interest in bringing proceedings’ and ‘person concerned’ and, secondly, the nature of the decision at issue, since the order under appeal classified it sometimes as a sui generis decision, sometimes as a decision relating solely to the procedures for recovering aid and as a decision concerning the existence or absence of a transfer of incompatible aid and the circumvention of a recovery decision. That confusion obfuscates the fact that the General Court did not adopt, in the order under appeal, the same approach as that which it had followed in the judgment in Ryanair v Commission (T‑123/09, EU:T:2012:164).
In the second place, the appellants consider that the General Court committed errors of law and of assessment when it held, in paragraphs 36 to 51 of the order under appeal, that the actions brought before the national courts for recovery of the aid at issue and compensation for damage suffered did not give them an interest in bringing proceedings before the EU Courts.
First of all, the appellants claim, in that regard, that the General Court wrongly held that an interest in bringing proceedings against an EU decision can be substantiated only where a party is entitled to bring an action for damages before the national courts. That interest could also result from an action for effective recovery of aid by the Member State concerned. In this case, Mory brought such proceedings before the tribunal administratif de Paris seeking an order that the French State must recover the aid at issue from all the successive beneficiaries thereof, including Geodis. Neither the Commission nor the General Court is competent to contest the appellants’ standing and interest in the context of those proceedings, as long as they were validly brought and are ongoing.
Next, the appellants claim that the General Court wrongly held that their interest in bringing proceedings was not established on the ground that they failed to take any step for several years in order to recover damages for the harm suffered as a result of the distortion of competition created by the aid at issue. The bringing of the action for damages before the tribunal de commerce de Paris became possible only after the adoption of the Sernam 3 Decision declaring that aid to be incompatible with the internal market. Moreover, that action was referred to in the application before the General Court and brought before the adoption of the order under appeal. In any event, it was not open to the General Court to replace the analysis of the merits of the action for damages against Geodis carried out by the national court with its own analysis in order to hold that that action could not succeed and that the success of the action for annulment brought before it had no impact on the success of the action for damages pending before the national courts.
Finally, the appellants consider that an action for damages before the national court against Geodis is valid in law, since the latter should be regarded as the actual beneficiary of the aid at issue and, on that basis, as being responsible for compensating the harm caused to the Mory companies by the grant of that aid, jointly and severally with the successive beneficiaries and their provider, the Société nationale des chemins de fer français (SNCF). Furthermore, if the decision at issue was annulled, the appellants could rely before the national court on the concept of French law known as ‘enrichissement sans cause’ (‘unjust enrichment’) against Geodis.
In the third place, the appellants complain that the General Court held that Superga Invest had no interest in bringing proceedings by refusing to consider that such an interest derived from the interest of the Mory companies, whose main shareholder is Superga Invest.
In the fourth place, the appellants complain that the General Court held, in paragraphs 54 to 58 of the order under appeal, that their procedural right to secure the instigation of a formal investigation procedure under Article 108(2) TFEU had not been infringed.
First of all, the appellants claim that, while they had brought to the attention of the Commission the existence of risks of circumvention due to the envisaged transfer, that institution, by adopting the decision at issue, ruled out the opening of a detailed investigation procedure and infringed their procedural rights. The appellants were therefore prevented from obtaining a detailed examination, not of new aid, but of the unlawful application of the Sernam 3 Decision.
Next, the appellants consider that the General Court deliberately avoided examining whether they were directly and individually concerned by the decision at issue in order to avoid addressing the question of the nature of the decision at issue, which was classified by the Commission as a sui generis decision. Being individually affected by that decision, the appellants are entitled to challenge it in order that the General Court may determine whether the Commission was competent to adopt that decision notwithstanding the lack of a legal basis.
Finally, the appellants complain that the General Court held, in paragraph 33 of the order under appeal, that given that the decision at issue relates not to the compatibility of State aid with the internal market, but to the procedures for recovering the aid at issue, it concerns only the Commission and the Member State which is required to recover the aid. The question to be examined is therefore not whether new aid was granted to Geodis, but whether the conditions in which the takeover of the assets of the Sernam group by Geodis were to take place constituted a correct application of the Sernam 3 Decision or, on the contrary, an unlawful application of that decision. Since a procedure for recovery may constitute an unlawful application of a decision on the recovery of aid, the Commission should initiate the formal investigation procedure if it has serious doubts in that regard.
According to the Commission, the appellants’ claims are unfounded for two reasons. First, at the time the action for annulment was lodged, the Mory companies were in liquidation and were therefore no longer the competitors of any undertaking. Secondly, the annulment of the decision at issue is not of real interest in the context of an action for damages before the national court on account of the competitive disadvantage suffered by them in the past.
The Commission contends, as a preliminary point, that the arguments advanced in the first and fourth places in the context of this ground of appeal relate not to the appellants’ interest in bringing proceedings but to their locus standi. Those arguments cannot, therefore, prove such an interest in bringing proceedings against the decision at issue.
As to the remainder, the Commission considers that neither the action for recovery nor the action for damages brought before the national courts grants the appellants an interest in bringing proceedings before the EU Courts.
As regards the first of those actions brought before the tribunal administratif de Paris, the Commission contends that, since the Mory companies continue to exist only for the purposes of their winding up, they cannot have an interest in bringing proceedings to have their competitive position restored through recovery of the aid at issue. In their application before the General Court, the appellants moreover invoked only the possibility of bringing an action for damages to try to substantiate an interest in bringing proceedings. Furthermore, it is not open to the appellants to invoke the argument at the appeal stage that the action for recovery before the tribunal administratif de Paris also covers recovery of the aid at issue from Geodis. That extension of the action took place after the order under appeal was delivered and the application before the General Court does not include that argument.
In the alternative, the Commission considers that it is not in any way established that that action before the tribunal administratif de Paris is well founded and has the slightest chance of success under national law. In addition, it appears that, following the adoption of the Sernam 3 Decision, the national court in question found that it was moving towards the adoption of an order that there was no need to adjudicate. Once the Commission made a decision, as in the present case, declaring the aid at issue incompatible with the internal market and ordering the recovery thereof, the proceedings brought earlier before the national court would lose their purpose.
As regards the second of those actions brought before the tribunal de commerce de Paris, the Commission contends that it does not suffice, in order to substantiate an interest in the annulment of a Commission decision, for an applicant before the EU Courts to rely on any action for damages capable of being lodged in the future or, as the case may be, which has already been lodged before a national court, on the ground that the annulment of that decision by the EU Courts would facilitate success in its action for damages, without showing, in addition, that that action is reasonably likely to result in the annulment of the Commission decision. In that context, although the General Court may not substitute itself for the national court in order to rule on the merits of the action for damages pending before the national court, it is nevertheless required to ensure that the applicants have established a real interest in applying for annulment of a Commission decision in order to substantiate that action for damages.
In the present case, the Commission considers that such evidence is lacking. The General Court’s assessment of that point is correct, an assessment which, moreover, comes within the factual sphere not subject to review by the Court on appeal. The appellants lodged their application for damages only in response to the argument presented by the Commission in its objection of inadmissibility more than one year after the adoption of the Sernam 3 Decision. As regards the possibility of invoking an argument against Geodis based on the concept of French law known as ‘enrichissement sans cause’, it was presented for the first time in the appeal and is, on that ground, manifestly inadmissible. In any event, no serious arguments have been presented in support of that concept.
Finally, the Commission considers that the General Court was correct to hold, in paragraph 53 of the order under appeal, that since the Mory companies are no longer active, they cannot suffer from any competitive threat, the consequences of which would be borne by Superga Invest.
Findings of the Court
By their first ground of appeal, the appellants claim that the General Court committed a number of errors of law by holding that they had failed to establish their interest in bringing proceedings for annulment of the decision at issue, within the meaning of the fourth paragraph of Article 263 TFEU.
According to the Court’s settled case-law, an action for annulment brought by a natural or legal person is admissible only in so far as that person has an interest in having the contested act annulled. Such an interest requires that the annulment of that act must be capable, in itself, of having legal consequences and that the action may therefore, through its outcome, procure an advantage to the party which brought it (see, inter alia, to that effect, judgments in Commission v Koninklijke FrieslandCampina, C‑519/07 P, EU:C:2009:556, paragraph 63; ACEA v Commission, C‑319/09 P, EU:C:2011:857, paragraph 67; Stichting Woonpunt and Others v Commission, C‑132/12 P, EU:C:2014:100, paragraph 67; and Stichting Woonlinie and Others v Commission, C‑133/12 P, EU:C:2014:105, paragraph 54).
An appellant’s interest in bringing proceedings must be vested and current (see, to that effect, judgments in Commission v Koninklijke FrieslandCampina, C‑519/07 P, EU:C:2009:556, paragraph 65, and Planet v Commission, C‑564/13 P, EU:C:2015:124, paragraph 34). It may not concern a future and hypothetical situation (see, to that effect, judgments in Stroghili v Court of Auditors, 204/85, EU:C:1987:21, paragraph 11, and Cañas v Commission, C‑269/12 P, EU:C:2013:415, paragraphs 16 and 17).
That interest must, in the light of the purpose of the action, exist at the stage of lodging the action, failing which the action will be inadmissible, and continue until the final decision, failing which there will be no need to adjudicate (see, to that effect, judgments in Abdulrahim v Council and Commission, C‑239/12 P, EU:C:2013:331, paragarph 61, and Cañas v Commission, C‑269/12 P, EU:C:2013:415, paragraph 15).
The interest in bringing proceedings is an essential and fundamental prerequisite for any legal proceedings (see, to that effect, order in S. v Commission, 206/89 R, EU:C:1989:333, paragraph 8, and judgment in Andechser Molkerei Scheitz v Commission, C‑682/13 P, EU:C:2015:356, paragraph 27).
Moreover, the admissibility of an action brought by a natural or legal person against an act which is not addressed to them, in accordance with the fourth paragraph of Article 263 TFEU, is subject to the condition that they be accorded standing to bring proceedings, which arises in two situations. First, such proceedings may be instituted if the act is of direct and individual concern to them. Second, such persons may bring proceedings against a regulatory act not entailing implementing measures if that act is of direct concern to them (see, to that effect, inter alia, judgments in Telefónica v Commission, C‑274/12 P, EU:C:2013:852, paragraph 19, and Stichting Woonpunt and Others v Commission, C‑132/12 P, EU:C:2014:100, paragraph 44).
In this case, it should be noted, in the first place, that the General Court held, in paragraph 59 of the order under appeal, that the action for annulment of the decision at issue brought by the appellants under the fourth paragraph of Article 263 TFEU was inadmissible, on the sole ground that the appellants did not justify their interest in bringing proceedings, without examining, in addition, whether those appellants had locus standi within the meaning of that provision.
In those circumstances, it appears that the grounds on which the General Court held, in paragraphs 29 to 35 and 55 to 58 of the order under appeal, that, first, Mory was not individually concerned by the decision at issue and, secondly, the appellants were not denied, in the absence of initiation of the formal investigation procedure provided for in Article 108(2) TFEU, the benefit of their procedural rights, are not capable of supporting the operative part of that order, since those grounds concern the examination not of the interest but locus standi, as the General Court moreover held itself in paragraphs 30 and 34 of that order.
In that regard, the appellants are wrong to claim that the mere fact that a natural or legal person is directly and individually concerned necessarily indicates his interest in bringing proceedings. As is apparent from paragraphs 55 to 59 of the present judgment, an interest in bringing proceedings and locus standi are distinct conditions for admissibility which must be satisfied by a natural or legal person cumulatively in order to be admissible to bring an action for annulment under the fourth paragraph of Article 263 TFEU (see, to that effect, inter alia, judgments in Stichting Woonpunt and Others v Commission, C‑132/12 P, EU:C:2014:100, paragraphs 67 and 68, and Stichting Woonlinie and Others v Commission, C‑133/12 P, EU:C:2014:105, paragraphs 54 and 55).
It follows from the foregoing considerations that the line of argument put forward by the appellants in the context of the first ground in support of their appeal, in so far as it complains that the order under appeal held that the appellants did not have locus standi, must be rejected as being, in part, ineffective and, in part, unfounded.
In the second place, it is necessary to examine the appellants’ first ground of appeal in so far as it is directed against the findings of the General Court, set out in paragraphs 36 to 51 of the order under appeal, by which it rejected the appellants’ line of argument that their interest in bringing proceedings resulted, in this case, from the action brought by the Mory companies, on 25 April 2007, before the tribunal administratif de Paris seeking recovery of the aid at issue, and the action for damages brought by them on 7 May 2013 before the tribunal de commerce de Paris seeking an order that the Sernam group and Geodis be held jointly and severally liable to reimburse the damage that those companies caused the appellants.
In that regard, the General Court held, first, in paragraphs 39 and 40 of the order under appeal that the action for recovery of the aid at issue brought before the national court did not seek damages for the harm which the appellants claimed to have suffered.
Secondly, the General Court, after noting, in paragraph 41 of the order under appeal, that the appellants had failed to bring any action for several years for damages for harm suffered as a result of the distortion of competition created by that aid, held, in paragraphs 42 to 49 of that order, that the action brought by the appellants before the tribunal de commerce de Paris, after the bringing of the action for annulment before the EU Courts, also did not grant them an interest in bringing proceedings before the latter, since they had failed to show that Geodis was likely to cause them harm, thereby giving them a basis for bringing an action for damages against the latter before the national court.
In that regard, the General Court, first of all, held in paragraphs 44 and 45 of the order under appeal that, since the assets of the Sernam group were taken over on a date after the Mory companies’ composition with their creditors, that takeover could not be the cause of their compulsory liquidation and that, as a result, Geodis could not be held responsible for their poor financial situation. Next, the General Court stated, in paragraph 47 of that order, that it was also not established that Geodis could, merely on the ground that it had taken over the assets of the Sernam group, be held theoretically responsible under national law for the alleged harm which that group had caused to the appellants. Finally, in so far as the appellants referred to the damage which could be caused to them by Geodis taking over certain of the assets of the Sernam group without being required to repay the aid at issue, the General Court held, in paragraph 48 of that order, that since the Mory companies had ceased all economic activity since their liquidation they could not suffer any harm caused by the transfee.
It must be observed at the outset that although it is known that the General Court has exclusive jurisdiction to find and appraise the facts and, in principle, to examine the evidence it accepts in support of those facts, the Court of Justice has jurisdiction to carry out a review, provided that the General Court has defined their legal nature and determined the legal consequences (see, to that effect, judgment in E.ON Energie v Commission, C‑89/11 P, EU:C:2012:738, paragraphs 64 and 65 and the case-law cited). Consequently, the question whether, in the light of such facts and evidence, the annulment of the decision at issue by the EU Courts is capable of granting the appellants a benefit in the context of an action brought before the national courts, which may establish their interest in bringing proceedings before the EU Courts, is a question of law which comes within the Court’s review in the context of an appeal.
It should be noted that, according to the Court’s settled case-law, an application for annulment may retain an interest as a basis for a possible action for damages (see, to that effect, judgments in Könecke Fleischwarenfabrik v Commission, 76/79, EU:C:1980:68, paragraph 9; France and Others v Commission, C‑68/94 and C‑30/95, EU:C:1998:148, point 74; orders in Lech-Stahlwerke v Commission, C‑111/99 P, EU:C:2001:58, paragraphs 19 and 20; Commission v Provincia di Imperia, C‑183/08 P, EU:C:2009:136, paragraph 30; and judgment in Abdulrahim v Council and Commission, C‑239/12 P, EU:C:2013:331, paragraph 64).
The continuation of such an interest in bringing proceedings must be assessed in the light of the specific circumstances, taking account, in particular, of the consequences of the alleged unlawfulness and of the nature of the damage claimed to have been sustained (judgment in Abdulrahim v Council and Commission, C‑239/12 P, EU:C:2013:331, paragraph 65).
In this case, as is apparent, in essence, from paragraph 46 of the order under appeal, the harm alleged by the appellants is due to the fact that the Sernam group benefited, for 10 years, from aid which is unlawful and incompatible with the internal market, granted by the French Republic and the recovery of which was ordered by the Commission in the Sernam 3 Decision.
By the decision at issue, the Commission informed the French Republic that that obligation to recover would not be extended to Geodis in the event that the latter took over part of the assets of the Sernam group, since, in the absence of economic continuity, it was not established that Geodis would actually benefit from the aid at issue.
It follows from that that, as a result of the adoption of that decision, Geodis, which effectively took over part of the assets of the Sernam group, is not affected by that obligation to recover, since it cannot be regarded as a beneficiary of the aid at issue.
As stated by the Advocate General in point 91 of his Opinion, that fact alone is capable of showing that the appellants have an interest in applying for annulment of the decision at issue, since the action for damages before the national courts, in so far as it seeks compensation for harm allegedly suffered by them as a result of the grant of the aid at issue, is based precisely on the premiss that Geodis must, as transferee, be regarded as the beneficiary of that aid.
Since the annulment of the decision at issue is likely to have the result that Geodis should henceforth be regarded as the beneficiary of the aid at issue, the grant of which caused the damage alleged by the appellants, such an annulment would, in itself, be capable of increasing the likelihood that the action for damages brought before the tribunal de commerce de Paris would be successful in so far as that action is directed against Geodis and, therefore, that the appellants would benefit in the context of that action.
In that regard, contrary to the finding made by the General Court in paragraph 47 of the order under appeal, the appellants cannot be required to show that, under national law, Geodis could in fact be held responsible for the damage alleged solely on the basis of the takeover of the assets of the Sernam group. It is not for the EU Courts, for the purpose of determining an interest in bringing proceedings before them, to assess the likelihood that an action brought before the national courts under national law is well founded and, therefore, to substitute itself for those courts in making such an assessment. It is, by contrast, necessary, but sufficient, that, by its outcome, the action for annulment brought before the EU Courts would be capable of benefiting the party which brought it. That is so in this case, as follows from paragraphs 74 and 75 of the present judgment.
It is also irrelevant, contrary to what was stated by the General Court in paragraph 48 of the order under appeal, that the Mory companies had ceased all economic activity after their liquidation, since the damage alleged by the appellants, as the Commission itself acknowledged at the hearing, results precisely from the distortion of competition created by the grant of the aid at issue over a period during which it is agreed that the Mory companies carried out an economic activity on the market concerned and, therefore, were competitors of the beneficiary of that aid.
For the same reason, it is irrelevant that the takeover by Geodis of certain assets of the Sernam group, since it took place after the date on which the Mory companies were put into administration, as noted by the General Court in paragraphs 44 and 45 of the order under appeal, was not the cause of those companies being put into compulsory liquidation.
It should be added that the Commission is also wrong to criticise the appellants, at the stage of present appeal, for having their action for damages before the national court on a date after that at which they brought their action for annulment before the General Court. It is apparent from the Court’s case-law referred to in paragraphs 56 and 69 of this judgment that the possibility of an action for damages suffices to justify such an interest in bringing proceedings, in so far as that interest is not hypothetical. In the present case, it is not disputed that the appellants referred to the commencement of that action for damages in their application lodged before the General Court and that that action, as is apparent from paragraph 42 of the order under appeal, was indeed brought before the adoption of the order under appeal.
Furthermore, it should also be noted that the annulment of the decision at issue would also, in itself, be capable of benefiting the appellants in the action they have brought before the tribunal administratif de Paris seeking an order that the French State must recover the aid at issue, since that annulment would have as its effect that Geodis would no longer be necessarily subject to the obligation to repay deriving from the decision at issue, so that the annulment of the latter is liable to increase the likelihood that the action brought before the tribunal de commerce de Paris would be successful.
The General Court, therefore, erred in law by holding in paragraph 40 of the order under appeal that that action was not capable of conferring on the appellants an interest in bringing proceedings on the sole ground that that action did not seek compensation for the damage allegedly suffered, since the interest in bringing proceedings, as the Advocate General stated in point 40 of his Opinion, could arise from any action before the national courts in the context of which the possible annulment of the contested act before the EU Courts is capable of benefiting the applicant.
In that regard, the Commission is wrong to argue that the action brought by the appellants before the tribunal administratif de Paris is not capable of establishing the appellants’ interest in bringing proceedings before the EU Courts on the ground that that action seeks solely to obtain recovery of the aid at issue not from Geodis but from the Sernam group. It is clearly apparent from the documents before the Court that that action extended to the successive beneficiaries of the aid at issue. Since the appellants, moreover, referred expressly to that extension of their action in their written submissions before the General Court, it is necessary to reject the objection of inadmissibility raised by the Commission on the ground that that argument was not presented by the appellants in the proceedings before the General Court.
Furthermore, while it is true that it cannot be ruled out that the adoption of the Sernam 3 Decision, in so far as it orders the recovery of the aid at issue, or the cessation of the economic activities of the Mory companies may, as the case may be, affect the appellants’ interest in bringing proceedings before the tribunal administratif de Paris, that fact is, by contrast, of no relevance whatsoever, contrary to what was asserted by the Commission, in particular at the hearing, to the interest of those appellants in bringing proceedings before the EU Courts, since, by its outcome, the action for annulment brought before those courts is capable of affecting the outcome of the action before the national court seeking recovery of the aid at issue.
It follows from the above, in particular from paragraphs 77, 78 and 83 of this judgment, that the General Court also erred in law by holding, in paragraphs 52 to 54 of the order under appeal, that Superga Invest, as the main shareholder of the Mory companies, had not established its interest in bringing proceedings, since, as those companies were no longer active, they could not suffer from any competitive disadvantage, the consequences of which would be suffered by Superga Invest. Since Superga Invest’s interest in bringing proceedings is associated with that of the Mory companies, it also has, for the same reasons, such an interest before the EU Courts.
In the light of all the foregoing, it must be held that the General Court erred in law by holding that the appellants had failed to establish their interest in bringing proceedings for annulment of the decision at issue, within the meaning of the fourth paragraph of Article 263 TFEU.
In those circumstances, the appellants’ first ground in support of their appeal should be declared well founded.
The order under appeal must accordingly be set aside, and there is no need to examine the second ground of appeal put forward by the appellants in support of their appeal.
The action before the General Court
Under Article 61 of the Statute of the Court of Justice, if the appeal is well founded, the Court is to quash the decision of the General Court. It may therefore itself give final judgment in the matter, where the state of the proceedings so permits, or refer the case back to the General Court for judgment.
In this case, the Court considers that it has the information necessary to rule definitively on the objection of inadmissibility raised by the Commission during the proceedings at first instance.
In the first place, it is necessary, for the reasons set out in paragraphs 74 to 85 of the present judgment, to reject that objection of inadmissibility in so far as it claims that the appellants have no interest in bringing proceedings.
In the second place, in so far as that objection claims that the appellants have no interest in bringing proceedings, it should be noted that, as has already been stated in paragraph 59 of the present judgment, the fourth paragraph of Article 263 TFEU provides for two situations in which natural or legal persons are granted standing to institute proceedings against an EU act not addressed to them. First, such proceedings may be instituted if the act is of direct and individual concern to them. Second, they may bring proceedings against a regulatory act not entailing implementing measures if that act is of direct concern to them.
As the decision at issue, which was addressed to the French Republic, does not constitute a regulatory act under the fourth paragraph of Article 263 TFEU, since it is not an act of general application (see, to that effect, judgment in Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraph 56), it is necessary to determine whether the appellants are directly and individually concerned by that decision, within the meaning of that provision.
According to the Court’s settled case-law, persons other than those to whom a decision is addressed may claim to be individually concerned only if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of those factors distinguishes them individually just as in the case of the person addressed by such a decision (see, inter alia, judgments in Plaumann v Commission, 25/62, EU:C:1963:17, p. 107; Sniace v Commission, C‑260/05 P, EU:C:2007:700, paragraph 53; 3F v Commission, C‑319/07 P, EU:C:2009:435, paragraph 29; and T & L Sugars and Sidul Açúcares v Commission, C‑456/13 P, EU:C:2015:284, paragraph 63).
As the action at first instance concerned a Commission decision on State aid, it must be borne in mind that, in the context of the procedure for reviewing State aid provided for in Article 108 TFEU, the preliminary stage of the procedure for reviewing aid under Article 108(3) TFEU, which is intended merely to allow the Commission to form a prima facie opinion on the partial or complete conformity of the aid in question, must be distinguished from the stage of the review under Article 108(2) TFEU. It is only at the latter stage, which is designed to enable the Commission to be fully informed of all the facts of the case, that the Treaty imposes an obligation on the Commission to give the parties concerned notice to submit their comments (see, inter alia, judgment in 3F v Commission, C‑319/07 P, EU:C:2009:435, paragraph 30 and the case-law cited).
It follows that, where, without initiating the formal review procedure under Article 108(2) TFEU, the Commission finds, on the basis of Article 108(3) TFEU, that aid is compatible with the common market, the persons intended to benefit from those procedural guarantees may secure compliance therewith only if they are able to challenge that decision before the EU Courts. For those reasons, an action for the annulment of such a decision brought by a person who is concerned within the meaning of Article 108(2) TFEU is to be declared to be admissible where that person seeks, by instituting proceedings, to safeguard the procedural rights available to him under the latter provision (see, to that effect, judgments in 3F v Commission, C‑319/07 P, EU:C:2009:435, paragraph 31 and the case-law cited, and Commission v Kronoply and Kronotex, C‑83/09 P, EU:C:2011:341, paragraph 47).
The Court has had occasion to observe that such concerned parties are any persons, undertakings or associations whose interests might be affected by the granting of aid, that is, in particular, undertakings competing with the recipients of the aid and trade associations (see, inter alia, judgment in 3F v Commission, C‑319/07 P, EU:C:2009:435, paragraph 32 and the case-law cited).
On the other hand, if the applicant calls into question the merits of the decision appraising the aid taken on the basis of Article 108(3) TFEU or after the formal investigation procedure, the mere fact that it may be regarded as concerned within the meaning of Article 108(2) TFEU cannot suffice to render the action admissible. It must then demonstrate that it has a particular status within the meaning of the case-law referred to in paragraph 93 of the present judgment. That applies in particular where the applicant’s market position is substantially affected by the aid to which the decision at issue relates (see, to that effect, judgments in Commission v Aktionsgemeinschaft Recht und Eigentum, C‑78/03 P, EU:C:2005:761, paragraph 37 and the case-law cited, and British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraph 30).
In that regard, in addition to the undertaking in receipt of aid, competing undertakings have been recognised as individually concerned by a Commission decision terminating the formal examination procedure where they have played an active role in that procedure, provided that their position on the market is substantially affected by the aid which is the subject of the decision at issue (see judgment in Sniace v Commission, C‑260/05 P, EU:C:2007:700, paragraph 55 and the case-law cited).
As regards the determination of such an effect, the Court has had occasion to clarify that the mere fact that a measure such as the decision at issue may exercise an influence on the competitive relationships existing on the relevant market and that the undertaking concerned was in a competitive relationship with the addressee of that measure cannot in any event suffice for that undertaking to be regarded as being individually concerned by that measure (see, to that effect, judgment in British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraph 47).
Therefore, an undertaking cannot rely solely on its status as a competitor of the undertaking in receipt of aid but must additionally show that its circumstances distinguish it in a similar way to the undertaking in receipt of the aid (see, inter alia, judgment in British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraph 48).
In this case, as is apparent from paragraph 72 of the present judgment, by the decision at issue, the Commission informed the French Republic that the obligation to recover aid which is unlawful and incompatible imposed on that Member State by the Sernam 3 Decision would not be extended to Geodis in the event that the latter took over part of the assets of the Sernam group, since, in the absence of economic continuity, it was not established that Geodis would actually benefit from that aid.
Moreover, it follows expressly from paragraph 54 of the decision at issue that it does not apply to the reasonableness or otherwise of the investment carried out by Geodis, consisting of the takeover of part of the assets of the Sernam group and that, consequently, it did not prejudge the assessment of that investment by the Commission in the light of Article 107(1) TFEU.
It follows that the aid which, under the decision at issue, cannot be recovered from the transferee of part of the assets of their initial beneficiary is specifically and exclusively the aid which was already the subject of the Sernam 3 Decision.
As the Advocate General stated in points 147 and 169 of his Opinion, the decision at issue must, therefore, be regarded as a decision which is related and complementary to the Sernam 3 Decision, in so far as it defines the scope thereof as regards the status of beneficiary of the aid at issue and, therefore, as regards that of the party obliged to repay that aid, following the occurrence of an event after the adoption of that decision, namely, in this case, the acquisition by a third party of part of the assets of the initial beneficiary of that aid.
It is not disputed that the Sernam 3 Decision was adopted by the Commission after the formal investigation procedure provided for in Article 108(2) TFEU.
In those circumstances, the appellants can be regarded as individually concerned by the decision at issue, within the meaning of the fourth paragraph of Article 263 TFEU, if they show, inter alia, that their position on the market has been substantially affected by the grant of the aid at issue. By contrast, the mere fact that they might be regarded as interested within the meaning of Article 108(2) TFEU cannot suffice to render the action admissible.
In this case, the appellants claim that the Mory companies are individually concerned by the decision at issue, since, by not opening the formal investigation procedure, the Commission deprived those companies of procedural rights afforded them by Article 108(2) TFEU, in particular with a view to claiming that that institution lacks competence to adopt that decision. Moreover, the Mory companies have shown the existence of an interest in bringing proceedings. In addition, they participated in the administrative procedure which led to the adoption of the Sernam 3 Decision and they questioned the Commission the day before the adoption of the decision at issue concerning the legal basis that institution intended to rely on for that purpose. Furthermore, those companies are the sole parties to have brought an action before the French courts seeking an order that the French authorities must recover the aid at issue from the beneficiaries thereof and, in addition to Superga Invest, they have brought an action before those courts for compensation for damage suffered as a result of the grant of that aid.
Moreover, the appellants claim, for the sake of completeness, that the competitive position of the Mory companies was substantially affected by the aid at issue. Those companies were even forced to cease their activities for reasons they consider are linked to the grant of that aid. As regards Superga Invest, it also suffered, as a shareholder of the Mory companies, from the anticompetitive effects of that aid, especially as it could itself decide to enter the market concerned.
In that regard, it should be noted that, in accordance with the case-law referred to in paragraphs 62, 97 and 98 of the present judgment, the alleged infringement of procedural rights afforded the Mory companies by Article 108(2) TFEU, their interest in bringing proceedings and the active role they played in the context of the procedure which led to the adoption of the Sernam 3 Decision and the decision at issue are not capable, in the present case, of distinguishing them for the purposes of the fourth paragraph of Article 263 TFEU. As regards the fact that the appellants brought actions before the national courts seeking, first, an order that the French authorities must recover the aid at issue and, secondly, for compensation for the damage suffered as a result of the grant of that aid, it also cannot, as such, suffice to distinguish them for the purposes of that provision, since anybody could potentially bring such an action.
Moreover, while the appellants claim, albeit on an alternative ground for the sake of completeness, that the competitive position of the Mory companies was substantially affected by the aid at issue, in particular in so far as those companies were forced to cease their activities, it must be held that, neither in their action at first instance, nor in the context of the present appeal, have they adduced evidence to substantiate that claim. In addition, they have failed to provide the Court with any information concerning the structure of the market at issue and their competitive position on that market. As regards Superga Invest, it is not disputed that it is not active on the market concerned and that it cannot, therefore, be classified as a competitor of the beneficiary of the aid at issue. Furthermore, since the Mory companies have not shown that their competitive position was substantially affected by that aid, Superga Invest may not derive locus standi in that regard on the sole basis of its status as shareholder of those companies.
Consequently, none of the appellants may be considered to be individually concerned by the decision at issue, within the meaning of the fourth paragraph of Article 263 TFEU.
Therefore, the objection of inadmissibility of the action for annulment brought by the appellants before the General Court, raised by the Commission during the proceedings at first instance, must be upheld in so far as that objection claims that the appellants have no interest in bringing proceedings and, therefore, that action must be dismissed as inadmissible.
Costs
Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is well founded and the Court itself gives final judgment in the case, the Court is to make a decision as to costs. Under Article 138(2) of those Rules, applicable to appeal proceedings by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the appeal brought by the appellants has been upheld, but their action for annulment dismissed, each of the parties is to bear its own costs relating both to the proceedings at first instance and to the appeal.
On those grounds, the Court (Third Chamber) hereby:
1.
Sets aside the Order of the General Court of the European Union in Mory and Others v Commission (T‑545/12, EU:T:2013:607);
2.
Dismisses as inadmissible the action for annulment brought by Mory SA, Mory Team and Superga Invest against Decision C(2012) 2401 final of the Commission of 4 April 2012 concerning the takeover of assets of the Sernam group as part of its composition with creditors;
3.
Orders Mory SA, Mory Team, Superga Invest and the European Commission to bear their own costs relating both to the proceedings at first instance and to the appeal.
[Signatures]
( *1 ) Language of the case: French. |
JUDGMENT OF THE EUROPEAN UNION CIVIL SERVICE TRIBUNAL (Second Chamber)
16 December 2015 ( *1 )
‛Civil service — EMA staff — Placement on ‘non-active status’ — Act adversely affecting an official or staff member — Right to be heard — Infringement’
In Case F‑135/14,
ACTION brought under Article 270 TFEU,
DE, a former member of the temporary staff of the European Medicines Agency, residing in Buckhurst Hill (United Kingdom), represented by S. Rodrigues and A. Blot, lawyers,
applicant,
v
European Medicines Agency (EMA), represented by S. Marino, T. Jabłoński and N. Rampal Olmedo, acting as Agents, assisted by D. Waelbroeck and A. Duron, lawyers,
defendant,
THE CIVIL SERVICE TRIBUNAL
(Second Chamber),
composed of K. Bradley (Rapporteur), President, H. Kreppel and M.I. Rofes i Pujol, Judges,
Registrar: P. Cullen, Administrator,
having regard to the written procedure and further to the hearing on 6 October 2015,
gives the following
Judgment
By application received at the Registry of the Civil Service Tribunal on 25 November 2014, DE brought the present action, seeking, in essence, the annulment of the decision of 31 January 2014 by which the European Medicines Agency (EMA) (‘the Agency’) placed him on ‘non-active status’ from 1 February 2014 until the expiry of his temporary staff contract on 15 March 2014, and an order that the EMA pay compensation for the harm suffered.
Legal context
The case arises in the legal context, first, of Article 41 of the Charter of Fundamental Rights of the European Union, and, secondly, of the second paragraph of Article 25 of the Staff Regulations of Officials of the European Union (‘the Staff Regulations’), applicable by analogy to members of the temporary staff by virtue of Article 11 of the Conditions of Employment of other servants of the European Union (‘the CEOS’).
In addition, on 1 December 2006 the Executive Director of the EMA adopted a decision regarding the placement on ‘non-active status’ of temporary or contractual staff members employed by the EMA. That decision is worded as follows:
Factual background to the dispute
The applicant entered into the service of the Agency as a Scientific Administrator on 1 January 1999 under a temporary staff contract concluded on the basis of Article 2(a) of the CEOS.
On 11 February 2004, the parties concluded a contract pursuant to which the applicant was employed as a Principal Scientific Administrator, commencing on 16 March 2004 for a period of five years expiring on 15 March 2009. That contract was renewed once, until 15 March 2014.
The 2010-2012 performance evaluation report
The procedure for drawing up the performance evaluation report for the period running from 15 September 2010 to 15 September 2012 (‘the 2010-2012 evaluation report’) began on 15 August 2012 with a meeting between the applicant and his reporting officer. The 2010-2012 evaluation report became final on 16 January 2013.
On 6 March 2013, the applicant lodged a complaint, pursuant to Article 90(2) of the Staff Regulations, against the 2010-2012 evaluation report, a complaint which was rejected by a decision of the Executive Director of the Agency in his capacity as the Agency’s authority empowered to conclude contracts of employment (‘the AECE’) of 2 July 2013.
On 14 October 2013, the applicant brought an action before the Tribunal against his 2010-2012 evaluation report, which was registered as Case F‑103/13.
By judgment of 11 December 2014 in DE v EMA (F‑103/13, EU:F:2014:265), the Tribunal dismissed the applicant’s action.
The decision not to renew the applicant’s contract
By letter of 12 September 2013, the AECE informed the applicant of its decision not to renew his contract, which thus came to an end upon its expiry on 15 March 2014 (‘the decision not to renew the contract’).
On 19 November 2013, the applicant lodged a complaint, pursuant to Article 90(2) of the Staff Regulations, against the decision not to renew the contract. That complaint was rejected by decision of the AECE of 13 March 2014.
On 23 June 2014, the applicant brought an action before the Tribunal against the decision not to renew the contract. That action was registered as Case F‑58/14 and is currently pending before the Tribunal.
The decision to place on ‘non-active status ’
By decision of 31 January 2014, the Executive Director of the EMA in his capacity as the AECE placed the applicant on ‘non-active status’ from 1 February 2014 until the expiry of his contract on 15 March 2014. That decision was worded as follows:
By email of 5 February 2014, the applicant’s hierarchical superior informed his team that the workload would temporarily increase owing to the departure of two staff members.
By letter of 14 March 2014 (‘the letter of 14 March 2014’), the Executive Director of the EMA in his capacity as the AECE made the following statement to the applicant:
On 24 April 2014, the applicant lodged a complaint, pursuant to Article 90(2) of the Staff Regulations, against the decision of 31 January 2014 to place him on ‘non-active status’. That complaint was rejected by decision of the AECE of 15 August 2014 (‘the decision rejecting the complaint’).
By letter of 1 October 2014, the applicant asked the AECE to provide him with certain explanations regarding the decision rejecting the complaint and to send him a number of documents.
By letter of 23 October 2014, the AECE replied to the request for information set out in the applicant’s letter of 1 October 2014 and sent him some of the documents requested, namely, a list of the documents printed by him for the period from 1 January 2012 to 31 January 2014 inclusive, and records of documents photocopied and printed for — according to the AECE — the years 2012 and 2013.
Forms of order sought and procedure
The applicant claims that the Tribunal should:
—
declare the action admissible;
—
annul the decision of 31 January 2014 to place him on ‘non-active status’ and the letter of 14 March 2014;
—
annul, so far as necessary, the decision rejecting the complaint;
—
compensate him for the non-material harm suffered, estimated at EUR 20000;
—
order the EMA to pay the costs.
The EMA contends that the Tribunal should:
—
declare the action inadmissible;
—
in the alternative, dismiss the action in its entirety;
—
dismiss the claim for compensation for non-material harm;
—
order the applicant to pay the costs.
By a letter from the Registry of 25 February 2015, the parties were informed of the Tribunal’s decision to authorise a second exchange of pleadings confined to the objections of inadmissibility raised by the EMA in its defence. The reply was received at the Registry of the Civil Service Tribunal on 7 April 2015 and the rejoinder was received on 18 May 2015.
By letter of 11 May 2015, the Registry of the Tribunal sent the parties a recommendation from the Judge-Rapporteur intended to help the parties find an amicable solution to the dispute. That recommendation was unsuccessful.
Law
Subject matter of the dispute
The applicant seeks the annulment of the decision of 31 January 2014 to place him on ‘non-active status’, the letter of 14 March 2014, and — so far as necessary — the decision rejecting the complaint.
The Tribunal points out, in the first place, that the letter of 14 March 2014 is not a decision since, as the EMA explained at the hearing, it is intended to clarify the reasons for the decision of 31 January 2014 to place the applicant on ‘non-active status’.
In the second place, the Tribunal recalls that, according to established case-law, claims for annulment formally brought against a decision to reject a complaint have, where that decision lacks any independent content, the effect of bringing before the Tribunal the act against which the complaint was submitted (judgment of 11 December 2014 in DE v EMA, F‑103/13, EU:F:2014:265, paragraph 29 and the case-law cited).
In the present case, the decision rejecting the complaint confirms the placement on ‘non-active status’ decision of 31 January 2014, as supplemented by the letter of 14 March 2014, by providing explanations regarding the reasons used to support that first decision. In such circumstances, it is indeed the legality of the initial act adversely affecting the official or staff member — in the present case, the decision to place him on ‘non-active status’, supplemented by the letter of 14 March 2014 — which must be examined, taking into account the reasons set out in the decision rejecting the complaint, those reasons being expected to be the same as those for that act (judgment of 18 April 2012 in Buxton v Parliament, F‑50/11, EU:F:2012:51, paragraph 21 and the case-law cited).
It follows from all of the foregoing that the claim for annulment brought against the letter of 14 March 2014 and the claim for annulment brought against the decision rejecting the complaint lack any independent content and, consequently, must be regarded as being formally directed against the decision of 31 January 2014 placing the applicant on ‘non-active status’ (‘the contested decision’), as supplemented, as regards the reasons for it, by the letter of 14 March 2014 and by the decision rejecting the complaint (judgment of 11 December 2014 in DE v EMA, F‑103/13, EU:F:2014:265, paragraph 30 and the case-law cited).
Admissibility of the action
Arguments of the parties
In the first place, the Agency contends, in essence, that the contested decision is not an act adversely affecting an official or staff member for the purposes of Article 90(2) of the Staff Regulations, in so far as it does not have binding legal effects liable to affect the applicant’s interests by bringing about a distinct change in his legal position.
According to the Agency, the idea that the contested decision is an act adversely affecting an official or staff member should be rejected for a number of reasons.
First, in adopting the contested decision — which should be distinguished from a normal suspension measure, which is an act adversely affecting an official or staff member — the EMA merely exercised ‘a right, which [it] can avail itself of in order to protect its interests, when a staff member is notified that his/her contract as a Temporary Agent or a Contract Agent will expire at the end of the fixed period’. The EMA adds that express provision is made for the adoption of the measure contained in the contested decision by means of the decision of its Executive Director of 1 December 2006 on ‘non-active status’, which had been brought to the attention of the staff of the Agency, and that such measures are common practice within the Agency, which has, on occasion, adopted measures of placement on ‘non-active status’ at the request of the staff members concerned. Second, as the applicant continued to receive his salary and allowances in full throughout the period during which he was placed on ‘non-active status’, his legal position has not undergone any distinct change.
In the second place, the Agency contends that the annulment of the contested decision would not be of any benefit to the applicant, since that decision ceased to have effect on 15 March 2014, and that, accordingly, the action is devoid of purpose.
By contrast, the applicant submits that the contested decision adversely affects him in so far as it affects his career and professional reputation.
In particular, the applicant claims, by way of example, that the contested decision prevented him from publishing a scientific article, prepared as part of the objectives which had been assigned to him by the Agency and of which he was the first author, and that his colleagues at the Agency and the persons outside the Agency with whom he was working had been given ‘a suspicious and negative message’ regarding his abrupt departure, having received no other explanation than the one given in the email from his hierarchical superior of 5 February 2014.
In addition, the applicant submits that, in the decision rejecting the complaint, the AECE accused him of having spent a disproportionate amount of time photocopying or printing documents and that the contested decision, added to his personal file, contains an explicitly negative assessment concerning his performance, with the result that he has an interest in contesting it so that his performance may be assessed in a just and equitable manner.
As regards his interest in challenging the contested decision, the applicant submits that a staff member may establish an interest in bringing proceedings when an act affects his reputation, as in the present case. In addition, the annulment of the contested decision would give him the opportunity to obtain compensation for the non-material damage which he claims to have suffered.
Findings of the Tribunal
– Whether the contested decision is an act adversely affecting the applicant
As a preliminary point, it should be borne in mind that, for the purposes of Article 90(2) of the Staff Regulations, only those acts or measures having binding legal effects which are such as to affect a staff member’s interests by bringing about a distinct change in his legal position are acts adversely affecting a staff member (judgment of 23 October 2013 in Solberg v EMCDDA, F‑124/12, EU:F:2013:157, paragraph 16 and the case-law cited).
In addition, it has been held that, even if it does not affect the material interests and/or rank of the staff member concerned, a change of duties may, in so far as it alters the conditions for the performance of his duties and also the nature of those duties, impair his non-material interests and future prospects and thus adversely affect him (judgment of 8 May 2008 in Kerstens v Commission, F‑119/06, EU:F:2008:54, paragraph 45 and the case-law cited).
Next, it should be borne in mind that, pursuant to Article 23 of Annex IX to the Staff Regulations, if the administrative authority accuses a staff member of serious misconduct, it may suspend that staff member. According to settled case-law, such a measure, although temporary, is, by its nature, an act adversely affecting the person concerned, as it is based on an accusation of serious misconduct and may have serious consequences for that person, both personally and professionally, by depriving him, on those grounds, of the opportunity to perform his duties (see, to that effect, judgments of 5 May 1966 in Gutmann v Commission, 18/65 and 35/65, EU:C:1966:24, ECR pp. 149 and 168, and 15 June 2000 in F v Commission, T‑211/98, EU:T:2000:153, paragraphs 30 and 31). In addition, measures which, without withholding or reducing his salary, deprive the staff member concerned of the opportunity to perform his duties, as in the present case, may be classed as acts adversely affecting him (see, concerning the suspension measure provided for by the Staff Regulations of the EIB, judgment of 16 December 2004 in De Nicola v EIB, T‑120/01 and T‑300/01, EU:T:2004:367, paragraphs 108 and 113).
In the present case, it must be held that the purpose and effect of the contested decision was to deprive the applicant of the opportunity to perform his duties for a period of six weeks. As is apparent from reading the contested decision — which includes the letter of 14 March 2014 and the decision rejecting the complaint — that decision was taken, inter alia, in view of the fact that, during 2013 and in particular after 12 September 2013, the date on which the AECE informed the applicant of the decision not to renew his contract, the applicant — according to the Agency — photocopied and printed an extremely large number of documents. According to the Agency, the reason for the number of documents photocopied and printed was not the performance of duties assigned to the applicant, but was connected with legal proceedings then pending before the Tribunal between the applicant and the Agency in the case which gave rise to the judgment of 11 December 2014 in DE v EMA (F‑103/13, EU:F:2014:256). Moreover, at the hearing, the Agency’s representatives contended that, in using the EMA’s printers and photocopiers for private purposes, the applicant had failed to fulfil his professional obligations, and some of his colleagues had complained about the fact that he was making unreasonable use of the shared printers.
In those circumstances, although the Agency has described the contested decision as a measure of placement on ‘non-active status’, such a decision is, in terms of its effects, equivalent to a decision to suspend a person from duty pursuant to Article 23 of Annex IX to the Staff Regulations, taken as a result of an accusation of wrongful conduct made against the applicant whom it adversely affects both by its reasoning and its operative part.
That finding cannot be called in question by the arguments put forward by the EMA.
First, the fact that, during the period running from 1 February to 15 March 2014, the applicant retained his salary and allowances in full cannot, per se, decisively establish that the contested decision is not an act adversely affecting him: the fact that the staff member concerned has been prevented from performing his professional duties is in itself liable to impair his non-material interests, especially if such a decision is based, as in the present case, on accusations of wrongful conduct made against that staff member.
Second, the fact that other Agency staff members have expressly asked to be placed on ‘non-active status’, even if it were to be proved, is also entirely irrelevant given that, in any event, this was not the situation in the present case.
Third, the EMA cannot validly rely either on the fact that provision is made for the possibility of placing a staff member on ‘non-active status’ through a decision of which all its staff have been made aware or on the fact that that possibility is a ‘right’ of the Agency, as the exercise of any privilege by an administrative authority is, in any event, subject to judicial review by the Courts of the European Union (see, to that effect, judgments of 23 April 1986 in Les Verts v Parliament, 294/83, EU:C:1986:166, paragraph 23, and 20 September 2011 in Evropaïki Dynamiki v EIB, T‑461/08, EU:T:2011:494, paragraph 46).
The plea of inadmissibility raised by the EMA on the ground that the contested decision is not an act adversely affecting an official or staff member must therefore be rejected.
– Objection of inadmissibility on the ground that there is no need to adjudicate
It should be noted that the contested decision ceased to have effect upon the date of expiry of the applicant’s contract, namely, 15 March 2014.
However, the expiry of the contract did not withdraw the contested decision with retroactive effect. Moreover, it must be held that, although the contested decision did not affect the applicant’s material situation, since he was not deprived of his salary during his suspension, it may on the other hand have had an effect on his reputation (see, to that effect, judgment of 30 November 2009 in Wenig v Commission, F‑80/08, EU:F:2009:160, paragraph 35 and the case-law cited). In those circumstances, at the time the action was brought, the contested decision had indeed had binding legal effects liable directly to affect the applicant’s interests by bringing about a distinct change in his legal position, effects which have not disappeared in the course of the proceedings (see, to that effect, judgment of 16 December 2004 in De Nicola v EIB, T‑120/01 and T‑300/01, EU:T:2004:367, paragraphs 113 and 114).
The plea of inadmissibility raised on the ground that there is no need to adjudicate must therefore be rejected and the present action declared admissible.
Merits of the claim for annulment of the contested decision
In support of his claim for annulment of the contested decision, the applicant raises, in essence, six pleas in law, the first alleging infringement of the right to an effective remedy, the second alleging a manifest error in the assessment of the facts, the third alleging a breach of the duty to provide a statement of reasons, the fourth alleging infringement of the principle of sound administration, the fifth alleging infringement of the right to be heard and the sixth alleging infringement of Articles 4, 11, 12 and 25 of Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (OJ 2001 L 8, p. 1).
The Tribunal will begin by examining the fifth plea in law, alleging infringement of the right to be heard.
Arguments of the parties
The applicant submits that, in breach of Article 41 of the Charter, the EMA adopted the contested decision without having given him the opportunity to put forward his arguments and without providing him with the documents on the basis of which it was making that decision.
In particular, according to the applicant, if he had been heard, he could have explained to the Agency that the data concerning the photocopying and printing of documents on which the AECE had based the contested decision were completely wrong. In addition, at the hearing, the applicant maintained that he could have pointed out to the Agency that he was exercising a fundamental right — that of access to the courts — and that he could not be penalised for that fact.
The EMA contends that, as the contested decision is not an act adversely affecting the applicant, it was not possible to infringe his right to be heard prior to the adoption of that decision.
Findings of the Tribunal
The Tribunal recalls at the outset that observance of the right of every person to be heard, before any individual measure which would affect him or her adversely is taken, forms part of the observance of the rights of the defence (see, to that effect, judgments of 19 June 2014 in BN v Parliament, F‑157/12, EU:F:2014:164, paragraph 84, and 15 April 2015 in Pipiliagkas v Commission, F‑96/13, EU:F:2015:29, paragraph 54).
That right has been set out in Article 41(2)(a) of the Charter, which acknowledges ‘the right of every person to be heard, before any individual measure which would affect him or her adversely is taken’, a provision which is of general application (judgment of 11 September 2013 in L v Parliament, T‑317/10 P, EU:T:2013:413, paragraph 81). In order to ensure that the addressee of such a measure is in fact protected, the object of that rule is, in particular, to enable him to correct an error or produce such information relating to his personal circumstances as will tell in favour of the decision’s being adopted or not, or of its having this content or that (judgments of 21 December 2011 in France v People’s Mojahedin Organization of Iran, C‑27/09 P, EU:C:2011:853, paragraph 65 and the case-law cited, and 9 September 2015 in De Loecker v EEAS, F‑28/14, EU:F:2015:101, paragraph 128).
Next, it should be explained that observance of the right to be heard involves the person concerned being put in a position, prior to the adoption of the decision adversely affecting him, effectively to make known his views on the truth and relevance of the facts and circumstances on the basis of which that decision was adopted (see, to that effect, judgments of 14 May 2014 in Delcroix v EEAS, F‑11/13, EU:F:2014:91, paragraph 35 and the case-law cited, and 13 November 2014 in De Loecker v EEAS, F‑78/13, EU:F:2014:246, paragraph 33).
As regards, in particular, a suspension decision adopted on the basis of Article 23 of Annex IX to the Staff Regulations, which is taken where there is an accusation of serious misconduct, it has been held that, while taking into account the urgency which normally obtains when such a decision is taken, that decision must be adopted in accordance with the rights of the defence, of which the right to be heard is one expression. Consequently, unless special circumstances are duly established, a decision to suspend a person from duty as a disciplinary measure may be adopted only after the official or staff member concerned has been put in a position effectively to make known his views on the evidence relied on against him and on which the competent authority proposes to base that decision (judgments of 15 June 2000 in F v Commission, T‑211/98, EU:T:2001:153, paragraphs 26 et seq., and 16 December 2004 in De Nicola v EIB, T‑120/01 and T‑300/01, EU:T:2004:367, paragraph 123).
In the present case, as has been stated in paragraph 39 above, the contested decision had the effect of depriving the applicant of the opportunity to perform his duties and was taken as a result of the fact that he had photocopied and printed an extremely large number of documents in connection — according to the EMA — with the dispute then pending before the Tribunal between the applicant and the Agency. As was concluded in paragraph 40 above, the contested decision must be regarded as equivalent, in terms of its effects, to a decision to suspend a person from duty as a disciplinary measure and is thus liable adversely to affect the applicant’s interests. In that regard, the contested decision could, in the circumstances, have had particularly serious implications for the applicant’s career, damaging his image both within and outside the Agency, since he occupied a position there which involved, inter alia, extensive contact with persons from outside the Agency.
Furthermore, the EMA did not rely, either in its written pleadings or at the hearing when responding to a question put by the Tribunal in that regard, on any special circumstance establishing that the AECE had been unable in practice to hear the applicant prior to the adoption of the contested decision or establishing that a prior hearing would have been incompatible with the interests of the service.
In those circumstances, the adoption of the contested decision should not have taken place without the applicant being heard beforehand.
However, it is common ground that the applicant was not heard prior to the adoption of the contested decision. That fact is not disputed by the EMA, which confines itself to contending, in essence, that the contested decision is not an act adversely affecting the applicant.
It must therefore be held that the applicant’s right to be heard before the adoption of any decision adversely affecting him was not observed by the EMA, in breach of Article 41(2)(a) of the Charter.
In addition, when questioned at the hearing regarding whether, after having heard the applicant, the AECE might have adopted the same decision, the EMA did not adduce any evidence allowing the Tribunal to conclude that it would have adopted the contested decision in any event, even if the applicant had been heard beforehand (see, to that effect, judgment of 8 October 2015 in DD v FRA, F‑106/13 and F‑25/14, EU:F:2015:118, paragraph 65).
By contrast, the applicant argued that, if he had received the documents on the basis of which the AECE adopted the contested decision and if he had been heard prior to the adoption of that decision, he would have been able to inform the AECE that its reasoning was based on a misinterpretation of the data under examination. Indeed, it is apparent from the documents sent to the applicant by the Agency on 23 October 2014 that the data regarding the number of documents photocopied and printed by the applicant in 2012 concern only the last three months of that year and not the whole of 2012 as was wrongly asserted by the EMA in (i) the letter of 14 March 2014 and the decision rejecting the complaint and (ii) the letter of 23 October 2014 to which the documents mentioned above were appended. Accordingly, the AECE compared the volume of documents photocopied and printed over a thirteen-month period, running from January 2013 to the end of January 2014, with the volume for a single quarter of the year 2012 and thus relied on considerations that were manifestly incorrect. Furthermore, the EMA itself acknowledged, both in its defence and at the hearing, that such an error had been made.
Lastly, if the applicant had been heard prior to the adoption of the contested decision, he would have been able to challenge the other arguments put forward by the EMA to justify the contested decision. Although the EMA maintained in its written pleadings that, in any event, the volume of documents photocopied and printed by the applicant had been ‘exceptional’, when questioned on that point at the hearing, it was unable to provide a benchmark enabling the Tribunal to assess the ‘exceptional’ nature of that volume. In addition, although requested to do so by the Tribunal, it was unable to provide any explanation of its argument, put forward at the hearing, based on supposed complaints from the applicant’s colleagues and in particular regarding the fact that those complaints had been received during the month of September 2013, whereas the contested decision was not adopted until 31 January 2014.
In those circumstances, the Tribunal cannot rule out the possibility that, had the AECE heard the applicant prior to the adoption of the contested decision, it might have adopted a different decision and kept the applicant in service until the expiry of his contract.
In the light of all of the foregoing, the plea alleging disregard of the right to be heard must be upheld. It is therefore necessary to annul the contested decision, without there being any need to examine the other pleas raised.
Claim for compensation
Arguments of the parties
The applicant submits that the contested decision has caused him non-material and professional harm as well as damage to his reputation.
Maintaining that the annulment of the contested decision would not be appropriate compensation for the damage suffered, the applicant asks the Tribunal to order the EMA to pay him the sum of EUR 20000.
The EMA contends that the claim for compensation should be dismissed.
Findings of the Tribunal
The Tribunal recalls that, according to settled case-law, the annulment of an unlawful act may in itself constitute appropriate and, in principle, sufficient compensation for any non-material damage that act may have caused, unless the applicant demonstrates that he has suffered non-material damage separable from the illegality of the act justifying its annulment and not capable of being entirely remedied by that annulment (judgment of 2 July 2014 in Psarras v ENISA, F‑63/13, EU:F:2014:177, paragraph 54).
In the present case, the Tribunal finds that the annulment of the contested decision cannot in itself constitute appropriate and sufficient compensation for the non-material damage it has caused which relates to the feeling of injustice experienced by the applicant as a result of the unlawfulness of that decision.
That finding is based on the nature of the unlawful act committed by the AECE, namely, the infringement of the applicant’s right to be heard, and on the circumstances in which that unlawful act took place. In that regard, account should be taken of the fact that: (i) the applicant was placed on ‘non-active status’ even though he had worked for the EMA for over fourteen years and was hoping to have his temporary staff contract renewed; (ii) the wording of the contested decision could lead the applicant to think that he was experiencing retaliation for having brought an action before the Tribunal; (iii) the AECE sent the applicant the data which it had relied on together with a statement that was false and likely to mislead, namely, that the data for the year 2012 concerned the whole year, when in reality they referred to only a quarter of that year.
In those circumstances, the Tribunal sets the sum ex æquo et bono which the EMA must pay the applicant as compensation for his non-material damage at EUR 10000.
Costs
Under Article 101 of the Rules of Procedure, without prejudice to the other provisions of Chapter 8 of Title 2 of those Rules, the unsuccessful party is to bear his own costs and is to be ordered to pay the costs incurred by the other party if they have been applied for in the other party’s pleadings. Pursuant to Article 102(1) of those Rules, the Tribunal may decide, if equity so requires, that an unsuccessful party is to bear his own costs, but is to pay only part of the costs incurred by the other party, or even that he is not to be ordered to pay any costs.
It is apparent from the grounds set out in the present judgment that the EMA is the unsuccessful party. In addition, the applicant has expressly requested in his pleadings that the EMA be ordered to pay the costs. As the circumstances of the present case do not justify applying Article 102(1) of the Rules of Procedure, the EMA must be ordered to bear its own costs and to pay the costs incurred by the applicant.
On those grounds,
THE CIVIL SERVICE TRIBUNAL
(Second Chamber)
hereby:
1.
Annuls the decision of 31 January 2014 by which the European Medicines Agency placed DE on ‘non-active status’;
2.
Orders the European Medicines Agency to pay DE the sum of EUR 10000;
3.
Orders the European Medicines Agency to bear its own costs and to pay the costs incurred by DE.
Bradley
Kreppel
Rofes i Pujol
Delivered in open court in Luxembourg on 16 December 2015.
W. Hakenberg
Registrar
K. Bradley
President
( *1 ) Language of the case: English. |
JUDGMENT OF THE COURT (Third Chamber)
6 October 2015 ( * )
‛Reference for a preliminary ruling — Judicial cooperation in civil matters — Jurisdiction, recognition and enforcement of decisions in matrimonial matters and in the matters of parental responsibility — Regulation (EC) No 2201/2003 — Article 1(1)(b) — Substantive scope — Inheritance settlement agreement between the surviving spouse and minor children represented by a guardian ad litem — Classification — Requirement for approval of such an agreement by the court — Measure relating to parental responsibility or measure relating to succession’
In Case C‑404/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Nejvyšší soud (Supreme Court, Czech Republic) made by decision of 25 June 2014, received at the Court on 25 August 2014, in the proceedings brought by
Marie Matoušková, acting as court commissioner,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Chamber, A. Ó Caoimh, C. Toader (Rapporteur), E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: J. Kokott,
Registrar: A. Calot Escobar,
having regard to the written proceedings,
after considering the observations submitted on behalf of:
—
the Czech Government, by M. Smolek and J. Vláčil, acting as Agents,
—
the European Commission, by M. Wilderspin and M. Thomannová-Körnerová, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 25 June 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 1(1)(b) and (3)(f) of Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000 (OJ 2003 L 338, p. 1).
The request has been made in proceedings brought by Ms Matoušková in her capacity as court commissioner, in order to determine jurisdiction to approve the agreement on the sharing-out of the estate concluded by the guardian ad litem on behalf of minor children.
Legal context
EU law
Regulation No 2201/2003
Article 1 of the regulation provides:
‘1. This Regulation shall apply, whatever the nature of the court or tribunal, in civil matters relating to:
…
(b)
the attribution, exercise, delegation, restriction or termination of parental responsibility.
2. The matters referred to in paragraph 1(b) may, in particular, deal with:
…
(b)
guardianship, curatorship and similar institutions;
(c)
the designation and functions of any person or body having charge of the child’s person or property, representing or assisting the child;
…
(e)
measures for the protection of the child relating to the administration, conservation or disposal of the child’s property.
3. This Regulation shall not apply to:
…
(f)
trusts or succession;
…’
According to Article 2 of that regulation:
‘For the purposes of this Regulation:
…
7.
the term “parental responsibility” shall mean all rights and duties relating to the person or the property of a child which are given to a natural or legal person by judgment, by operation of law or by an agreement having legal effect. The term shall include rights of custody and rights of access;
8.
the term “holder of parental responsibility” shall mean any person having parental responsibility over a child;
…’
Article 8(1) of the regulation, headed ‘General jurisdiction’, provides:
‘The courts of a Member State shall have jurisdiction in matters of parental responsibility over a child who is habitually resident in that Member State at the time the court is seised.’
Article 12 of Regulation No 2201/2003 is worded as follows:
‘1. The courts of a Member State exercising jurisdiction … on an application for divorce, legal separation or marriage annulment shall have jurisdiction in any matter relating to parental responsibility connected with that application …:
…
3. The courts of a Member State shall also have jurisdiction in relation to parental responsibility in proceedings other than those referred to in paragraph 1 where:
(a)
the child has a substantial connection with that Member State, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that Member State or that the child is a national of that Member State;
and
(b)
the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child.’
Regulation (EU) No 650/2012
Recital 9 in the preamble to Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession (OJ 2012 L 201, p. 107), is worded as follows:
‘The scope of this Regulation should include all civil-law aspects of succession to the estate of a deceased person, namely all forms of transfer of assets, rights and obligations by reason of death, whether by way of a voluntary transfer under a disposition of property upon death or a transfer through intestate succession.’
According to Article 1(2)(a) and (b) of the same regulation:
‘The following shall be excluded from the scope of this Regulation:
(a)
the status of natural persons, as well as family relationships and relationships deemed by the law applicable to such relationships to have comparable effects;
(b)
the legal capacity of natural persons, without prejudice to point (c) of Article 23(2) and to Article 26;
…’
Article 23 of the regulation states:
‘1. The law determined pursuant to Article 21 or Article 22 shall govern the succession as a whole.
2. That law shall govern in particular:
…
(c)
the capacity to inherit;
…’
Article 26 of that regulation, entitled ’Substantive validity of dispositions of property upon death’, provides:
‘1. For the purposes of Articles 24 and 25 the following elements shall pertain to substantive validity:
(a)
the capacity of the person making the disposition of property upon death to make such a disposition;
…’
Since, in accordance with Article 84 thereof, that regulation is applicable from 17 August 2015, it is not applicable ratione temporis to the dispute in the main proceedings.
Czech law
Paragraph 179 of the Civil Procedure Code, in the version in force at the material time provides:
‘If the validity of a legal act undertaken on behalf of a minor requires approval by a court, the court is to give approval if this is in the interests of the minor.’
Under Paragraph 28 of the Civil Code, in force until 31 December 2013, legal representatives are to manage the property of those they represent. However, for legal acts relating to the disposal of property which falls outside the scope of routine matters, they must obtain the approval of the competent court.
Under Paragraph 36(1) of Law No 94/1963 on the family, in force until 31 December 2013, ‘parents shall represent the child in legal acts of which he or she is not fully capable’.
Paragraph 37(1) of that law provides that no parent can represent his or her child as regards legal acts in matters where a conflict of interest between the parents and the child or a conflict of interest between children of the same parents could arise.
The dispute in the main proceedings and the question referred for a preliminary ruling
By decision of 27 April 2010, the Městský soud v Brně (Brno Municipal Court) commenced succession proceedings concerning the estate of Ms Martinus who died in the Netherlands on 8 May 2009. Ms Matoušková, a notary, was authorised to act as court commissioner in the succession proceedings. She established that the deceased was a citizen of the Czech Republic who was living in Brno (Czech Republic), at the time of her death. The deceased’s spouse and two minor children (‘the heirs’) lived in the Netherlands.
In order to avoid any possible conflict of interest between the heirs, the Městský soud v Brně (Brno Municipal Court), in accordance with Czech law, appointed a guardian ad litem to represent the interests of the minor children. The participants to the proceedings declared that no succession proceedings were pending in the Netherlands.
On 14 July 2011, the heirs concluded an agreement on the sharing-out of the estate. By decision of 10 August 2011, the Městský soud v Brně (Brno Municipal Court) determined the market value of the deceased’s property, the amount of debts and the net value of the estate.
On 2 August 2012, in notarial inheritance proceedings, the surviving spouse made mention of a new fact, namely that, at the date of her death, the deceased had in fact resided in the Netherlands and had merely maintained a record of permanent residence in the Czech Republic which was not consistent with the real situation. Furthermore, he also stated that succession proceedings were already ongoing in the Netherlands, and submitted an attestation to that effect, dated 14 March 2011.
The agreement on the sharing-out of the estate was submitted by Ms Matoušková to the court dealing with guardianship matters, since two of the parties to the agreement were minor children.
The court dealing with guardianship matters returned the file to Ms Matoušková without an examination of the substance of the dispute, on the ground that the minor children were long-term residents outside the Czech Republic, stating that it could not decline jurisdiction or refer the case to the Nejvyšší soud (Supreme Court) in order to determine the court having jurisdiction.
In those circumstances Ms Matoušková applied directly to the Nejvyšší soud (Supreme Court) on 10 July 2013, asking it to designate the court with local jurisdiction to decide the matter of approval of the agreement on the sharing-out of the estate at issue in the main proceedings.
That court takes the view that the interpretation by the Court of Justice of Regulation No 2201/2003 is necessary in so far as the approval at issue is a measure intended to protect the interests of minors and may fall within the scope of that regulation. However, such a measure, adopted in succession proceedings might also be classified as a matter relating to succession and, therefore, as such be excluded from the scope of the regulation by virtue of Article 1(3)(f) thereof.
In those circumstances, the Nejvyšší soud (Supreme Court) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘If an agreement on the sharing-out of an estate concluded on behalf of a minor by his or her guardian ad litem requires the approval of a court in order to be valid, is that decision on the part of the court a measure within the meaning of Article 1(1)(b) or a measure within the meaning of Article 1(3)(f) of [Regulation No 2201/2003]?’
Consideration of the question referred for a preliminary ruling
The case-file states that the agreement concluded between the heirs is not an agreement as rights to the future estate, but is an agreement on the sharing-out of an estate in respect of a process of succession already under way.
Therefore, it must be held that, by its question, the referring court asks essentially whether Regulation No 2201/2003 must be interpreted as meaning that the approval of an agreement on the sharing-out of an estate concluded by a guardian ad litem on behalf of minor children constitutes a measure relating to the exercise of parental responsibility within the meaning of Article 1(1)(b) thereof, falling as a result within the scope of that regulation, or whether such a procedure constitutes a measure relating to succession, within the meaning of Article 1(3)(f) thereof, excluded from its scope.
In the case in the main proceedings, the information before the Court shows that Ms Matoušková, in her capacity as court commissioner, brought proceedings for the approval of the agreement on the sharing-out of the estate before the court dealing with guardianship matters because that agreement was concluded by the guardian ad litem on behalf of minor children who have a limited legal capacity and who, in accordance with the provisions of Czech law, may only perform legal acts adapted to their level of intellectual and psychological maturity corresponding to their age. Other legal acts are to be performed on behalf of the minors by their legal representatives.
Thus, the approval of the agreement on the sharing-out of the estate is a measure taken having regard to the legal capacity of the minor, which aims to protect the best interests of the child and which is required, under Czech law, for legal acts relating to the administration of property which are not routine matters.
Such a measure relates directly to the legal capacity of a natural person (see, by analogy, judgment in Schneider, C‑386/12, EU:C:2013:633, paragraph 26) and, by its nature, constitutes an action intended to ensure that the requirements of protection and assistance of minor children are met.
As the Advocate General observed in point 41 of her Opinion, legal capacity and the associated representation issues must be assessed in accordance with their own criteria and are not to be regarded as preliminary issues dependent on the legal acts in question. Therefore, it must be held that the appointment of a guardian for the minor children and the review of the exercise of her activity are so closely connected that it would not be appropriate to apply different jurisdictional rules, which would vary according to the subject-matter of the relevant legal act.
Therefore, the fact that the approval at issue in the main proceedings has been requested in succession proceedings cannot be regarded as decisive as to whether that measure should be classified as falling within the law on succession. The need to obtain approval from the court dealing with guardianship matters is a direct consequence of the status and capacity of the minor children and constitutes a protective measure for the child relating to the administration, conservation or disposal of the child’s property in the exercise of parental responsibility within the meaning of Article 1(1)(b) and 2(e) of Regulation No 2201/2003.
Such an interpretation is supported by the report of Mr Lagarde on the Hague Convention 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children, the scope of which corresponds with regard to parental responsibility to that of Regulation No 2201/2003. While explaining that successions must, in principle, be excluded from that convention, the report states that, if the legislation governing the rights to succession provides for the intervention of the legal representative of the child heir, that representative must be designated in accordance with the rules of the convention, since such a situation falls within the area of parental responsibility.
That interpretation is also confirmed by Regulation No 650/2012, not applicable ratione temporis in the case in the main proceedings, which, in accordance with recital 9 in the preamble thereto, was adopted in order to cover all civil law aspects of succession to the estates of a deceased person. Article 1(2)(b) thereof excludes from its scope the legal capacity of natural persons. That regulation governs only the aspects relating specifically to the capacity to inherit, under Article 23(2)(c) thereof, and the capacity of the person making the disposition of property upon death to make such a disposition in accordance with Article 26(1)(a) thereof.
Moreover, that interpretation of the scope of Regulations No 2201/2003 and No 650/2012 is consistent with the case-law of the Court which is designed to avoid any overlap between the rules of law that those texts lay down and any legal vacuum (see, by analogy, judgment in Nickel & Goeldner Spedition, C‑157/13, EU:C:2014:2145, paragraph 21 and the case-law cited).
In the present case, the order for reference states that the Nejvyšší soud (Supreme Court) also asks whether the best interests of the child would be compromised by a splitting of the decision-making process concerning matters relating to succession between two different Member States, one in which the succession proceedings have been opened and the other which is the habitual residence of the child, laid down in Article 8(1) of Regulation No 2201/2003.
In that connection, it must be observed that, according to Article 12(3) of Regulation No 2201/2003, the courts of a Member State also have jurisdiction in relation to parental responsibility in proceedings other than those referred to in paragraph 1 of that article where, first, the child has a substantial connection with that Member State, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that Member State or that the child is a national of that Member State, and, second, the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child.
In the case in the main proceedings, as the European Commission submits, Article 12(3) of Regulation No 2201/2003 is capable of founding the jurisdiction of the court dealing with the matters relating to succession to approve the agreement on the sharing-out of the estate, even though that court is not the court of the child’s habitual residence, as long as the abovementioned conditions are fulfilled.
Having regard to the foregoing considerations, the answer to the question referred is that Regulation No 2201/2003 must be interpreted as meaning that the approval of an agreement for the sharing-out of an estate concluded by a guardian ad litem on behalf of minor children constitutes a measure relating to the exercise of parental responsibility, within the meaning of Article 1(1)(b) of that regulation and thus falls within the scope of the latter, and not a measure relating to succession, within the meaning of Article 1(3)(f) thereof, excluded from the scope thereof.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000, must be interpreted as meaning that the approval of an agreement for the sharing-out of an estate concluded by a guardian ad litem on behalf of minor children constitutes a measure relating to the exercise of parental responsibility, within the meaning of Article 1(1)(b) of that regulation and thus falls within the scope of the latter, and not a measure relating to succession, within the meaning of Article 1(3)(f) thereof, excluded from the scope thereof.
[Signatures]
( * ) Language of the case: Czech. |
JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
3 March 2016 ( *1 )
‛State aid — Retroactive public service compensation granted by the Italian authorities — Inter-regional bus transport services provided between 1987 and 2003 — Decision declaring the aid incompatible with the internal market — Maintenance of a public service obligation — Grant of compensation — Regulation (EEC) No 1191/69’
In Case T‑15/14,
Simet SpA, established in Rossano Calabro (Italy), represented by A. Clarizia, C. Varrone and P. Clarizia, lawyers,
applicant,
v
European Commission, represented by G. Conte, D. Grespan and P.‑J. Loewenthal, acting as Agents,
defendant,
APPLICATION for annulment of Commission Decision 2014/201/EU of 2 October 2013 on compensation to be paid to SIMET SpA for public transport services provided between 1987 and 2003 (State aid measure SA.33037 (2012/C) Italy) (OJ 2014 L 114, p. 67).
THE GENERAL COURT (Eighth Chamber),
composed of D. Gratsias, President, M. Kancheva (Rapporteur) and C. Wetter, Judges,
Registrar: J. Palacio González, Principal Administrator,
having regard to the written procedure and further to the hearing on 14 July 2015,
gives the following
Judgment
Background to the dispute
The applicant, Simet SpA, is a company providing road-based passenger transport services. More specifically, it operates a network of inter-regional scheduled bus connections between Calabria and other Italian regions (‘the inter-regional connections’). In addition to these services, which account for most of its business, the applicant also provides other services, including international travel services, tourism services and bus hire with driver.
Legislative and regulatory framework governing the applicant’s business
Over the years, the applicant’s business has been governed by successive legislative and regulatory provisions at both national and EU level.
EU law
Road transport was given a framework at EU level by, in particular, Regulation (EEC) No 1191/69 of the Council of 26 June 1969 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway (OJ, English Special Edition, Series I, Chapter 1969 (I), p. 276).
Article 1 of Regulation No 1191/69 provides:
‘1. Member States shall terminate all obligations inherent in the concept of a public service as defined in this Regulation imposed on transport by rail, road and inland waterway.
2. Nevertheless, such obligations may be maintained in so far as they are essential in order to ensure the provision of adequate transport services.
…
4. Financial burdens devolving on transport undertakings by reason of the maintenance of the obligations referred to in paragraph 2 … shall be subject to compensation made in accordance with common procedures laid down in this Regulation.’
Article 2 of Regulation No 1191/69 provides:
‘1. “Public service obligations” means obligations which the transport undertaking in question, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions.
2. Public service obligations within the meaning of paragraph 1 consist of the obligation to operate, the obligation to carry and tariff obligations.
3. For the purposes of this Regulation “the obligation to operate” means any obligation imposed upon a transport undertaking to take, in respect of any route or installations which it is authorised to work by licence or equivalent authorisation, all necessary measures to ensure the provision of a transport service satisfying fixed standards of continuity, regularity and capacity. It also includes any obligation to operate additional services and any obligation to maintain in good condition routes, equipment — in so far as this is surplus to the requirements of the network as a whole — and installations after services have been withdrawn.
4. For the purposes of this Regulation, “the obligation to carry” means any obligation imposed upon transport undertakings to accept and carry passengers or goods at specified rates and subject to specified conditions.
5. For the purposes of this Regulation, “tariff obligations” means any obligation imposed upon transport undertakings to apply, in particular for certain categories of passenger, for certain categories of goods, or on certain routes, rates fixed or approved by any public authority which are contrary to the commercial interests of the undertaking and which result from the imposition of, or refusal to modify, special tariff provisions.
The provisions of the foregoing subparagraph shall not apply to obligations arising from general measures of price policy applying to the economy as a whole or to measures taken with respect to transport rates and conditions in general with a view to the organisation of the transport market or of part thereof.’
Article 4 of Regulation No 1191/69 provides:
‘1. It shall be for transport undertakings to apply to the competent authorities of the Member States for the termination in whole or in part of any public service obligation where such obligation entails economic disadvantages for them.
2. In their applications, transport undertakings may propose the substitution of some other form for the forms of transport being used. Undertakings shall apply the provisions of Article 5 to calculate what savings could be made as a means of improving their financial position.’
Article 5 of Regulation No 1191/69 provides:
‘1. Any obligation to operate or to carry shall be regarded as imposing economic disadvantages where the reduction in the financial burden which would be possible as a result of the total or partial termination of the obligation in respect of an operation or a group of operations affected by that obligation exceeds the reduction in revenue resulting from that termination.
Economic disadvantages shall be determined on the basis of a statement, actualised if necessary, of the annual economic disadvantages represented by the difference between the reductions in the annual financial burden and in annual revenue that would result from termination of the obligation.
However, where the obligation to operate or to carry covers one or more categories of the passenger or goods traffic on the whole or a substantial part of a network, the financial burden which would be eliminated by terminating the obligation shall be estimated by allocating among the various categories of traffic the total costs borne by the undertaking by reason of its transport activities.
The economic disadvantage will in such case be equal to the difference between the costs allocable to that part of the undertaking’s activities affected by the public service obligation and the corresponding revenue.
Economic disadvantages shall be determined taking into account the effects of the obligation on the undertaking’s activities as a whole.
2. A tariff obligation shall be regarded as entailing economic disadvantages where the difference between the revenue from the traffic to which the obligation applies and the financial burden of such traffic is less than the difference between the revenue which would be produced by that traffic and the financial burden thereof if working were on a commercial basis — account being taken both of the costs of those operations which are subject to the obligation and of the state of the market.’
Under Article 6(2) of Regulation No 1191/69, ‘decisions to maintain a public service obligation or part thereof, or to terminate it at the end of a specified period, shall provide for compensation to be granted in respect of the financial burdens resulting therefrom; the amount of such compensation shall be determined in accordance with the common procedures laid down in Articles 10 to 13’.
Article 10 of Regulation No 1191/69 provides:
‘1. The amount of the compensation provided for in Article 6 shall, in the case of an obligation to operate or to carry, be equal to the difference between the reduction in financial burden and the reduction in revenue of the undertaking if the whole or the relevant part of the obligation in question were terminated for the period of time under consideration.
However, where the calculation of economic disadvantage was made by allocating among the various parts of its transport activities the total costs borne by the undertaking in respect of those transport activities, the amount of the compensation shall be equal to the difference between the costs allocable to that part of the undertaking’s activities affected by the public service obligation and the corresponding revenue.
2. For the purposes of determining the financial burdens and revenue referred to in paragraph 1, the effects of the termination of the obligation in question on the undertaking’s activities as a whole shall be taken into account.’
In accordance with Article 12 of Regulation No 1191/69, costs resulting from the maintenance of obligations are to be calculated on the basis of efficient management of the undertaking and the provision of transport services of an adequate quality. Interest relating to own capital may be deducted from the interest taken into account in the calculation of costs.
Article 14 of Regulation No 1191/69 provides:
‘1. Save for cases falling within Article 1(3), after the date of entry into force of this Regulation Member States may impose public service obligations on a transport undertaking only in so far as such obligations are essential in order to ensure the provision of adequate transport services.
2. Where obligations thus imposed entail for transport undertakings economic disadvantages within the meaning of Article 5(1) and (2) or financial burdens within the meaning of Article 9, the competent authorities of the Member States shall, when deciding to impose such obligations, provide for grants of compensation in respect of the financial burdens resulting therefrom. The provisions of Articles 10 to 13 shall apply.’
Article 17(2) of Regulation No 1191/69 provides:
‘2. Compensation paid pursuant to this Regulation shall be exempt from the preliminary information procedure laid down in Article 93(3) of the Treaty establishing the European Economic Community.
Member States shall promptly forward to the Commission details, classified by category of obligation, of compensation payments made in respect of financial burdens devolving upon transport undertakings by reason of the maintenance of the public service obligations set out in Article 2 or by reason of the application to passenger transport of transport rates and conditions imposed in the interests of one or more particular categories of person.’
Council Regulation (EEC) No 1893/91 of 20 June 1991 amending Regulation No 1191/69 (OJ 1991 L 169, p. 1), which came into force on 1 July 1992, removed the possibility for Member States to maintain or impose public service obligations on transport undertakings, except those whose activities were confined exclusively to the operation of urban, suburban or regional services.
Under Article 1(4) of Regulation No 1191/69, as amended by Regulation No 1893/91, ‘in order to ensure adequate transport services which in particular take into account social and environmental factors and town and country planning, or with a view to offering particular fares to certain categories of passenger, the competent authorities of the Member States may conclude public service contracts with a transport undertaking’.
Thus, Article 14 of Regulation No 1191/69, as amended by Regulation No 1893/91, provides:
‘1. “A public service contract” shall mean a contract concluded between the competent authorities of a Member State and a transport undertaking in order to provide the public with adequate transport services.
A public service contract may cover notably
—
transport services satisfying fixed standards of continuity, regularity, capacity and quality,
—
additional transport services,
—
transport services at specified rates and subject to specified conditions, in particular for certain categories of passenger or on certain routes,
—
adjustments of services to actual requirements.
2. A public service contract shall cover, inter alia, the following points:
(a)
the nature of the service to be provided, notably the standards of continuity, regularity, capacity and quality;
(b)
the price of the services covered by the contract, which shall either be added to tariff revenue or shall include the revenue, and details of financial relations between the two parties;
(c)
the rules concerning amendment and modification of the contract, in particular to take account of unforeseeable changes;
(d)
the period of validity of the contract;
(e)
the penalties in the event of failure to comply with the contract.
3. Those assets involved in the provision of transport services which are the subject of a public service contract may belong to the undertaking or be placed at its disposal.
4. Any undertaking which intends to discontinue or make substantial modifications to a transport service which it provides to the public on a continuous and regular basis and which is not covered by the contract system or the public service obligation shall notify the competent authorities of the Member State thereof at least three months in advance.
The competent authorities may decide to waive such notification.
This provision shall not affect other national procedures applicable as regards entitlement to terminate or modify transport services.
5. After receiving the information referred to in paragraph 4 the competent authorities may insist on the maintenance of the service concerned for up to one year from the date of notification and they shall inform the undertaking at least one month before the expiry of the notification.
They may also take the initiative of negotiating the establishment or modification of such a transport service.
6. Expenditure arising for transport undertakings from the obligations referred to in paragraph 5 shall be compensated in accordance with the common procedures laid down in Sections II, III and IV.’
On the other hand, in accordance with Article 1(5) of Regulation No 1191/69, as amended by Regulation No 1893/91, ‘the competent authorities of the Member States may maintain or impose the public service obligations referred to in Article 2 for urban, suburban and regional passenger transport services’. In those circumstances, ‘the conditions and details of operation, including methods of compensation, are laid down in Sections II, III and IV’.
That provision also states:
Regulation No 1191/69, as amended by Regulation No 1893/91, was repealed by Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Regulations (EEC) Nos 1191/69 and 1107/70 (OJ 2007 L 315, p. 1), which came into force on 3 December 2009.
National law
The applicant initially operated inter-regional connections pursuant to annual licences granted by the Italian Ministry of Infrastructure and Transport (Ministero delle Infrastructure e dei Trasporti; ‘the MIT’) in accordance with Law No 1822 of 28 September 1939 laying down rules on scheduled bus services for passengers, baggage and agricultural packages under the system of licences granted to private undertakings (legge n. 1822 Disciplina degli autoservizi di linea (autolinee) per viaggiatori, bagagli e pacchi agricoli in regime di concessione all’industria privata) (GURI No 292 of 18 December 1939; ‘Law No 1822/1939’).
In accordance with Article 3 of Law No 1822/1939, the licence was granted ‘on the basis of particular specifications covering all technical, administrative and economic conditions governing the licence itself, as well as transport obligations in respect of mail items’. Point 3 of the second paragraph of Article 6 of that law provided that if there were several applicants for a single licence, the authorities would give priority, inter alia, to any applicant showing that it assumed other financial burdens for works or services of local interest related to the transport services and that it was capable of meeting those burdens. Furthermore, Article 1 of Law No 1822/1939 provided that licence holders were required to carry mail items at the request of the postal and telegraph authorities.
Law No 1822/1939 was amended by Presidential Decree No 369 of 22 April 1994 laying down rules simplifying the licensing procedure in respect of ordinary bus services under State responsibility (decreto del Presidente della Repubblica n. 369 Regolamento recante semplificazione del procedimento di concessione di autolinee ordinarie di competenza statale) (Ordinary Supplement No 91 to GURI No 136 of 13 June 1994; ‘Decree No 369/1994’). Pursuant to Decree No 369/1994, undertakings wishing to secure a licence had to demonstrate in their licence application, ‘in a clear and detailed manner, why the identified public utility needs could not be met, in whole or in part, through existing transport services’.
Law No 1822/1939, as amended by Decree No 369/1994, was subsequently repealed by Legislative Decree No 285 of 21 November 2005 reorganising motor vehicle services under State responsibility (decreto legislativo n. 285 Riordino dei servizi automobilistici interregionali di competenza statale) (Ordinary Supplement to GURI No 6 of 9 January 2006), adopted pursuant to Law No 32 of 1 March 2005 delegating reform of the rules on the transport of persons and goods by road to the Government (legge n. 32 Delega al Governo per il riassetto normativo del settore dell’autotrasporto di persone e cose) (GURI No 57 of 10 March 2005).
However, the effect of the transitional provisions of Legislative Decree No 285/2005 was that the annual licence system provided for in Law No 1822/1939, as amended by Decree No 369/1994, was maintained in respect of the applicant until 31 December 2012.
In addition, the applicant benefited from successive national provisions providing for the payment of compensation in respect of financial burdens resulting from some of the obligations assumed by the holders of licences for road transport services.
The applicant thus benefited from the provisions of Presidential Decree No 1227 of 29 December 1969 concerning the rules on the termination of public service obligations with respect to undertakings providing predominantly inter-regional motor vehicle services, on compensation for the maintenance of public service obligations and on reimbursement of expenses in respect of tariff obligations (decreto del Presidente della Repubblica n. 1227 Norme riguardanti la soppressione degli obblighi di servizio pubblico nei confronti delle aziende esercenti servizi automobilistici a carattere prevalentemente interregionale, la compensazione degli obblighi di servizio pubblico da mantenere e il rimborso degli oneri per obblighi tariffari) (GURI No 75 of 25 March 1970; ‘Decree No 1227/69’).
Article 2 of Decree No 1227/69 provided that, in accordance with Article 6(2) of Regulation No 1191/69, undertakings mainly operating regional transport services by road could apply to the MIT for the termination in whole or in part of any public service obligation imposed on them, if that obligation had not already been terminated. On 8 January 1981, the applicant consequently received from the Italian authorities, pursuant to Decree No 1227/69, an allocation of funds as compensation for the financial burdens resulting from the tariff obligations imposed on licensees between 1972 and 1974.
The applicant also benefited from the provisions of Law No 877 of 13 December 1986 on urgent action in respect of scheduled public bus services under State responsibility (legge n. 877 Interventi urgenti per gli autoservizi pubblici di linea di competenza statale) (GURI No 295 of 20 December 1986), which provided that assistance had to be granted, based on the distances covered between 1 April 1972 and 1986, to undertakings operating scheduled bus services under State responsibility and international bus services to the Italian border.
The applicant did not receive any further compensation.
In addition, Article 4(4)(b) of Law No 59 of 15 March 1997 delegating to the Government the allocation of functions and powers to the regions and to local bodies, the reform of public authorities and administrative simplification (legge n. 59 Delega al Governo per il conferimento di funzioni e compiti alle regioni ed enti locali, per la riforma della pubblica amministrazione e per la semplificazione amministrativa) (Ordinary Supplement No 56 to GURI No 63 of 17 March 1997), as amended by Legislative Decree No 422 of 19 November 1997 allocating functions and powers in the area of public transport at local level to the regions and local bodies, under Article 4(4) of Law No 59 of 15 March 1997 (Decreto legislativo n. 422 Conferimento alle regioni ed agli enti locali di funzioni e compiti in materia di trasporto pubblico locale, a norma dell’articolo 4, comma 4, della legge 15 marzo 1997, n. 59) (GURI No 287 of 10 December 1997), states:
‘to provide that regions and local bodies, within the framework of their respective powers, shall regulate the provision of services regardless of the manner in which they are carried out and the method employed to allocate them, either by way of licence or in accordance with the detailed rules laid down in Articles 22 and 25 of Law No 142 of 8 June 1990, through public service contracts, detailed rules which shall comply with Articles 2 and 3 of Regulation (EEC) No 1191/69 and Regulation (EEC) No 1893/91, which ensure financial security/certainty and budget coverage as well as, by 1 January 2000, a ratio of at least 0.35 between revenue from traffic/movement and operational costs, after deducting infrastructure costs following the application of Directive 91/440/EEC to railway transport of regional and local interest; to lay down detailed rules to overcome monopoly situations in the management of urban and out-of-town transport and to establish rules on competition in the periodic award of services; to lay down detailed rules, by 1 January 2000, according to which regions will replace their own independent regional service contracts with public service contracts between the State and Ferrovie dello Stato Spa.’
Actions brought by the applicant before the national courts
On 22 October 1999, the applicant applied to the MIT for compensation in consideration for the public service obligations it had assumed in connection with the operation of inter-regional connections between 1987 and 1999. The MIT refused that application on the ground that it did not satisfy the requirements set out in Article 4 of Regulation No 1191/69 for the award of such compensation. The applicant challenged the MIT’s decision by way of an extraordinary action brought before the President of the Italian Republic. That action was dismissed by Presidential decree on 10 October 2002.
In 2004, the applicant brought an action before the Tribunale amministrativo regionale del Lazio (Regional Administrative Court, Lazio, Italy; ‘the TAR Lazio’) seeking recognition of its right to receive EUR 66891982 in consideration for the financial burdens it had assumed as a result of performing public service obligations since 1987, by way of either annual compensation, pursuant to Regulation No 1191/69, as amended by Regulation No 1893/91, or damages, or by means of an action for unjust enrichment, pursuant to Article 2041 of the Italian Civil Code. By judgment No 112/2009 of 12 January 2009 (‘the judgment of the TAR Lazio’), the TAR Lazio dismissed as inadmissible the claims of the applicant based on Regulation No 1191/69, as amended by Regulation No 1893/91, and on Article 2041 of the Italian Civil Code. The TAR Lazio held, in particular, pursuant to the principle of Italian procedural law that judgments are to rule not only on the questions actually raised, but also on those raised by implication (il giudicato copre il dedotto e il deducibile), that the Presidential Decree of 10 October 2002 had already ruled by implication on the claim based on Regulation No 1191/69, as amended by Regulation No 1893/91. Moreover, the TAR Lazio dismissed the applicant’s action for damages as unfounded.
On 9 March 2009, the applicant lodged an appeal against the judgment of the TAR Lazio, referred to in paragraph 31 above, before the Consiglio di Stato (Council of State).
By judgment No 1405/2010 of 3 March 2010 (‘the judgment of the Consiglio di Stato’), the Consiglio di Stato (Council of State) reversed the judgment of the TAR Lazio, holding that the applicant was entitled, in its capacity as a public service operator, to receive compensation in respect of the costs entailed by the provision of that service, under Articles 6, 10 and 11 of Regulation No 1191/69. The Consiglio di Stato (Council of State) made clear that the amount of that compensation should be determined, pursuant to Article 35 of Legislative Decree No 80 of 31 March 1998 laying down new provisions on the organisation of and working relations in public authorities, and on jurisdiction over labour disputes and administrative matters, adopted in accordance with Article 11(4) of Law No 59 of 15 March 1997 (decreto legislativo n. 80 Nuove disposizioni in materia di organizzazione e di rapporti di lavoro nelle amministrazioni pubbliche, di giurisdizione nelle controversie di lavoro e di giurisdizione amministrativa, emanate in attuazione dell’articolo 11, comma 4, della legge 15 marzo 1997, n. 59.) (Ordinary Supplement to GURI No 82 of 8 April 1998), by public authorities on the basis of reliable data from the applicant’s accounts allowing the difference to be calculated between the costs attributable to the part of the applicant’s activities affected by the public service obligation and the revenue generated by that activity.
However, the Consiglio di Stato (Council of State) stayed the action for damages on the ground that only after the Italian public authorities had calculated the sums due in respect of compensation would it be possible to identify any residual loss, not covered by that calculation, which would then have to be proven by the applicant. Furthermore, the Consiglio di Stato (Council of State) found that, since it had upheld the applicant’s claim seeking recognition of its right to receive compensation, it was not necessary to rule on the claim of unjust enrichment based on Article 2041 of the Italian Civil Code.
On 1 April 2011, the Consiglio di Stato (Council of State), at the request of the applicant, issued an order intended to force the MIT to calculate the compensation payments pursuant to its judgment, referred to in paragraph 33 above.
On 17 January 2012, in the light of the difficulties experienced by the MIT in calculating the compensation and at the request of the applicant, the Consiglio di Stato (Council of State) issued a further order appointing a panel of three independent experts tasked with calculating the amount of compensation due to the applicant under its judgment, referred to in paragraph 33 above.
Since the panel of experts were unable to reach a unanimous conclusion, it submitted, on 20 August 2012, a majority report signed by two experts concluding that the compensation due to the applicant was EUR 22049796 and, on 29 August 2012, a minority report signed by the third member and chairman of the panel of experts concluding that the available data was not sufficient to determine the compensation to be recognised in favour of the applicant with the result that no award of compensation could be made.
Administrative procedure
Following the order of the Consiglio di Stato (Council of State) of 1 April 2011, on 18 May 2011 the Italian authorities notified the European Commission of the grant of compensation to the applicant for the provision of inter-regional passenger transport services by bus between 1987 and 2003 in the context of a public service obligation, in compliance with the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above.
On 12 July and 5 October 2011 and 20 February, 2 and 28 March and 17 April 2012, the Italian authorities submitted additional information on the notified measure.
By letter of 31 May 2012, the Commission informed the Italian authorities of its decision to initiate the formal investigation procedure laid down in Article 108(2) TFEU and invited the parties concerned to submit observations.
The Italian authorities submitted their observations on the initiation of the formal investigation procedure on 1 June, 24 September and 11 October 2012.
The applicant, in its capacity as interested third party, submitted observations on the decision to initiate the formal investigation procedure on 4 August, 31 October and 13 December 2012.
The Italian authorities submitted comments on the applicant’s observations on 28 November and 4 and 19 December 2012 and 10 January 2013.
Contested decision
On 2 October 2013, the Commission adopted Decision 2014/201/EU on compensation to be paid to Simet for public transport services provided between 1987 and 2003 (State aid SA.33037 (2012/C) Italy) (OJ 2014 L 114, p. 67; ‘the contested decision’), in which it found that the measure notified by the Italian authorities as State aid within the meaning of Article 107(1) TFEU was incompatible with the internal market.
In the contested decision, the Commission, first of all, found that the notified measure was imputable to the State, entailed the use of State resources, conferred an economic advantage on the applicant, was selective in nature and was likely to distort competition to the extent that it affected trade between Member States. In those circumstances, the Commission observed that the notified measure did not satisfy the second criterion laid down by the Court in its judgment of 24 July 2003 in Altmark Trans and Regierungspräsidium Magdeburg (C‑280/00, ECR, EU:C:2003:415; ‘Altmark’), according to which the parameters on the basis of which compensation is calculated must be established in advance in an objective and transparent manner. The Commission concluded that the notified measure constituted State aid within the meaning of Article 107(1) TFEU.
Next, the Commission examined whether the notified measure could be regarded, in the light of Article 17(2) of Regulation No 1191/69, as compensation exempted from the prior notification obligation set out in Article 108(3) TFEU.
To that end, the Commission considered whether the Italian authorities had unilaterally imposed on the applicant a public service obligation within the meaning of Article 1 of Regulation No 1191/69. In the first place, the Commission found that the applicant’s initiative in requesting the renewal of the licence specifications for all 16 years of the period under review was incompatible with the alleged unilateral imposition of a public service obligation. In the second place, it pointed out that the fact that the specifications stipulated the fares, the routes and the frequency and timing of the services did not necessarily mean that unilateral public service obligations had been imposed on the applicant as a result of the licences granted. In the third place, the Commission considered that the applicant had not adduced any evidence to prove that it had actually provided mail transport services or to substantiate the net costs involved. In the fourth place, as regards the fares that the applicant was able to charge for the passenger transport services it provided, the Commission took the view that the fact that they were approved by the MIT and that reference was made to regulated fares did not, in itself, mean that those fares were not initially set by the operators. In any event, those regulated fares do not fall within the definition of tariff obligation within the meaning of Article 2(5) of Regulation No 1191/69, as that provision does not apply to obligations arising from general measures of price policy applying to the economy as a whole or to measures taken with respect to transport rates and conditions in general with a view to the organisation of the transport market or of part thereof. In the fifth place, as regards the MIT’s rejections of the applicant’s requests to establish new services or to expand existing services, the Commission observed that those rejections were the result of the way in which the operation of scheduled passenger transport services was regulated under Law No 1822/1939, which only allowed the creation or expansion of new services in so far as the new licences did not impinge on the rights of existing operators. Furthermore, the Commission found that, in general terms, the applicant had not adduced any evidence to show that it had submitted requests to change the details set out in the specifications or that those requests had been rejected by the MIT.
The Commission also checked whether the compensation awarded to the applicant complied with the common method of compensation laid down in Regulation No 1191/69.
In the first place, the Commission noted that, under Article 10 of Regulation No 1191/69, in the case of an obligation to operate or to carry, the amount of compensation had to be equal to the difference between the reduction in financial burden and the reduction in revenue of the undertaking if the whole or the relevant part of the obligation in question were terminated for the period of time under consideration. In accordance with the case-law, the requirement set out in that provision is not fulfilled where it is not possible to ascertain on the basis of reliable data from the company’s accounts the difference between the costs imputable to the parts of its activities in the areas covered by the respective licences and the corresponding income and consequently it is not possible to calculate the additional cost deriving from the performance of public service obligations by that undertaking. The Commission also found that, under Article 1(5) of Regulation No 1191/69, in the version applicable from 1 July 1992, transport undertakings which not only operated services subject to public service obligations but also engaged in other activities were required to provide those services in such a way that (i) the operating accounts corresponding to each of those activities were separate and the proportion of the assets pertaining to each was used in accordance with the accounting rules in force; and (ii) expenditure was balanced by operating revenue and payments from public authorities, without any possibility of transfer from or to another sector of the undertaking’s activity. Since the applicant did not implement a proper account separation for the services provided by it until 2002, and in view of the concerns over the robustness of the cost accounts as regards account separation for the years 2002 and 2003, in the absence of any evidence that those cost accounts were used by the applicant’s governance bodies to exercise control over its activities, the Commission found that Article 10 of Regulation No 1191/69 had not been complied with.
In the second place, the Commission considered that the applicant had not shown that it had complied with Article 5(1) of Regulation No 1191/69, which provided that economic disadvantages had to be determined taking into account the effects of the obligation on the undertaking’s activities as a whole, or with Article 13 of that regulation, under which the amount of compensation had to be fixed in advance.
In the third and last place, the Commission pointed out that the common method of compensation applied to the applicant’s inter-regional transport activities only until the entry into force of Regulation No 1893/91, on 1 July 1992, and that it could not therefore apply to compensation for the period between 1987 and 2003.
The Commission therefore found that the notified measure could not be regarded as compliant with the common method of compensation laid down in Regulation No 1191/69.
The Commission concluded that the notified measure was not exempted from the preliminary information obligation under Article 17(2) of Regulation No 1191/69.
Lastly, the Commission examined whether the notified measure was compatible with the legislation in force when the contested decision was adopted, namely Regulation No 1370/2007. After finding that the notified measure did not comply with some of the obligations laid down in Article 4 of Regulation No 1370/2007, concerning the content of the public service contract, and Article 6(1) of and the Annex to that regulation, concerning the separation of the accounts of the compensation recipient and the detailed rules to be applied to determine the maximum amount of compensation, the Commission concluded that the compensation ordered by the Consiglio di Stato (Council of State) was not in accordance with Regulation No 1370/2007 and, therefore, the notified measure was incompatible with the internal market. The Commission also rejected the applicant’s argument that the Consiglio di Stato (Council of State) did not order the MIT to pay it compensation for public service obligations pursuant to Regulation No 1191/69, but instead ordered the MIT to pay it damages on account of the unlawful imposition of such obligations in terms of Article 1(3) and (5) of that regulation. The Commission observed that it was apparent from the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, that the latter had recognised the applicant’s right to receive compensation on the basis of Articles 6, 10 and 11 of Regulation No 1191/69 and had dismissed its claim for damages. The Commission also stated that, in any event, the award of damages to the applicant for the alleged unilateral and unlawful imposition of public service obligations, calculated on the basis of the common method of compensation laid down in Regulation No 1191/69, would contravene Articles 107 TFEU and 108 TFEU, since it would produce the same result for the applicant as compensation for public service obligations in respect of the period under review even though the licence specifications governing the services in question did not comply with the substantive requirements of either Regulation No 1191/69 or Regulation No 1370/2007.
The operative part of the contested decision reads as follows:
‘Article 1
The compensation payments to Simet notified by the Italian authorities constitute [S]tate aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union. The aid was not exempt from prior notification on the basis of Article 17(2) of Regulation (EEC) No 1191/69.
The aid is not compatible with the internal market, as the conditions of Regulation (EC) No 1370/2007 have not been met. Consequently, the aid may not be implemented by the Italian authorities.
Article 2
This Decision is addressed to the Italian Republic.’
Procedure and forms of order sought by the parties
The applicant brought the present action on 6 January 2014.
The Commission lodged its defence on 24 March 2014.
The applicant lodged a reply on 12 May 2014. The Commission lodged a rejoinder on 28 August 2014.
On 4 June 2015, the Court put a question to the applicant for a written reply by way of measures of organisation of procedure provided for in Article 64(3)(a) and (b) of the Rules of Procedure of the General Court of 2 May 1991. The applicant replied to that question on 12 June 2015.
The parties presented oral argument and replied to the questions put by the Court at the hearing on 14 July 2015.
The applicant claims that the Court should:
—
annul the contested decision;
—
order the Commission to pay the costs.
The Commission contends that the Court should:
—
dismiss the action;
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order the applicant to pay the costs.
Law
Admissibility
The Commission submits that, since the applicant stated in the reply that it was discontinuing its application for enforcement of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, it no longer has any legal interest in bringing proceedings in the context of this case, bearing in mind that the very purpose of the contested decision was to notify the compensation to which the applicant was entitled in compliance with that judgment, according to the majority report drawn up in the application for enforcement.
It should be recalled that having a legal interest in bringing proceedings is a precondition for the admissibility of an action for annulment brought by a natural or legal person. Such an interest presupposes that the annulment of the contested measure must of itself be capable of having legal consequences and that the action must be likely, if successful, to procure an advantage for the party who brought it (see judgment of 18 March 2010 in Centre de Coordination Carrefour v Commission, T‑94/08, ECR, EU:T:2010:98, paragraph 48 and the case-law cited). That interest must be vested and present when the action is brought.
Moreover, it must continue until the final decision, failing which there will be no need to adjudicate (see judgment in Centre de Coordination Carrefour v Commission, cited in paragraph 64 above, EU:T:2010:98, paragraph 49 and the case-law cited).
It must also be borne in mind that if the interest which a party bringing proceedings claims concerns a future legal situation, he must demonstrate that the prejudice to that situation is already certain (order of 27 March 2012 in European Goldfields v Commission, T‑261/11, EU:T:2012:157, paragraph 29).
In the present case, it is apparent both from the contested decision and the applicant’s pleadings that the Italian authorities twice refused to comply with the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, ordering them to pay compensation to the applicant, which resulted in the Consiglio di Stato issuing, at the request of the applicant, an initial order for enforcement on 1 April 2011 followed by a second order for enforcement on 17 January 2012.
In the reply, the applicant stated that it was discontinuing its application for enforcement of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, and reserved the right to bring a fresh application.
In response to a question for a written reply put by the Court under Article 64(3)(a) and (b) of the Rules of Procedure of 2 May 1991, the applicant stated that it had discontinued the proceedings by which it sought to secure enforcement of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, but that it had not discontinued its action for enforcement of that judgment and therefore retained the possibility of bringing a fresh application for enforcement thereof until expiry of the limitation period, being 9 March 2020. According to the applicant, it thus retained an interest in the outcome of proceedings in the present case, with a view to bringing a fresh application to enforce the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above.
It follows that there is no certainty that the applicant will take further steps in its action for enforcement of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above.
However, in this case, that fact is not, of itself, capable of depriving the applicant of its legal interest in bringing proceedings.
If the Court found it necessary to annul the contested decision, the Italian authorities would still in any event be bound to comply with the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, irrespective of the applicant’s discontinuance of its application for enforcement of that judgment.
Furthermore, it should be noted that in accordance with the very wording of the contested decision, the Italian authorities ‘decided to await the assessment of the notified measure by the Commission before executing the [judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, and its order of 1 April 2011] and paying [the applicant] the compensation’.
In the light of the foregoing considerations, the applicant retains an interest in the outcome of the proceedings.
Substance
In support of the action, the applicant essentially relies on five pleas in law. The first plea alleges infringement of Article 107(1) TFEU and Regulation No 1191/69, in so far as the Commission committed an error of fact and manifest errors of assessment and failed to investigate the case sufficiently. The second plea alleges infringement of the principles relating to compensation for harm suffered by individuals as a result of breaches of EU law by a Member State. The third plea alleges infringement of the obligation to state reasons. The fourth plea alleges infringement of Article 107(1) TFEU, in so far as the Commission committed manifest errors of assessment as regards whether the notified measure complied with the common method of compensation laid down in Regulation No 1191/69. The fifth plea alleges that the Commission interfered with the judicial business of the national court by taking account, in the contested decision, of the reports of the panel of experts on which the Consiglio di Stato (Council of State) had yet to rule.
First plea in law, alleging infringement of Article 107(1) TFEU and Regulation No 1191/69
The first plea in law is essentially divided into two parts. The first part alleges error of fact, in so far as the Commission wrongly found that the Consiglio di Stato (Council of State) had ordered the MIT to pay compensation to the applicant pursuant to Regulation No 1191/69. The second part alleges manifest error of assessment, or insufficient investigation, in so far as the Commission failed to take account of the fact that the national legislation on the basis of which public service obligations were imposed on the applicant was contrary to Regulation No 1191/69.
– First part of the first plea in law, alleging error of fact
Following the line it took in the administrative procedure, the applicant submits that the Consiglio di Stato (Council of State) did not order the MIT to pay it compensation pursuant to Regulation No 1191/69, but instead ordered the MIT to pay it damages on account of the harm suffered as a result of the unilateral imposition of public service obligations in breach of that regulation for the period between 1987 and 2003. According to the applicant, the Consiglio di Stato (Council of State) — as expressly provided for in Article 35 of Legislative Decree No 80/1998 — referred to Regulation No 1191/69 (which applied to the relevant period) solely for the purpose of determining the appropriate criteria in order to quantify the damage. The applicant argues that the Consiglio di Stato (Council of State) did not dispose of the case pursuant to Regulation No 1191/69; in the light of the pleas put forward by the applicant, it merely referred to the criteria set out in that regulation in order to quantify the actual amount of compensation due in respect of the costs incurred in the performance of public service obligations under domestic law. In other words, the Consiglio di Stato (Council of State) recognised the right to compensation only in respect of the losses suffered pursuant to its case-law.
The Commission disputes the applicant’s arguments and contends that the first part of this plea should be rejected.
It should be noted that the applicant’s proposition is tantamount to considering that the notified measure was not compensation for the imposition of public service obligations, for the purposes of Altmark, cited in paragraph 45 above (EU:C:2003:415), or Regulation No 1191/69, but rather damages awarded by the national court for the harm caused as a result of the imposition of such obligations in breach of the applicable EU law.
That proposition is at odds with the judgment of the TAR Lazio, referred to in paragraph 31 above, and the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above.
The judgment of the TAR Lazio, referred to in paragraph 31 above, shows that the applicant brought an action before that court in 2004 seeking recognition of its right to receive EUR 66891982 in consideration for the financial burdens it had assumed as a result of performing public service obligations since 1987, by way of either annual compensation, pursuant to Regulation No 1191/69, as amended by Regulation No 1893/91, or damages, or by means of an action for unjust enrichment, pursuant to Article 2041 of the Italian Civil Code (see paragraph 31 above).
At this juncture it is appropriate to return, as the Commission did, to the content of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above.
In paragraph 2 of its judgment (referred to in paragraph 33 above), the Consiglio di Stato (Council of State) set out the applicable legal framework, recalling that Law No 1822/1939 governed the grant by licence of bus routes under State responsibility to private operators, in so far as those licences did not compete with existing licences, and enabled the MIT to pay mileage-based subsidies for establishment and operation.
It went on to state that Regulation No 1893/91 ‘drew a clear distinction between transport services of special public interest (namely “regional or local services”) and transport services in respect of which the termination of service obligations was definitive, without prejudice to the possibility for public authorities to conclude public service contracts in order to ensure the provision of adequate transport services and notwithstanding the guarantees for special categories of person’.
The Consiglio di Stato (Council of State) also observed that ‘the Court of Justice ruled [in Altmark] on the nature of the compensation paid by Member States in the field of transport services, so as not to include it in the category of State aid’.
The Consiglio di Stato (Council of State) concluded that ‘any trader who provides, in respect of public service obligations, public transport services … is entitled to receive compensation for the financial burdens borne by him’.
It then stated that, in consequence, ‘in the light of the rules described above, it is necessary to ascertain in the present case whether or not the [applicant] is entitled to the compensation provided for’.
As the Commission correctly points out, the reasoning of the Consiglio di Stato (Council of State) set out above shows that it examined the substance of the applicant’s application for compensation for the performance of certain public service obligations.
Furthermore, after finding that ‘the company’s court claim seeking recognition of its right to compensation’ was admissible, unlike the TAR Lazio, the Consiglio di Stato (Council of State) noted that ‘Regulation (EEC) No 1191/69 of the Council of 26 June 1969, as amended by Regulation (EEC) No 1893/91’, expressly provided, in Article 1(5) thereof, for the possibility of maintaining or imposing service obligations for urban, suburban and regional services. It also stated that, in those circumstances, the financial burdens arising from the decision to maintain or impose unilateral service obligations must be compensated for by the Member States, in accordance with the methods listed in Articles 10, 11 and 12 of Regulation No 1191/69, irrespective of the applications referred to in Article 4 of that regulation. The Consiglio di Stato (Council of State) made clear that ‘not only did the Italian legislature not avail itself of that power, but it established, by adopting Article 4(4) of Law No 59/97 and the provisions of Legislative Decree No 422/97, that public service contracts [had] to be concluded which incorporate the obligation to pay compensation for public service obligations’.
After recalling that Regulation No 1191/69 was directly applicable, the Consiglio di Stato (Council of State) went on to state that ‘it follows from the foregoing … that it is not possible to reject the public service provider’s application for reimbursement of the costs actually incurred on account of the provision of public services’.
The Consiglio di Stato (Council of State) concluded as follows:
Consequently, the Consiglio di Stato (Council of State) ‘orders the Ministry … to pay the amounts to be determined in accordance with Article 35 of Legislative Decree No 80 of 1998 within the time-limit and under the conditions stipulated by this court’.
It is therefore apparent from the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, that the court recognised the applicant’s right to receive the compensation provided for in Articles 6, 10 and 11 of Regulation No 1191/69 for the public service obligations imposed on it and also ordered the MIT to pay the applicant, by way of compensation, an amount to be determined by the authorities in accordance with Article 35 of Legislative Decree No 80/1998.
Article 35(1) of Legislative Decree No 80/1998 provides that the administrative courts are to adjudicate on claims for damages in actions over which they have exclusive jurisdiction. Article 35(2) thereof states that the administrative courts may, in the context of that jurisdiction, lay down the criteria in accordance with which the authorities are to propose the payment of a sum to the applicant within a reasonable time.
However, contrary to what the applicant submits, the mere reference to Article 35 of Legislative Decree No 80/1998 does not lead to the conclusion that the notified measure was necessarily intended to indemnify it for the harm caused by the breach of Regulation No 1191/69 by national legislation, in terms of the judgment of 22 January 1976 in Russo (60/75, ECR, EU:C:1976:9, paragraph 9).
The wording of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, shows that the court did not find that the national rules were unlawful in the light of Regulation No 1191/69, but simply refrained from applying those rules in order to find that a right to compensation existed on the basis of Regulation No 1191/69.
Furthermore, the payment ordered against the MIT must be made by way of compensation and such compensation must correspond, according to the terms of the judgment, to the financial burden attributable to the public service obligations imposed on the applicant.
In addition, the Consiglio di Stato (Council of State) expressly stayed the action for damages brought by the applicant.
In those circumstances, it must be considered that the purpose of the notified measure was not to indemnify the applicant for the harm resulting from the breach of Regulation No 1191/69, but rather to compensate it for the financial burdens attributable to the imposition of the public service obligation pursuant to the provisions of that regulation.
Indeed, the Consiglio di Stato (Council of State) confirmed that interpretation of its judgment, referred to in paragraph 33 above, in its order of 1 April 2011, in which it stated:
It follows that the applicant’s contention that the Commission committed an error of fact in finding that the Consiglio di Stato (Council of State) had ordered the MIT to pay it compensation pursuant to Regulation No 1191/69 is unfounded.
Moreover, if the notified measure had to be construed, as the applicant submits, not as compensation for the imposition of public service obligations within the meaning of Regulation No 1191/69, but as damages for the harm caused as a result of the imposition of such obligations in breach of that regulation, the applicant cannot argue at the same time that such damages fall outside the definition of State aid, within the meaning of Article 107(1) TFEU, solely because they seek to compensate for the imposition of public service obligations within the meaning of that regulation.
Otherwise, as the Commission correctly pointed out in recitals 131 to 133 of the contested decision, in such a situation, the classification of the payment due in respect of compensation not as compensation but as damages would make it possible to circumvent the application of Articles 107 TFEU and 108 TFEU.
In the present case, the applicant has not put forward any arguments to challenge the finding that the notified measure contains all the constituent elements of State aid within the meaning of Article 107(1) TFEU, with the result that the applicant’s contention that the notified measure is not compensation within the meaning of Regulation No 1191/69 but damages for the harm caused by the breach of that regulation is, on any view, ineffective.
The first part of the first plea in law must therefore be dismissed.
– Second part of the first plea in law, alleging manifest error of assessment or insufficient investigation as to whether the applicable national legislation was consistent with EU law
The applicant essentially makes two complaints against the Commission.
In the first place, the applicant criticises the Commission for failing to examine of its own motion the question whether national legislation was consistent with EU law. According to the applicant, if the Commission had considered that question, it would have realised that national legislation was not consistent with EU law and that that was why the Consiglio di Stato (Council of State) had refrained from applying domestic law and had ordered the MIT to pay it damages.
In the second place, the applicant criticises the Commission for having found, in the contested decision, that it had not been subject under national legislation to public service obligations in breach of Regulation No 1191/69.
The Commission submits that the second part of the first plea in law is inadmissible, in the light of Article 44(1) of the Rules of Procedure of 2 May 1991, because the applicant’s complaints are not related to the title of the first plea, which the applicant disputes.
The Commission also challenges the admissibility of the documents annexed to the applicant’s reply in support of its first complaint. They comprise Italian legislative instruments, namely Law No 1822/1939, Law No 32/2005 and Law No 877/86, by which the applicant sought to prove that Italian legislation was contrary to Regulation No 1191/69. The Commission claims that these documents were not produced in order to address the arguments set out in the defence and that the applicant could have submitted them with its application. In those circumstances, the Commission considers that, in the absence of any justification for the delay in producing this new evidence, the documents in question must be deemed inadmissible.
Furthermore, the Commission challenges the merits of the applicant’s complaints.
It should be borne in mind that the applicant’s first complaint is based on three clearly identifiable arguments. According to the first argument, the Commission was required to examine of its own motion the question whether domestic law was consistent with EU law. This argument concerns a breach of the duty to investigate. According to the second and third arguments, respectively, domestic law was not consistent with EU law and that was why the Consiglio di Stato (Council of State) refrained from applying domestic law and ordered the MIT to pay the applicant damages. These arguments concern alleged errors of assessment by the Commission.
The second complaint, by which the applicant criticises the Commission for finding that it had not been subject under national legislation to public service obligations in breach of Regulation No 1191/69, can also be easily seen to concern a manifest error of assessment.
In addition, it must be stated that notwithstanding the wording of the applicant’s complaints, the Commission’s understanding of those complaints was sufficient to enable it to deal with them substantially in the defence. Accordingly, the plea of inadmissibility raised by the Commission on the basis of Article 44(1) of the Rules of Procedure of 2 May 1991 must be rejected.
The merits of the applicant’s complaints must therefore be assessed.
As regards the first complaint, it is necessary at the outset to reject as unfounded the applicant’s arguments that national legislation was contrary to EU law and that that was why the Consiglio di Stato (Council of State) ordered the MIT to pay the applicant damages. Those arguments simply repeat the contention that was rejected in the examination of the first part of the first plea in law.
It is also necessary to reject as unfounded the applicant’s argument that the Commission ought to have examined of its own motion whether domestic law was compatible with EU law. It should be recalled that, according to settled case-law, it cannot be complained that the Commission failed to take into account matters of fact or of law which could have been submitted to it during the administrative procedure but which were not, since the Commission is under no obligation to consider, of its own motion and on the basis of prediction, what information might have been submitted to it (judgments of 2 April 1998 in Commission v Sytraval and Brink’s France, C‑367/95 P, ECR, EU:C:1998:154, paragraph 60, and 3 February 2011 in Italy v Commission, T‑3/09, ECR, EU:T:2011:27, paragraph 84).
The applicant does not deny the Commission’s assertion that, during the administrative procedure in which it participated as an interested third party, it did not raise the question of the consistency of national legislation with Regulation No 1191/69. Therefore, the applicant’s first complaint must be rejected as unfounded without it being necessary to rule on the admissibility of annexes C1, C3 and C4 to the reply.
In respect of the second complaint, since, unlike the first complaint (which is directly linked to the first part of the first plea in law), it concerns a manifest error of assessment as regards the application of Regulation No 1191/69, the Court considers it appropriate to examine it alongside the other complaints of the fourth plea in law, which specifically relate to such errors of assessment.
In the light of the foregoing considerations, the Court must reject the second part of the first plea in law and, therefore, the first plea in law in its entirety, except for the second complaint of the second part, which will be considered in the context of the fourth plea in law.
Second plea in law, alleging infringement of the principles governing compensation for harm suffered by individuals as a result of breaches of EU law by a Member State
The applicant submits that the Consiglio di Stato (Council of State) found that the licences granted to it each year infringed its right to receive compensation on the basis of Regulation No 1191/69 and, after the entry into force of Regulation No 1893/91, its right to pursue business activities without public service obligations. Consequently, the Consiglio di Stato (Council of State) ordered the MIT to make good the harm caused, in accordance with the principles governing the liability of Member States for damage sustained as a result of the adoption of administrative measures which are contrary to EU law, and directed that the amount of reparation be calculated fairly, by reference to the criteria laid down in Regulation No 1191/69 for the determination of compensation for public service obligations, subject to those criteria being adapted to the applicant’s individual situation. The applicant also claims that the Consiglio di Stato (Council of State) expressly stated that, if the existence of harm exceeding that determined on the basis of the criteria laid down in Regulation No 1191/69 could be proven, such harm would have to be compensated for separately. According to the applicant, the harm may be greater or lesser than the compensatory measure awarded to the company on the basis of Regulation No 1191/69. It follows that, by classifying the notified measure as State aid within the meaning of Article 107(1) TFEU, the Commission infringed the principles established by the case-law governing compensation for harm suffered by individuals a result of a breach of EU law.
In support of that proposition, the applicant argues that the failure to comply with the criteria laid down in Altmark, cited in paragraph 45 above (EU:C:2003:415), which the Commission found as a fact in the contested decision, is not relevant in the present case because that judgment concerns situations in which public service obligations may be imposed, whereas the imposition of such obligations has not been possible as regards the applicant since 1992. With respect to the earlier period, the failure to comply with those criteria confirms, in the applicant’s view, that the measures by which the MIT granted the annual licences were unlawful. Similarly, according to the applicant, the failure to comply with the account separation obligation is not relevant as the applicant was not required to separate its accounts after 1992 because, after that time, it could not be subject to public service obligations. In any event, Regulation No 1191/69 only imposes the obligation to separate public resources from private resources in the accounts of the undertaking in order to avoid cross-subsidies. Since the applicant had not received any compensation, it was not required to separate its accounts.
The Commission disputes the applicant’s arguments and contends that the action should be dismissed.
It must be noted that this plea in law is based on the premiss that, in the present case, the Consiglio di Stato (Council of State) ordered the authorities to pay damages to the applicant for the harm suffered as a result of the imposition of public service obligations in breach of Regulation No 1191/69. As the Court held in its examination of the first part of the first plea in law, it is apparent from the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, that this premiss is incorrect: the Consiglio di Stato did not find that the national legislation in question was unlawful. Instead, it recognised the applicant’s right to receive compensation on the basis of Articles 6, 10 and 11 of Regulation No 1191/69 on account of the public service obligations which had been imposed on it and ordered the MIT to pay, by way of compensation, the difference between the financial burdens and revenue linked to the performance of those obligations.
The Court must therefore reject the second plea in law as unfounded, without there being any need to examine the merits of the applicant’s arguments concerning the alleged misapplication of Altmark, cited in paragraph 45 above (EU:C:2003:415), and the account separation obligation set out in Regulation No 1191/69.
Third plea in law, alleging infringement of the obligation to state reasons
In its third plea in law, the applicant again argues in favour of the proposition that the Consiglio di Stato (Council of State) ordered the MIT to pay it damages on account of the imposition of public service obligations in breach of Regulation No 1191/69. However, in addition to those considerations, it puts forward various arguments and complaints, some of which concern infringement of the obligation to state reasons or insufficient investigation, while others concern manifest errors of assessment as regards the application of Regulation No 1191/69.
To ensure that the action is structured clearly, the complaints relating to alleged manifest errors of assessment in the application of Regulation No 1191/69 will be examined in the context of the fourth plea in law, in the same way as the complaints raised by the applicant in the second part of the first plea in law.
Furthermore, since the Court dealt with the applicant’s arguments concerning the alleged error of fact as regards the interpretation of the judgment of the Consiglio di Stato (Council of State), referred to in paragraph 33 above, in the examination of the first part of the first plea in law, it will confine itself in this plea to examining the applicant’s complaints alleging infringement of the obligation to state reasons.
As a preliminary point, it should be recalled that the statement of reasons required under Article 296 TFEU must be appropriate to the measure in question and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to carry out its review. Thus, the requirement to state reasons must be assessed by reference to the circumstances of the case, in particular the content of the measure, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of the reasons for a measure meets the requirements of Article 296 TFEU must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (judgments in Commission v Sytraval and Brink’s France, cited in paragraph 117 above, EU:C:1998:154, paragraph 63; of 22 June 2004 in Portugal v Commission, C‑42/01, ECR, EU:C:2004:379, paragraph 66; and of 15 April 2008 in Nuova Agricast, C‑390/06, ECR, EU:C:2008:224, paragraph 79).
In addition, it would be inappropriate for the Court to examine, in considering fulfilment of the obligation to state reasons, the substantive legality of the reasons relied on by the Commission to justify its decision. It follows that, in a plea based on a failure to state reasons or a lack of adequate reasons, objections and arguments which aim to challenge the merits of the contested decision are misplaced and irrelevant (judgment of 15 June 2005 in Corsica Ferries France v Commission, T‑349/03, ECR, EU:T:2005:221, paragraphs 58 and 59).
The question whether the Commission complied with its obligation to state reasons in this case must be assessed in the light of those principles.
– First complaint, alleging that the Commission failed to give reasons for its finding that the applicant’s accounts were not reliable
The applicant criticises the Commission for, in essence, failing to explain in the contested decision why it considered the applicant’s accounts not to be reliable, thereby reproducing the view taken in the minority report of the panel of experts appointed by the Consiglio di Stato (Council of State), without addressing the arguments set out in the majority report of the panel. It also criticises the Commission for not examining the accounts itself.
The Commission disputes the applicant’s arguments and contends that the first part of the third plea in law should be dismissed.
It should be noted at the outset that the applicant’s criticism of the Commission’s failure to examine its accounts has less to do with an infringement of the obligation to state reasons, the scope of which was recalled in paragraph 129 above, than with a failure to investigate the case properly.
It should also be borne in mind that, as is apparent from the contested decision and in contrast to the submissions of the applicant, the Commission did not challenge the reliability of the applicant’s accounts for the entire period under review.
In recital 115 of the contested decision, the Commission recalled the principle established by the Court in its judgment of 7 May 2009 in Antrop and Others (C‑504/07, ECR, EU:C:2009:290), according to which the requirements set out in Article 10 of Regulation No 1191/69 are not satisfied where ‘it is not possible to ascertain on the basis of reliable data [from the company’s accounts] the difference between the costs imputable to the parts of [its] activities in the areas covered by the respective concessions and the corresponding income and consequently it is not possible to calculate the additional cost deriving from the performance of public service obligations by [that undertaking]’.
In recital 117, the Commission found:
In recitals 127 and 128, the Commission reproduced the same arguments in the context of its review of the compatibility of the notified measure with Regulation No 1370/2007:
These recitals show that, except for the financial years 2002 and 2003, the Commission did not challenge the reliability of the applicant’s accounts and simply found that, since there was no proper account separation, it was not possible to rule out completely the risk of overcompensation, as required by Article 10 of Regulation No 1191/69 and Article 6(1) of Regulation No 1370/2007, with the result that the applicant’s complaint has no basis in fact as regards the period between 1987 and 2001.
Furthermore, as regards the doubt cast on the reliability of the analytical accounts for the financial years 2002 and 2003, the Commission stated that this was the result of there being no evidence that such accounts were actually used by the applicant’s governance bodies to exercise control over its activities, so that the applicant was able to understand the reasoning of the Commission in that respect.
This complaint should therefore be rejected in its entirety.
– Second complaint, alleging that the Commission did not explain in the contested decision why, in its view, a return rate exceeding the swap rate plus 100 basis points was normally not regarded as a suitable reference for calculating reasonable profit
The applicant criticises the Commission for having asserted, without giving any other reasons, that a return rate exceeding the swap rate plus 100 basis points was normally not regarded as a suitable reference for calculating reasonable profit.
The Commission disputes the applicant’s arguments and contends that the first part of the third plea in law should be rejected.
It must be pointed out that the assertion mentioned by the applicant, which concerns the return rate applicable to the capital employed by the applicant each year in the operation of inter-regional routes, appears in recital 129 of the contested decision, in the section of the decision relating to the compatibility of the notified measure with Regulation No 1370/2007.
Recital 129 of the contested decision reads as follows:
It is apparent from recital 129 that the Commission justified the assertion that the return rate proposed in the majority report would normally not be considered suitable for calculating the reasonable profit on the fact that an ex post calculation of the amount of compensation will always result in full compensation of the costs incurred in the provision of the service encumbered by public service obligations. Thus, the Commission indeed justified its assertion, thereby complying with its obligation to state reasons.
The question whether that justification is sufficient, which is moreover disputed by the applicant, forms part of the assessment of the merits of the contested decision. The arguments put forward to that effect by the applicant must therefore be regarded, in the light of the case-law cited in paragraph 130 above, as ineffective and irrelevant in the context of a plea alleging infringement of the obligation to state reasons.
The second complaint of the third plea in law must therefore be dismissed as unfounded.
Having regard to the foregoing, the third plea in law must be dismissed as unfounded.
Fourth plea in law, alleging infringement of Article 107(1) TFEU, in so far as the Commission committed several manifest errors of assessment in the application of Regulation No 1191/69
In its application, the applicant makes several complaints against the Commission concerning manifest errors of assessment in the application of Regulation No 1191/69 which can essentially be grouped under a single plea in law alleging infringement of Article 107(1) TFEU.
The applicant criticises the Commission for finding that, since there was no account separation, the notified measure was not immune from the risk of overcompensation and, therefore, was not consistent with the common method of compensation laid down in Regulation No 1191/69. The applicant submits that, before 1992, it was not required to keep its accounts separate because it did not receive any compensation and, after 1992, it could not be required to keep its accounts separate because it could no longer be subject by unilateral decision to public service obligations. It states that, in those circumstances, Antrop and Others, cited in paragraph 136 above (EU:C:2009:290), does not apply to it. Furthermore, the applicant contends that the calculation method suggested in the majority report served to avoid all risks of overcompensation since it was based on an ex post reconstruction of the costs incurred in respect of public service obligations.
– First complaint, alleging that the Commission wrongly found that the applicant had not been subject to public service obligations within the meaning of Regulation No 1191/69
The applicant criticises the Commission for, in essence, finding that it had not been subject to public service obligations within the meaning of Regulation No 1191/69.
The Commission disputes that complaint.
It is important to note that the present complaint touches on the key issue in this case. Although the Consiglio di Stato (Council of State) held in its judgment, referred to in paragraph 33 above, that the applicant was entitled to claim compensation pursuant to Articles 6, 10 and 11 of Regulation No 1191/69, it did not expressly indicate the basis for that right in the applicant’s favour. It simply stated that such a right could not be refused to public service operators in relation to the financial burdens assumed by them in respect of that service.
The applicant argues that the Consiglio di Stato (Council of State) therefore drew the logical conclusion from the fact that national legislation, by organising the activity of scheduled passenger transport by road as a public service the operation of which was licensed to private undertakings on the terms stipulated by the State, necessarily imposed on those undertakings, including the applicant, obligations inherent in the concept of public service, in breach of Regulation No 1191/69, which precisely required Member States to terminate such obligations.
However, the applicant’s proposition is not persuasive for the following reasons.
In the first place, as regards the obligations to which the applicant was subject pursuant to the annual licensing decisions between 1987 and 30 June 1992, during which time Regulation No 1191/69 as originally worded applied to the facts of the case, under Article 1(1) and (2) of that regulation, the obligations which the Member States were, in principle, required to terminate were those inherent in the concept of public service, as defined in the regulation, imposed in the field of transport by rail, road and inland waterway.
It should be noted, first of all, that the setting of passenger tariffs in the annual licensing decisions and the obligation to submit a fare table to the local office of the MIT for approval cannot be construed as tariff obligations within the meaning of Article 2(5) of Regulation No 1191/69.
According to the case-law, the distinguishing features of a tariff obligation are not only that rates are fixed or approved by public authorities but also that it satisfies the double condition that ‘special’ tariff obligations for certain specified categories of passenger or goods, or on certain routes, should be involved, and that, in addition, they should be contrary to the commercial interests of the undertaking. This interpretation is confirmed by the second subparagraph of Article 2(5), which excludes from the definition of tariff obligations ‘general measures of price policy’ and ‘measures taken with respect to transport rates and conditions in general with a view to the organisation of the transport market or of part thereof’. It follows that a legal obligation of general application whereby transport rates are submitted for approval by public authorities cannot, therefore, of itself, be regarded as constituting a ‘tariff obligation’ within the meaning of Article 2(5) of Regulation No 1191/69 (judgment of 27 November 1973 in Nederlandse Spoorwegen, 36/73, ECR, EU:C:1973:130, paragraphs 11 to 13).
Although the applicant claims that the setting of tariffs was contrary to its commercial interests, since the price of bus tickets could not exceed the price of second class rail tickets in Italy, it does not submit and, a fortiori, does not adduce evidence to show that the setting of tariffs in the annual licensing decisions was for specified categories of passengers or goods or for certain routes.
Next, in so far as some of the obligations contained in the annual licensing decisions — relating to the determination of the route, both in terms of destination and itinerary; the number of stops and their frequency; the timing of the route; the immediate reporting of all service interruptions, suspensions and changes; the requirement for prior authorisation from the local office of the MIT in order to purchase vehicles to be used in the service or to put vehicles used in the service to other uses; the issuance of tickets for the transport of passengers, baggage and agricultural packages and their storage for five years; the inspection of the applicant’s accounts by officials from the local office of the MIT; and the statutory obligation to carry without charge packages for the postal authorities — may be construed as ‘obligations to operate’ or ‘obligations to carry’ within the meaning of, respectively, Article 2(3) and Article 2(4) of Regulation No 1191/69, it must be noted that the system provided for under Italian law allowed the applicant to request renewal of the annual licensing decisions or to refrain from doing so if it considered that the public service obligations to which the operation of an inter-regional route was subject were unsuited to it.
It follows that such obligations were not obligations imposed by the State unilaterally in order to ensure adequate transport services, within the meaning of Article 1 of Regulation No 1191/69.
As the Commission points out, the applicant seems to confuse the unilateral imposition of public service obligations by the authorities, which, under Regulation No 1191/69, must give rise to compensation in accordance with the common methods of compensation referred to in Articles 10 to 13 thereof, with the voluntary acceptance of a relationship of a contractual nature requiring the provision of certain transport services, specifically defined in the public interest, which does not trigger any obligation to compensate under Regulation No 1191/69.
The arguments put forward by the applicant in that regard are also unconvincing. The applicant essentially contends that, under national law, it was only able to submit its application in accordance with the public interest criteria laid down by the authorities in advance. Thus, in the applicant’s opinion, the only choice actually open to it was whether or not to pursue its passenger transport activities on inter-regional routes.
It should be recalled that pursuant to Article 4(1) of Regulation No 1191/69, it was for transport undertakings to apply to the competent authorities of the Member States for the termination in whole or in part of any public service obligation where such obligation entailed economic disadvantages for them. Under Article 4(2) of that regulation, ‘… transport undertakings [could] propose the substitution of some other form for the forms of transport being used’. However, as the Commission found in the contested decision, without being challenged by the applicant, at no point did the applicant ever submit such an application. This shows that the applicant voluntarily and automatically accepted the obligations stipulated in the specifications and contained in the annual licensing decisions.
The applicant argues that, under national law, first, the applicant had to identify in clear and detailed terms the public interest needs that the previous licensee had not met and had to undertake to meet those needs itself; secondly, in the grant of annual licenses, the MIT gave priority to undertakings which ’showed that they assum[ed] other financial burdens for works or services of local interest related to the transport services and that they [were] capable of meeting such burdens’; and, thirdly, as from 1994, licences were only granted after a public meeting at which the interested parties were heard, during which ‘the actual existence of a public interest’ had to be confirmed. However, those arguments are not such as to call in question the finding that the applicant voluntarily accepted the public service obligations stipulated in the specifications and not once applied for the termination or variation of those obligations, as permitted under the regulation.
The applicant’s argument that the imposition of public service obligations within the meaning of Regulation No 1191/69 also stems from the fact that, in the past, it received compensation in that respect, under Law No 877/86, is not persuasive either. The applicant has not shown that the purpose of the law in question was to establish compensation for public service obligations imposed unilaterally on transport undertakings within the meaning of Regulation No 1191/69. Furthermore, the criterion set out in that law in order to calculate the aid, namely the number of kilometres travelled, prevents such aid being assimilated to compensation within the meaning of Regulation No 1191/69, which lays down a specific method for calculating the amount of compensation due in consideration for the public service obligations imposed on transport undertakings.
Lastly, under Article 2(1) of Regulation No 1191/69, ‘“public service obligations” means obligations which the transport undertaking in question, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions’. It is difficult to believe that the applicant could request renewal of the various licences, notwithstanding the obligations to carry and operate stipulated in the specifications and contained in the annual licensing decisions, without having a commercial interest in doing so.
It should be pointed out that the applicant simply submits that the obligations contained in the annual licensing decisions were prejudicial to its freedom of economic development, which it claims is evidenced by the MIT’s multiple rejections of its applications to vary routes and timetables. It is apparent from the documents supplied by the applicant in support of that assertion that the applications in question related not to routes already awarded to the applicant and operated by it, but to the extension of routes already awarded to it. Furthermore, as the Commission stated in the contested decision, specifically because of the exclusive nature of the licences granted by the MIT to operators of scheduled passenger transport services, including the applicant, the applicant’s requests for expansion could only be met if they did not interfere with the rights of other operators.
In the second place, the obligations to which the applicant was subject pursuant to the annual licensing decisions taken between 1 July 1992 and 2003, during which time Regulation No 1191/69, as amended by Regulation No 1893/91, applied to the facts of the case, could not, under any circumstances, give rise to a right to compensation.
It is apparent from Article 1 of Regulation No 1191/69, in the version applicable from 1 July 1992, that only urban, suburban and regional transport undertakings were entitled to receive compensation where the State decided to impose on them or maintain in respect of them public service obligations.
It is not in dispute that the activity of the applicant at issue concerns the operation of inter-regional routes, so that, as from 1 July 1992, it was not possible for the State to impose public service obligations on the applicant or, in consequence, for the applicant to claim compensation for the financial burdens assumed in respect of those obligations.
Even if the services provided by the applicant allowed it to be treated in the same way as a regional transport undertaking, it must be stated that, in the light of the fact that the obligations to which the applicant was subject pursuant to the annual licensing decisions were not imposed on it unilaterally, they were necessarily covered by the contract system provided for in Article 14(1) and (2) of Regulation No 1191/69, in the version applicable from 1 July 1992, which laid down a specific financing scheme leaving no room for compensation according to the methods set out in Sections II, III and IV of that regulation (see, to that effect, judgment of 16 March 2004 in Danske Busvognmænd v Commission, T‑157/01, ECR, EU:T:2004:76, paragraph 79).
In view of the above, it must be held that the applicant failed to demonstrate that the Commission committed a manifest error of assessment in finding, in the contested decision, that the Italian authorities had not unilaterally imposed on it public service obligations within the meaning of Regulation No 1191/69 for the period between 1987 and 2003.
The first complaint of the fourth plea in law must therefore be dismissed as unfounded.
– Second complaint, alleging that the Commission wrongly found that the applicant had not demonstrated the existence of an economic disadvantage warranting the payment of compensation within the meaning of Article 5(1) of Regulation No 1191/69
The applicant submits, in essence, that the Commission was wrong to find that it had not demonstrated that the existence of economic disadvantages had been determined taking into account the effects of the obligation on the undertaking’s activities as a whole, in accordance with Article 5(1) of Regulation No 1191/69, since, in the present case, the risk of overcompensation was offset by the fact that the losses sustained by the applicant as a result of the public service obligations it had assumed were calculated ex post.
The Commission disputes the applicant’s arguments and contends that this complaint should be rejected.
It should be noted, as the Commission did, that economic disadvantage and the risk of overcompensation are two separate concepts. Thus, under Articles 5, 10 and 11 of Regulation No 1191/69, proof of an economic disadvantage is necessary in order to determine the amount of compensation due to a transport undertaking on account of the unilateral imposition of public service obligations. On the other hand, the risk of overcompensation can be the result of a wide range of factors giving rise to a higher amount of compensation than that due to the undertaking under Regulation No 1191/69. In the present case, although the Commission indeed found that the notified measure was not consistent with Article 10 of Regulation No 1191/69, on account of the genuine lack of account separation which, in the Commission’s view, was the only way to prevent the risk of overcompensation, it also found that the measure was not consistent with Article 5(1) of that regulation, because the applicant had not shown that the economic disadvantages had been determined taking into account the effects of the public service obligation on the undertaking’s activities as a whole. In the absence of any specific arguments from the applicant to demonstrate that, on the contrary, it had proved that point, the present complaint must be dismissed as unfounded.
– Third complaint, based on the finding of the Commission, like that of the MIT, that the majority report wrongly concluded that the capital employed was not limited to the amount of capital attributable to public service obligations
The applicant criticises the Commission for finding, as the MIT did, that the majority report wrongly concluded that the capital employed was not limited to the amount of capital attributable to public service obligations.
The Commission disputes the applicant’s arguments and contends that this complaint should be dismissed.
It should be noted from the outset that the applicant’s complaint has no basis in fact. The applicant objects to the Commission’s endorsement of the criticism levelled by the Italian authorities against the majority report concerning the amount of capital it employed in the operation of inter-regional routes subject to public service obligations. The applicant refers in that regard to recital 62 of the contested decision. That recital appears in the section of the contested decision in which the Commission summarises the observations submitted by Italy. The Italian authorities’ assertion is not, however, reproduced in turn by the Commission in the section of the decision dealing with the assessment of the aid.
– Fourth complaint, alleging that the Commission wrongly found that, since there was no account separation, the notified measure was not immune from the risk of overcompensation and, therefore, was not consistent with the common method of compensation laid down in Regulation No 1191/69
The applicant criticises the Commission for finding that, since there was no account separation, the notified measure was not immune from the risk of overcompensation and, therefore, was not consistent with the common method of compensation laid down in Regulation No 1191/69. The applicant submits that, before 1992, it was not required to keep its accounts separate because it did not receive any compensation and, after 1992, it could not be required to keep its accounts separate because it could no longer be subject by unilateral decision to public service obligations. It states that, in those circumstances, Antrop and Others, cited in paragraph 136 above (EU:C:2009:290), does not apply to it. Furthermore, the applicant contends that the calculation method suggested in the majority report served to avoid all risks of overcompensation since it was based on an ex post reconstruction of the costs incurred in respect of public service obligations.
The Commission disputes the applicant’s arguments.
As a preliminary remark, it should be noted that the applicant argues, in particular, that it was not required to comply with the account separation obligation laid down in Article 5(2) of Regulation No 1191/69 in so far as that regulation no longer allowed the Italian authorities to impose public service obligations on it. It also submits that Antrop and Others, cited in paragraph 136 above (EU:C:2009:290), does not apply to it since the Court ruled in that judgment on the detailed rules for the common method of compensation set out in Regulation No 1191/69, in the version applicable from 1 July 1992.
Under Article 10 of Regulation No 1191/69, as originally worded, in the case of an obligation to operate or to carry, the amount of compensation is to be equal to the difference between the reduction in financial burden and the reduction in revenue of the undertaking if the whole or the relevant part of the obligation in question were terminated for the period of time under consideration. It follows from this provision that the amount of compensation must not exceed the financial burdens assumed by the undertaking in respect of the public service obligation for which it is responsible.
In addition, Article 1(5) of Regulation No 1191/69, in the version applicable from 1 July 1992, provided as follows:
‘Where a transport undertaking not only operates services subject to public service obligations but also engages in other activities, the public services must be operated as separate divisions meeting at least the following conditions:
(a)
the operating accounts corresponding to each of these activities shall be separate and the proportion of the assets pertaining to each shall be used in accordance with the accounting rules in force;
…’
It is apparent from this provision that, in contrast to the applicant’s assertions, all transport undertakings operating services subject to public service obligations, either following the unilateral imposition of such obligations (in the case of, for example, undertakings providing urban, suburban or regional transport services) or after the conclusion of a public service contract, as well as other activities, were required to comply with the account separation obligation as from 1 July 1992.
Therefore, irrespective of whether or not in this case the Italian authorities infringed Articles 1 and 14 of Regulation No 1191/69, in the version applicable from 1 July 1992, by failing to conclude formally a public service contract at the end of the annual licensing procedures for the operation of inter-regional routes — which is a matter for the national court to assess, where appropriate by referring a question to the Court of Justice for a preliminary ruling — the applicant, for its part, remained bound to comply with the account separation obligation.
However, since, as the Court found in its examination of the first part of the fourth plea, the applicant was not entitled to claim compensation as from 1 July 1992, the question whether or not it was required to comply with the account separation obligation from that date is, in practical terms, irrelevant in the present case.
It nevertheless remains to be determined whether the notified measure was consistent with Article 10 of Regulation No 1191/69, as regards the period between 1987 and 30 June 1992.
As is apparent from recital 24 of the contested decision, in so far as no analytical accounts were available for the period between 1987 and 1992, the experts who drafted the majority report allocated the costs of operating the inter-regional scheduled transport services on the basis of the percentage of revenue generated by those services during that period. The experts took the total amount of costs from the annual financial statement for each of the financial years covered. Then, to reconstruct the operating costs, they deducted from the total costs all of the following non-operating costs: interest payable, financial charges, losses on disposal of assets, miscellaneous losses and costs, direct taxes and final inventories. Finally, the operating costs attributable to the inter-regional scheduled transport services were calculated on the basis of the percentage of revenue generated by those services.
Accordingly, although the method for calculating compensation recommended in the majority report was indeed based, as the applicant submitted, on an ex post analysis of the applicant’s accounts, the costs assumed in respect of inter-regional scheduled transport services were determined according to the revenue generated by those services expressed as a percentage of the applicant’s revenue as a whole. As the Commission points out in recital 129 of the contested decision, such a method is based on the assumption that each service provided by the applicant should necessarily represent the same proportion of costs and revenue in a given year. As the Commission found, that assumption is, in itself, difficult to accept and it does not ensure that the amount of compensation will not exceed the financial burdens actually assumed by the applicant in respect of the public service obligations for which it was responsible between 1987 and 30 June 1992.
Accordingly, the applicant’s fourth complaint must be dismissed as unfounded.
The fourth plea in law must therefore be dismissed in its entirety as unfounded.
Fifth plea in law, alleging that the Commission interfered with the judicial business of the national court by taking account, in the contested decision, of the reports of the panel of experts on which the Consiglio di Stato (Council of State) had yet to rule
The applicant claims that the Commission unlawfully interfered in the national judicial proceedings by taking into account, in the contested decision, the majority report and the minority report drawn up by the experts appointed by the Consiglio di Stato (Council of State) in the proceedings for enforcement of the judgment of the Consiglio di Stato, referred to in paragraph 33 above. According to the applicant, those reports are documents drawn up at the request of the Consiglio di Stato (Council of State) by experts acting as assistants to the court and their assessment is a matter solely for the court. The Commission deprived the Consiglio di Stato (Council of State) of its decision-making power by agreeing to take the panel of experts’ reports into consideration — reports which were unlawfully forwarded to it by the MIT — before the Consiglio di Stato had itself ruled on them.
The Commission argues that this plea is inadmissible in so far as it was raised for the first time in the reply. Furthermore, it disputes the merits of the applicant’s arguments and contends that the plea should be dismissed.
As the Commission points out, this plea was raised for the first time in the reply and the applicant has not justified that delay by claiming that new matters of fact or law have come to light. In addition, the plea does not expand upon a plea raised previously, directly or by implication, in the application initiating proceedings. Therefore, in accordance with the case-law relating to Article 48(2) of the Rules of Procedure of 2 May 1991, this plea must be dismissed as inadmissible (see judgment of 15 March 2006 in Italy v Commission, T‑226/04, EU:T:2006:85, paragraph 64 and the case-law cited).
It must also be noted that the applicant has failed to demonstrate how the conduct of the Commission which it complains of constitutes an infringement of EU law affecting the lawfulness of the contested decision, with the result that this plea does not satisfy the requirements of Article 44(1) of the Rules of Procedure of 2 May 1991 and must, for this reason too, be regarded as inadmissible.
In the light of all the foregoing considerations, the action must be dismissed in its entirety.
Costs
Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.
On those grounds,
THE GENERAL COURT (Eighth Chamber),
hereby:
1.
Dismisses the action;
2.
Orders Simet SpA to bear its own costs and to pay the costs incurred by the European Commission.
Gratsias
Kancheva
Wetter
Delivered in open court in Luxembourg on 3 March 2016.
[Signatures]
Table of contents
Background to the dispute
Legislative and regulatory framework governing the applicant’s business
EU law
National law
Actions brought by the applicant before the national courts
Administrative procedure
Contested decision
Procedure and forms of order sought by the parties
Law
Admissibility
Substance
First plea in law, alleging infringement of Article 107(1) TFEU and Regulation No 1191/69
– First part of the first plea in law, alleging error of fact
– Second part of the first plea in law, alleging manifest error of assessment or insufficient investigation as to whether the applicable national legislation was consistent with EU law
Second plea in law, alleging infringement of the principles governing compensation for harm suffered by individuals as a result of breaches of EU law by a Member State
Third plea in law, alleging infringement of the obligation to state reasons
– First complaint, alleging that the Commission failed to give reasons for its finding that the applicant’s accounts were not reliable
– Second complaint, alleging that the Commission did not explain in the contested decision why, in its view, a return rate exceeding the swap rate plus 100 basis points was normally not regarded as a suitable reference for calculating reasonable profit
Fourth plea in law, alleging infringement of Article 107(1) TFEU, in so far as the Commission committed several manifest errors of assessment in the application of Regulation No 1191/69
– First complaint, alleging that the Commission wrongly found that the applicant had not been subject to public service obligations within the meaning of Regulation No 1191/69
– Second complaint, alleging that the Commission wrongly found that the applicant had not demonstrated the existence of an economic disadvantage warranting the payment of compensation within the meaning of Article 5(1) of Regulation No 1191/69
– Third complaint, based on the finding of the Commission, like that of the MIT, that the majority report wrongly concluded that the capital employed was not limited to the amount of capital attributable to public service obligations
– Fourth complaint, alleging that the Commission wrongly found that, since there was no account separation, the notified measure was not immune from the risk of overcompensation and, therefore, was not consistent with the common method of compensation laid down in Regulation No 1191/69
Fifth plea in law, alleging that the Commission interfered with the judicial business of the national court by taking account, in the contested decision, of the reports of the panel of experts on which the Consiglio di Stato (Council of State) had yet to rule
Costs
( *1 ) Language of the case: Italian. |
OPINION OF ADVOCATE GENERAL SHARPSTON delivered on 16 July 2015 (1)
Case C‑73/14 Council of the European Union v European Commission (Submission by the Commission of a written statement on behalf of the European Union to the International Tribunal for the Law of the Sea — Articles 13(2), 16(1) and 17(1) TEU — Articles 218(9) and 335 TFEU — External representation of the European Union — Violation of the Council’s prerogatives — Sincere cooperation — Article 263 TFEU — Admissibility) 1. On 29 November 2013, the European Commission submitted a written statement on behalf of the European Union (‘the EU’) to the International Tribunal for the Law of the Sea (‘ITLOS’) regarding an advisory opinion to be delivered by that court.
2. The Council of the European Union seeks annulment of ‘the Commission’s decision of 29 November 2013’ to submit that statement. Supported by a number of Member States, it claims essentially that the Commission should have requested and obtained its approval before submitting the written statement to ITLOS. The Council claims that, by failing to do so, the Commission violated Article 218(9) TFEU and/or Article 16 TEU (first and second parts, respectively, of the first plea) and breached the duty of sincere cooperation (second plea). For its part, the Commission claims that it was competent to submit that statement without the Council’s approval; and that it cooperated fully with the Council.
3. The central issue debated between the parties thus concerns the identity of the EU institution entrusted with the task of deciding upon the position of the EU before a judicial body constituted in accordance with an international agreement to which the EU is a Contracting Party.
4. I shall examine the various aspects of that highly important issue in due course, but it seems to me that the Council’s action is in fact inadmissible and should be dismissed on that ground alone.
Law governing ITLOS 5. The EU, together with its Member States, is a Contracting Party to the United Nations Convention on the Law of the Sea (‘UNCLOS’). (2)
6. ITLOS is constituted and governed by UNCLOS, in particular by Annex VI thereto, which contains its Statute.
7. Article 16 of the ITLOS Statute requires ITLOS to lay down its rules of procedure. Article 20 provides that ITLOS shall be available to Contracting Parties.
8. Under Article 133 of the ITLOS rules of procedure, which apply to the advisory opinion proceedings of the Seabed Dispute Chamber of ITLOS, the Contracting Parties to UNCLOS shall be invited by ITLOS to present written statements on the question(s) raised in the request for an advisory opinion.
9. Article 138(1) of the ITLOS rules of procedure provides for ITLOS to ‘give an advisory opinion on a legal question if an international agreement related to the purposes of [UNCLOS] specifically provides for the submission to [ITLOS] of a request for such an opinion’. Article 138(3) provides that, in such circumstances, ITLOS ‘shall apply mutatis mutandis Articles 133 to 137’.
EU law Treaty on European Union 10. Article 13(2) TEU provides: ‘Each institution shall act within the limits of the powers conferred on it in the Treaties, and in conformity with the procedures, conditions and objectives set out in them. The institutions shall practice mutual sincere cooperation.’
11. The second sentence of Article 16(1) TEU states that the Council is to ‘carry out policy-making and coordinating functions as laid down in the Treaties’. The remainder of Article 16 lays down the general rules governing Council action. In particular, Article 16(3) provides that ‘[t]he Council shall act by a qualified majority except where the Treaties provide otherwise’.
12. Article 17(1) TEU provides:
‘The Commission shall promote the general interest of the [EU] and take appropriate initiatives to that end. It shall ensure the application of the Treaties, and of measures adopted by the institutions pursuant to them. It shall oversee the application of [EU] law under the control of the Court of Justice of the [EU]. ... It shall exercise coordinating, executive and management functions, as laid down in the Treaties. With the exception of the common foreign and security policy, and other cases provided for in the Treaties, it shall ensure the [EU]’s external representation. …’
Treaty on the Functioning of the European Union 13. External action by the EU is regulated by Part V TFEU, Title V of which relates to international agreements. Within that title, Articles 216 and 217 TFEU empower the EU to conclude agreements with one or more third countries or international organisations, and Article 218 TFEU sets out the procedure in accordance with which such agreements must be negotiated and concluded. Its relevant provisions read as follows:
‘1. Without prejudice to the specific provisions laid down in Article 207 [common commercial policy], agreements between the [EU] and third countries or international organisations shall be negotiated and concluded in accordance with the following procedure.
2. The Council shall authorise the opening of the negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them.
3. The Commission … shall submit recommendations to the Council, which shall adopt a decision authorising the opening of negotiations and … nominating the [EU] negotiator …
4. The Council may address directives to the negotiator … 5. The Council, on a proposal from the negotiator, shall adopt a decision authorising the signing of the agreement … 6. The Council, on a proposal by the negotiator, shall adopt a decision concluding the agreement. 7. When concluding an agreement, the Council may, by way of derogation from paragraphs 5, 6 and 9, authorise the negotiator to approve on the [EU]’s behalf modifications to the agreement where it provides for them to be adopted by a simplified procedure or by a body set up by the agreement. The Council may attach specific conditions to such authorisation.
8. The Council shall act by a qualified majority throughout the procedure. However, it shall act unanimously [in specified circumstances]. 9. The Council, on a proposal from the Commission …, shall adopt a decision … establishing the positions to be adopted on the [EU]’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.
10. The European Parliament shall be immediately and fully informed at all stages of the procedure. 11. [This subparagraph contains the procedure for obtaining the opinion of the Court as to whether an agreement envisaged is compatible with the Treaties and the consequences of an adverse opinion.]’
14. The first, second and sixth paragraphs of Article 263 TFEU provide:
‘The Court of Justice of the [EU] shall review the legality of legislative acts, of acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions, and of acts of the European Parliament and of the European Council intended to produce legal effects vis-à-vis third parties. It shall also review the legality of acts of bodies, offices or agencies of the [EU] intended to produce legal effects vis-à-vis third parties.
It shall for this purpose have jurisdiction in actions brought by a Member State, the European Parliament, the Council or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaties or of any rule of law relating to their application, or misuse of powers.
… The proceedings provided for in this Article shall be instituted within two months of the publication of the measure, or of its notification to the plaintiff, or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be.’
15. Article 264 TFEU provides that, if the action is well founded, the Court of Justice is to declare the act concerned to be void and may, if it considers necessary, state which of the effects of the act which it has declared void are to be considered as definitive.
16. Article 335 TFEU provides: ‘In each of the Member States, the [EU] shall enjoy the most extensive legal capacity accorded to legal persons under their laws; it may, in particular, acquire or dispose of movable and immovable property and may be a party to legal proceedings. To this end, the [EU] shall be represented by the Commission. However, the [EU] shall be represented by each of the institutions, by virtue of their administrative autonomy, in matters relating to their respective operation.’
UN Fish Stocks Agreement 17. By Council Decision 98/414/EC, (3) the EU concluded the Agreement implementing the provisions of UNCLOS relating to the conservation and management of straddling stocks and highly migratory fish stocks (‘the UN Fish Stocks Agreement’). Article 3 of Decision 98/414 states:
‘Where the Community initiates a dispute settlement procedure as provided for by the [UN Fish Stocks Agreement], it shall be represented by the Commission. Before taking any action the Commission shall consult the Member States, taking into account binding procedural time limits.’
18. ITLOS is amongst the jurisdictions before which such proceedings may be lodged.
Statute and Rules of Procedure of the Court of Justice 19. Article 21 of the Statute of the Court of Justice of the European Union (‘the Statute’) states, inter alia, that an application before the Court ‘… shall be accompanied, where appropriate, by the measure of which the annulment is sought …’.
20. Articles 120 and 122 of the Rules of Procedure of the Court of Justice require an application to state, inter alia, the subject-matter of the dispute and the form of order sought, and to be accompanied, in particular, by the measure the annulment of which is sought.
21. Article 150 states that: ‘On a proposal from the Judge-Rapporteur, the Court may at any time of its own motion, after hearing the parties and the Advocate General, decide to rule by reasoned order on whether there exists any absolute bar to proceeding with a case.’
Background to the dispute 22. On 28 March 2013, ITLOS received a request for an advisory opinion from the Sub-Regional Fisheries Commission (‘the SRFC’), an intergovernmental organisation for fisheries cooperation established by the Convention of 29 March 1995 between Cape Verde, The Gambia, Guinea, Guinea-Bissau, Mauritania, Senegal and Sierra Leone. (4) The EU has concluded fisheries partnership agreements with five of the SRFC States and, with two of them, protocols granting fishing access in return for a financial contribution.
23. That request, registered as Case No 21, concerns questions relating essentially to the rights, obligations and liabilities of flag States, international agencies and coastal States in cases of illegal, unreported and unregulated (‘IUU’) fishing and with regard to ensuring the sustainable management of shared stocks and stocks of common interest.
24. On 24 May 2013, ITLOS invited the Contracting Parties to UNCLOS to present their written statements on the questions submitted by 29 November 2013 at the latest, and decided to hold oral proceedings.
25. Within the Council, the request for an advisory opinion was discussed on several occasions in two working parties: the Law of the Sea Working Party (‘COMAR’), essentially with regard to issues of jurisdiction and admissibility; and the Working Party on Internal and External Fisheries Policy (‘FISH’), with regard to the substance of the questions. During the initial discussions in COMAR between April and July 2013, the Commission indicated that its services were considering whether the EU should intervene in Case No 21 and undertook to consult the Council as appropriate.
26. On 5 August 2013, the Commission adopted an explicit decision (5) to submit written statements on behalf of the EU to ITLOS in Case No 21 and to participate in the oral proceedings (Article 1). It instructed its legal service to give effect thereto (Article 2). In that decision, recital 9 mentioned Article 335 TFEU as the legal basis for the Commission’s participation on behalf of the EU and recital 11 specified that, under the principle of sincere cooperation, the Commission should inform the Council via its competent working group.
27. During meetings of FISH on 12 September 2013 and COMAR on 17 September 2013, the Commission reaffirmed that it would submit written observations on behalf of the EU and argued that, in accordance with Article 335 TFEU, no prior approval by the Council was needed for the Commission to act. At the FISH meeting, the Council Presidency stated that it was necessary for the Council to approve the content of the submission made on behalf of the EU and invited the Commission to submit a draft written statement to the Council no later than the end of October 2013.
28. On 22 October 2013, the Commission sent the Council’s working parties a first working document indicating the main lines of the text to be submitted to ITLOS. The introductory paragraph to that document cited the decision of 5 August 2013 in which the Commission had decided to submit observations on behalf of the EU in Case No 21, reiterating that the Council’s working parties would be informed in accordance with the principle of sincere cooperation. The Commission also stressed that it looked forward to taking the fullest account of any suggestion and advice from the Member States in order to make the EU’s case more solid.
29. That document was examined by FISH and COMAR on 24 and 30 October 2013 respectively, when the Commission repeated that it would not submit any draft statement for prior approval by the Council. Revised versions of the document were discussed during FISH meetings on 15 and 22 November 2013. On 27 November 2013, on the basis of a report prepared by FISH, the Permanent Representatives Committee (‘Coreper’) discussed the matter. The Member States’ delegations and the Presidency insisted that it was for the Council, in accordance with its policy-making functions under Article 16 TEU, to decide whether the EU should submit observations and, if so, to endorse their content. Furthermore, if the Council could not endorse any position regarding such a submission on behalf of the EU, no EU position existed and no submission could be made. The Commission stressed that no Council approval was required and that it would submit a written statement to ITLOS.
30. On 29 November 2013, having taken account of comments received from a number of Member States, the Commission submitted the written statement on behalf of the EU and communicated a copy to the Council’s Secretariat via email. Between 18 and 29 November 2013, in their capacity as States Parties to UNCLOS, seven Member States had submitted their written statements to ITLOS.
31. Subsequently, after the lodging of the application in the present case, the Commission submitted a further written statement on 13 March 2014 in a second round of written proceedings and took part in the oral proceedings on 2 to 5 September 2014. ITLOS delivered its advisory opinion on 2 April 2015.
Procedure, pleas and forms of order sought 32. In its application lodged on 10 February 2014, the Council advances two pleas in law. In its first plea, the Council contends that the task of deciding on the EU’s position in international judicial proceedings falls within its competence under Article 218(9) TFEU or, in any event, under Article 16(1) TEU. Accordingly, the Council submits that the Commission should have obtained its prior approval before transmitting a written statement on behalf of the EU to ITLOS. In its second plea, the Council accuses the Commission of having disregarded the duty of mutual sincere cooperation in Article 13(2) TEU.
33. The Council therefore asks the Court to ‘annul the Commission’s decision of 29 November 2013 to submit a “Written statement by the European Commission on behalf of the [EU]” to [ITLOS] in Case [No] 21’ and to order the Commission to pay the costs. It specifies that it does not request the annulment of the Commission’s statement.
34. The Commission asks the Court to reject the application and to order the Council to bear the costs. In the alternative, it requests the Court to maintain the effects of its decision until a new decision has been taken within a reasonable time.
35. The Austrian, Czech, Finnish, French, Greek, Lithuanian, the Netherlands and Spanish Governments have submitted statements in intervention in support of the Council. At the hearing on 14 April 2015, oral argument was presented by the representatives of the parties, the Czech, French, Netherlands, Spanish and United Kingdom Governments (the latter also supported the Council). On that occasion, the Council stated that, if the contested decision were annulled, it did not object to the Commission’s request for maintaining its effects until a new decision was adopted. At the hearing, issues relating to admissibility were also canvassed.
Assessment 36. As I have stated, I consider the Council’s action to be inadmissible – for reasons, which I shall set out below, relating to the absence of a reviewable act challenged in good time. The admissibility of an action is a matter which it falls to the Court to examine of its own motion. (6) In principle, and in all logic, it must be examined before turning to the substance of the case. However, the issue has on occasion been bypassed where, although the admissibility of the action appeared doubtful, the Court considered it desirable to give a ruling on the merits. (7)
37. I do not propose such a course of action in the present case, as I consider that the rules on admissibility should be applied uniformly and not in a discretionary manner. However, I recognise that the parties wish to have a clear ruling on the important issue of the extent of their respective competences and obligations, as laid down by the Treaties, in a situation such as that which has given rise to the dispute. I shall therefore turn to those matters after having set out my reasoning, which I consider should prevail, on admissibility.
Admissibility 38. The Council’s application is based on Articles 263 and 264 TFEU; it seeks review by the Court of the legality of an act of the Commission and a declaration that the act is void. Article 21 of the Statute and Articles 120 and 122 of the Court’s Rules of Procedure apply to such proceedings.
39. In its application, the Council seeks annulment of ‘the Commission’s decision of 29 November 2013’ to submit a written statement to ITLOS on behalf of the EU in Case No 21. The application is not accompanied by that ‘decision’ in any form, merely by evidence that the written statement was in fact submitted to ITLOS on 29 November 2013 and that the Council was informed of the submission on the same day.
40. However, it is the decision to submit a written statement that is exclusively and explicitly the act which the Council seeks to have annulled. The Council expressly states, in a footnote to the form of order sought in its application and again in its reply, that it does not seek the annulment of the Commission’s statement to ITLOS.
41. If a decision to submit a written statement was in fact taken by the Commission on 29 November 2013, it can only have been, it would appear, an implicit decision, since it has not been shown to have been expressed in any document or even oral utterance.
42. It seems clear to me, however, that no such decision was taken. On 5 August 2013, the Commission did take an explicit, reasoned decision to submit a written statement to ITLOS in Case No 21 and instructed its legal service to give effect to that decision. No further decision was required in order to submit that statement. Nor is there any evidence in the case-file that any such decision was taken, whether embodied in written form or not. There is no shred of an indication that the Commission decided on 29 November 2013 to do anything which it had not already decided to do in that earlier decision. There is only the unchallenged fact that the statement was indeed submitted, and an email from the Commission informing the Council of that statement.
43. If no decision was taken on 29 November 2013, it cannot be annulled – nor can its effects be maintained until a new decision is taken. The absence of a reviewable act is an absolute bar to proceeding with a case, within the meaning of Article 150 of the Court’s Rules of Procedure. (8) The same is true, a fortiori, of the absence of any act whatever.
44. The purpose of the procedure under Articles 263 and 264 TFEU is to obtain a finding that an act having legal effects is (or is not) void. Such a finding would be pointless, and a waste of judicial time, if it could itself have no tangible effect. The procedure is not designed to deliver solely an abstract statement of the law governing relations between the institutions, although of course such statements are likely to be an integral part of the reasoning necessary to rule on the validity of an act. (9) The annulment procedure cannot be used in order to obtain such a ruling in the absence of any act whose annulment is capable of affecting any legal position. Consequently, the institutions should examine attentively their procedural positions before submitting applications to the Court which may not meet the requirements of the Treaties, the Statute or the Rules of Procedure.
45. It seems to me, however, that the Council’s aim is to challenge the Commission’s decision of principle to submit a written statement to ITLOS without having first obtained the Council’s approval. That would appear to imply that it should have sought the annulment of the decision of 5 August 2013, in which that decision of principle was taken.
46. If the Council had done so, in accordance with the sixth paragraph of Article 263 TFEU, the two-month time-limit for bringing proceedings (‘extended on account of distance by a single period of 10 days’, pursuant to Article 51 of the Court’s Rules of Procedure) would have run from the day on which the decision of 5 August 2013 came to its knowledge.
47. According to the Commission, that decision was not notified or communicated to the Council. However, the Council was clearly and explicitly informed of it and of its essential content in the introductory paragraph of the Commission’s first working document of 22 October 2013, (10) which was discussed in the Council working group meetings of FISH and COMAR on 24 and 30 October 2013 respectively, by which time the Council necessarily had knowledge of the decision of 5 August 2013. Any possible doubt as to the Commission’s interpretation of that decision and how it intended to implement it also evaporated as a result of those meetings. The Commission’s position was clear and unambiguous: it would not submit any draft statement for prior approval by the Council.
48. The Council did not seek annulment of the decision of 5 August 2013 within 2 months and 10 days of the latest possible date on which it can have had knowledge of that decision, and did not lodge its application in the present proceedings until 10 February 2014.
49. None the less, I am well aware that both parties to the action earnestly desire a ruling on their respective competences and prerogatives, as do all the intervening Member States. I also acknowledge that such a determination of the law is of cardinal importance for the conduct of the EU’s external representation, and that the Court has in the past addressed comparable substantive issues even where there were strong indications of inadmissibility. I shall therefore turn now to examine the substantive issues which arise in circumstances such as those of the present case, but in doing so I shall not address my reasoning to the question whether the Commission’s decision to submit a written statement to ITLOS in Case No 21 should be annulled – a question which I consider cannot be answered in these proceedings, for the reasons I have given.
Substance Preliminary remarks 50. I need first to address two preliminary aspects of this case: whether it is necessary to resolve whether the EU has exclusive or shared competence in relation to the questions raised before ITLOS; and the exact scope of the Council’s complaint.
51. First, as regards exclusive or shared competence: the Council accepts that the questions posed concern, at least in part, matters falling within the EU’s exclusive competence regarding conservation of marine biological resources under the Common Fisheries Policy within the meaning of Article 3(1)(d) TFEU. However, the Council maintains that the preliminary issue of whether ITLOS has jurisdiction to deliver advisory opinions falls entirely within the competence of the Member States. The Commission submits that the EU has exclusive competence in relation to the questions posed; and that the EU is also competent to take a position on the extent of ITLOS’ jurisdiction.
52. It is common ground that the EU, as a Contracting Party to UNCLOS, may express itself before ITLOS. (11) As the French Government has rightly pointed out, the central question in the present case is whether the Commission or the Council is competent to decide on the EU’s position before that tribunal. That question is unrelated to the question of the division of powers between the EU and the Member States; and the Council has raised no complaint on that score. I therefore suggest that the Court need not address the latter issue.
53. Second, what is the exact scope of the Council’s complaint?
54. Put as simply as possible: the Council requests the Court to decide which institution is entrusted, under the Treaties, with the task of deciding on (as distinct from expressing) the EU’s position before ITLOS in advisory proceedings.
55. The Council does not claim that its prerogatives include representing the EU before ITLOS or in any other international judicial proceedings. It accepts that that task falls to the Commission by virtue of Article 335 TFEU (read either alone or in conjunction with Article 17(1) TEU). (12) That is distinct, however, from the question of which institution is competent to decide on the position which is then expressed by the Commission on behalf of the EU before a judicial body such as ITLOS.
56. In the remainder of this Opinion, I shall first look in turn at whether (i) Article 218(9) TFEU applies to the submission of written statements in international judicial proceedings in which the EU has standing; and (if not) whether (ii) Article 16(1) TEU constitutes a legal basis for reserving competence to the Council to decide on the submission of such statements. I shall then examine the duty of sincere cooperation. Finally, I shall address the scope and limits of Article 335 TFEU, on which the Commission has relied as a legal basis for submitting the written statement to ITLOS.
First part of the first plea: Article 218(9) TFEU 57. By the first part of its first plea, the Council claims that the Commission infringed its prerogatives under Article 218(9) TFEU according to which the Council is to establish, on a proposal from the Commission, the position to be adopted on the EU’s behalf in a body set up by an agreement when that body is called upon to adopt acts having legal effects. The Council submits that ITLOS, including when it is requested to deliver an advisory opinion, is a ‘body’ within the meaning of that provision and adopts acts having legal effects (even if those effects are not binding). Moreover, the Council maintains that, since the entry into force of the Treaty of Lisbon, Article 218(9) TFEU, unlike its predecessor Article 300(2) EC, no longer constitutes a lex specialis in relation to the procedure for the negotiation, signature and conclusion of international agreements, but should rather be read as a stand-alone provision.
58. The Commission contests the application of Article 218(9) TFEU to the EU’s interventions in international judicial proceedings. It interprets that provision as applying to rule-making bodies exercising treaty-making and/or quasi-legislative functions which are established by an international agreement in order to allow that agreement to be developed by taking a series of decisions within the framework of the agreement. The term ‘body’ in Article 218(9) TFEU does not cover bodies exercising judicial functions because such functions do not involve the creation of new rules. Moreover, the phrase ‘in a body’ clearly indicates that positions expressed by the EU before a court fall outside the scope of Article 218(9) TFEU.
59. I shall first examine the wording of Article 218(9) TFEU before turning to its drafting history, context and objectives.
60. Article 218(9) TFEU only applies where a position is to be adopted on the EU’s behalf ‘in a body set up by an agreement’ and, in principle, ‘when that body is called upon to adopt acts having legal effects’.
61. In my opinion, the first part of the Council’s first plea must fail because when the EU participates in international judicial proceedings, such as ITLOS advisory proceedings, it is not taking a position in the body (however it may be characterised) that has been called upon to settle disputes falling within its jurisdiction or deliver an opinion on purely interpretative questions.
62. In such circumstances, neither the EU nor any other party having standing to appear before such a body takes part in the formation that deliberates. Nor does it participate in the adoption of a judgment or any other type of judicial decision. Rather, a party expresses its position on the matter put to the body through (oral and/or written) submissions ‘to’ (or ‘before’) that body with the objective of influencing the outcome of the proceedings.
63. The rules of the World Trade Organisation (‘the WTO’) dispute settlement system helpfully illustrate the dividing line between the situation where the position on the EU’s behalf is taken ‘in’ a body (to which Article 218(9) TFEU applies) and the situation where it is not. Whereas all WTO Members, including the EU, are represented and take part in the decision-making processes of the Dispute Settlement Body (‘the DSB’), including when the DSB adopts panel and Appellate Body reports (so that they become legally binding), (13) they do not participate in the panels’ and the Appellate Body’s exercise of their (respective) jurisdiction.
64. This interpretation is consistent with the Court’s judgment in Case C‑399/12 (‘the OIV case’). The Court there held that Article 218(9) TFEU applies in the context of recommendations, relating to the Common Agricultural Policy, to be voted on at the General Assembly of the International Organisation of Vine and Wine (‘the OIV’), despite the fact that the EU (unlike its Member States) cannot formally participate in the governing body of the OIV because it is not an OIV Member. The Court specifically recalled its case-law according to which, where an area of law falls within a competence of the EU, the fact that the EU does not take part in the international agreement in question does not prevent it from exercising that competence by establishing, through its institutions, a position to be adopted on its behalf in the body set up by that agreement, in particular through the Member States which are party to that agreement acting jointly in its interest. (14) The EU’s position concerning the recommendations to be adopted by the OIV General Assembly was thus to be expressed ‘in’ that body by the Member States acting collectively in the EU’s interest.
65. Whilst the phrase ‘when that body is called upon to adopt acts having legal effects’ provides context for reading the phrase ‘in a body set up by an agreement’ (because it makes it clear that the scope of Article 218(9) TFEU is confined to situations in which that body adopts acts having legal effects), it cannot be used to argue that Article 218(9) TFEU also applies when the EU participates in international judicial proceedings. I accept that judgments and other judicial decisions may very well be ‘acts having legal effects’. Whilst in Treaty terminology, the word ‘act’ is not typically used to designate the outcome of judicial proceedings, (15) the Court itself has already used the term ‘acte juridictionnel’ to describe a court decision. (16) Moreover, whilst an advisory opinion does not have exactly the same legal effects as a binding judicial decision on the interpretation and application of an international agreement (or any other rule of international law which is part of the applicable law governing a dispute and for which jurisdiction is established), I agree with the Commission that Article 218(9) TFEU does not specify that the legal effects of an act must be binding. That was also the position of the Court in the OIV case where it accepted that (non-binding) OIV recommendations could influence decisively the content of EU legislation regulating the common organisation of the market in wine markets and that such recommendations, in particular by reason of their incorporation into EU law, had legal effects. (17) I would therefore be prepared to consider that an advisory opinion of ITLOS is capable of constituting an ‘act having legal effects’ because it contains an interpretation by the body which has authority to do so and informs the meaning of the obligations assumed under UNCLOS and other agreements which ITLOS has jurisdiction to interpret, such as the UN Fish Stocks Agreement.
66. However, this wide reading of ‘acts having legal effects’, read in isolation, cannot alter the meaning of ‘in a body set up by an agreement’ so as to include situations in which the EU does not participate in a body’s adoption of such acts.
67. I also note that Article 218(7) TFEU allows, ‘by way of derogation’ from Article 218(9), for further simplification of the procedure, by giving the Council power to authorise the negotiator to approve, on the EU’s behalf, modifications to the agreement where it provides for them to be adopted by a simplified procedure or by a body set up by the agreement.
68. That derogation makes good sense if the acts referred to in Article 218(9) TFEU are to be negotiated by the Contracting Parties ‘in’ the body set up by the agreement. But the context is clearly one of negotiating and approving texts that will have legal effects, rather than that of international judicial proceedings in which such acts are interpreted.
69. The reading of ‘in a body’ which I propose is also confirmed by the drafting history of Article 218(9) TFEU.
70. That history shows that Article 218(9) TFEU was included because many bilateral or multilateral international agreements, through which the EU assumed obligations vis-à-vis third States or other international organisations, established bodies entrusted with implementing the agreements and empowered to adopt decisions having (binding) legal effects for the Contracting Parties. An early example is the EEC-Turkey Association Council, (18) whose decisions concerning the rights of Turkish workers are, according to the Court, capable of having direct effect within the EU legal order. (19) The status of those decisions is therefore generally assimilated to that of the underlying international agreements; and they may consequently be considered as an additional source of EU law. (20)
71. Before the entry into force of the Treaty of Amsterdam, no specific Treaty provision established a procedure for deciding on the (then) EC’s position in such decision-making bodies. Unless ad hoc arrangements were adopted between the institutions, the procedure in Article 228 EC for concluding international agreements was typically used. (21)
72. This situation was considered unsatisfactory, because the procedure for concluding international agreements required prior assent or prior consultation of the European Parliament and was therefore rather elaborate. The Commission therefore suggested using a simplified procedure, limiting the involvement of the European Parliament, so as to enable more effective EU participation in decision-making bodies created by international agreements. (22) The Treaty of Amsterdam partly achieved this objective by amending Article 228 EC (which became Article 300 EC) and adding a second subparagraph to Article 300(2) EC (which is the predecessor to Article 218(9) TFEU). This set up a simplified procedure, in which no assent or consultation of the European Parliament was required for the Council to decide on ‘the positions to be adopted on behalf of the Community in a body set up by an agreement… when that body was called upon to adopt decisions having legal effects …’. However, the material scope of the second subparagraph of Article 300(2) EC was confined to association agreements concluded by the EU. Furthermore, the consultation or assent of the European Parliament was still required when association councils were called upon to adopt ‘decisions supplementing or amending the institutional framework of the agreement’.
73. The Treaty of Nice extended the material scope of the provision, so that the simplified procedure could be used to decide on the position to be adopted by the Community in bodies set up by any international agreement. That remains the current situation.
74. I cannot therefore accept that Article 218(9) is a stand-alone provision, as the Council suggests. Its drafting history clearly shows that it forms an integral part of the rules applicable to the conclusion of international agreements. Its purpose remains identical to that of Article 300(2) EC. It enables the EU to use a simplified procedure to take part in the decision-making process of bodies set up under an international agreement that are called upon to adopt acts having legal effects, unless the acts in question supplement or amend the institutional framework of the agreement (in which case the European Parliament’s prior involvement is required). (23)
75. The reading that I propose on the basis of both the text and the drafting history of Article 218(9) TFEU is, thus, confirmed by the overall scheme of that provision.
76. Finally, I draw attention to certain legal and practical consequences that would follow from concluding that Article 218(9) TFEU does apply to the submission of statements in international legal proceedings.
77. First, since on that reading, provisions currently found in EU secondary legislation which authorise the Commission to initiate dispute settlement procedures after merely consulting or informing Member States would no longer be permissible.
78. Amongst the provisions thereby invalidated would be Article 3 of Decision 98/414 (24) and Article 13 of Council Regulation (EC) No 3286/94, as amended (the Trade Barriers Regulation: ‘the TBR’). (25) More generally, the discretion that the Commission currently enjoys to lodge WTO proceedings and to participate therein would obviously be fettered. (26)
79. Second, since judicial proceedings are subject to the observance of strict procedural time-limits (unlike the situation that normally pertains when negotiating acts to be adopted in decision-making bodies), there is a risk that the Council may not manage to reach a qualified majority (27) regarding the EU’s position rapidly enough to enable action to be taken on the EU’s behalf. That would tend to reduce the EU’s ability to influence the interpretation and application of international agreements to which it is a signatory. That result would appear to run counter to the Court’s existing approach to the EU’s involvement as an international actor, exemplified in the OIV case. (28)
80. I conclude that, because the EU does not participate in the decision-making process in international judicial proceedings, Article 218(9) TFEU is not intended to cover the situation in which the EU submits written or oral statements in such proceedings. It is therefore unnecessary to consider in greater detail the remaining conditions for the application of Article 218(9) TFEU. (29) I therefore propose that the first part of the Council’s first plea be dismissed.
Second part of the first plea: Article 16(1) TEU 81. The Council contends that, pursuant to Article 16(1) TEU, it is responsible for defining the EU’s policies. The Commission’s function, under Article 17 TEU, is to execute those policies once defined and, in that context, to ensure (where necessary) the EU’s external representation. Although the Council accepts that it is for the Commission to represent the EU before ITLOS in accordance with Article 335 TFEU, which is a specific reflection of Article 17(1), sixth sentence, TEU, it falls within the Council’s exclusive prerogatives to determine whether the EU should express a position and, if so, to settle the content or at least the broad lines of such a position. As a result, by submitting written statements to ITLOS without the Council’s approval, the Commission infringed the Council’s prerogatives under Article 16(1) TEU. The Commission responds that the Council disregards the distinction between external representation for political purposes (to which the sixth sentence of Article 17(1) TEU applies and in relation to which Article 16(1) may be relevant if no EU policy has yet been defined) and the EU’s representation before an international tribunal (to which the second sentence of Article 17(1) TEU applies in connection with Article 335 TFEU).
82. As I see it, whether this part of the Council’s first plea is successful depends, first, on whether deciding on the EU’s position in international judicial proceedings is a question of policy-making and, second, on whether carrying out such functions is ‘laid down in the Treaties’.
83. As regards the first of those conditions, the Council, supported by some of the intervening Member States, contends that the decision to submit a written statement to ITLOS was a political decision. The EU was under no obligation to participate in the proceedings. Since the correct answer to the request for an advisory opinion cannot be objectively and neutrally deduced from the relevant texts (in particular, UNCLOS), any submissions by the EU involve political choices, including as regards the preliminary issues as to the general jurisdiction of ITLOS and the admissibility of the request for an advisory opinion.
84. I accept that any act of an EU institution, especially in external relations, can have political consequences. Likewise, submissions made in (international) judicial proceedings are, by their very nature, intended to influence the decision resulting from those proceedings. Depending on the rules governing the international judicial proceedings, a party having standing to intervene may, for example, question jurisdiction, express doubts as to the admissibility of some or all of the questions raised, suggest answers to some or all of those questions, or focus on one argument rather than another.
85. However, as I see it, this does not necessarily mean that submissions made in international judicial proceedings fall within the Council’s ‘policy-making functions’ under Article 16(1) TEU. (30)
86. In the present case, the Council had already exercised its ‘policy-making’ role within the framework of UNCLOS before the Commission submitted a written statement to ITLOS.
87. First, the EU became a party to both UNCLOS and the fisheries partnership agreements with five of the SRFC States described above in accordance with procedures in which the Council played to the full the role reserved to it by the Treaties. (31) It has consequently, in particular, agreed to be bound by their dispute settlement provisions (32) and, more generally, by arrangements concerning the jurisdiction to interpret them. Under Article 216(2) TFEU, these international agreements are binding on the EU and form an integral part of EU law. (33)
88. Second, the EU has adopted a wide range of internal rules which cover the substantial aspects of those agreements. In particular, as the Commission has pointed out, provisions of Council (EC) Regulation No 1005/2008 relevant to IUU fishing, such as those defining ‘illegal fishing’, are constructed upon the basis of pre-existing international rules. (34)
89. These are the ‘policy-making’ choices which the Council has made in accordance with Article 16(1) TEU and the specific procedural rules in the Treaties which protect the Council’s prerogatives with respect to the negotiating, signing and conclusion of international agreements.
90. The subsequent clarification and application of existing commitments of the EU under international law through international judicial proceedings, including ITLOS advisory proceedings, represent in most cases merely the consequences of the Council’s earlier ‘policy’ choices and thus do not require defining a new policy.
91. Although that is the situation here, I would be reluctant to accept that this will always be the case. Thus, it is not unforeseeable that, in the context of international judicial proceedings in which the EU has standing, the EU might need to take a position on an issue that is not yet covered either by existing EU commitments under international law which are to be interpreted (and applied) in those proceedings or by any other rules of international law on which the EU has already taken a position. In such circumstances, the Council’s prerogatives would need to be respected. However, it seems to me that the ITLOS proceedings at issue here, and the submissions made by the EU, concerned matters arising within the operation of UNCLOS and the UN Fish Stocks Agreement.
92. As regards the second condition on which this part of the Council’s plea depends, it seems to me that, in any event, the Council cannot rely on the second sentence of Article 16(1) TEU in isolation from any other provision in the Treaties.
93. I read the phrase ‘as laid down in the Treaties’ as meaning necessarily that the Council’s policy-making functions cannot be exercised without a separate provision (or, where relevant, a series of provisions) in the Treaties creating that power, thus respecting the principle of conferral.
94. I do not think, however, that the absence of another provision in the Treaties laying down the role of the Council with respect to the adoption of specific instruments through which the EU acts externally – and through which EU policies may be given effect – is an obstacle to the Council exercising its prerogatives under Article 16(1) TEU to decide on EU policies in external relations where no sufficient policy yet exists. If that were the case, the EU might be seriously hampered in its efforts to act effectively. In fact, the Treaties do not contain separate provisions on many instruments of external action through which the EU, having international legal personality, may act. (35) Effective external action by the EU must nevertheless be able to use a variety of instruments and in so doing, the Council’s prerogatives must be respected.
95. I add that, where the Treaties have laid down the procedural rules within which the Council is to act with respect to a particular instrument of EU external action, the Council cannot use Article 16(1) TEU to undermine those rules. (36) The Court has confirmed that it follows from Article 13(2) TEU that the rules regarding the manner in which the EU institutions are to arrive at their decisions are laid down in the Treaties and are not at the disposal of the Member States or of the institutions themselves. (37)
96. That said, as I have already explained above, deciding on the EU’s position in international judicial proceedings did not here require the Council to exercise these prerogatives further.
97. I conclude that the second part of the Council’s first plea should be dismissed.
Second plea: Article 13(2) TEU 98. By its second plea, the Council contends that the Commission’s course of action clearly violates the principle of sincere cooperation set out in the second sentence of Article 13(2) TEU. The Council submits that the Commission failed: (i) to present, under Article 218(9) TFEU, a proposal for a Council decision establishing the EU’s position to be expressed before ITLOS, (ii) to cooperate with the Council as regards establishing the content of the statement to be made and (iii) to take account of the Council’s view that, in the absence of an EU position agreed by the Council, no written statement could be submitted to ITLOS, by announcing at the Coreper meeting of 27 November 2013 that it would proceed with submitting the statement and then doing exactly that two days later. For its part, the Commission stresses that it kept the Council fully informed throughout and, so far as possible, took into account detailed comments from individual Member States when preparing the written statement that it submitted to ITLOS.
99. The duty of mutual sincere cooperation under the second sentence of Article 13(2) TEU applies within the limits of the powers conferred on each institution by the Treaties. It is therefore not such as to add to or reduce those powers. (38) Thus, where the Treaties provide that the Commission is competent to act without the Council’s approval, the Commission’s duty to cooperate with the Council cannot extend as far as precluding the Commission from so acting.
100. As I see it, the first and third parts of the Council’s second plea are predicated on the assumption that, on a correct reading of Article 218(9) TFEU, the Commission required the Council’s prior authorisation in order to lodge written submissions in the ITLOS advisory proceedings and no level of consultation or sincere cooperation could remedy that breach. However, if — as I have concluded — Article 218(9) TFEU did not require the Commission to obtain such prior authorisation, the Commission cannot have failed in its duty of sincere cooperation by not taking steps to obtain it.
101. As regards the second part, I consider that the facts available show that, during the preparation of the statement, the Commission did, indeed, consult the Member States and the Council, and took their comments into account (including those relating to ITLOS’s jurisdiction) (39) before lodging the written statement on behalf of the EU within the time-limit specified by ITLOS.
102. For these reasons, I therefore conclude that the second plea should also be dismissed.
Additional issue: Article 17(1) TEU and Article 335 TFEU 103. If Article 16(1) TEU and Article 218(9) TFEU do not apply, the Council’s application should be dismissed: at least under those provisions, the Council had already taken the relevant position; and it was not competent to decide on the submission of the written statement at issue. But does that conclusion also imply that the decision to submit that statement was properly based, as the Commission contends, on Article 335 TFEU (read together with Article 17(1) TEU) and therefore fell within the Commission’s competence? Or, if Article 335 TFEU does not apply, was the Commission nevertheless competent, under Article 17(1) TEU, to take that decision? I shall address those questions now.
104. As I see it, given that the relevant EU position already exists, it is then the task of the Commission, pursuant to Article 17(1) TEU, to execute that position by giving effect to it and representing that position on the international scene (including in international judicial proceedings). After all, it is the task of the Commission to promote the general interest of the EU and to ensure the application of the Treaties and of measures adopted by the institutions pursuant to them. (40)
105. If Article 335 TEU is simply the specific expression, in respect of representing the EU, of the general principle laid down in Article 17(1) TEU, Article 335 TFEU, read together with Article 17(1) TEU, would give the Commission competence to decide on written statements such as those at issue in this case.
106. The Court in Reynolds Tobacco has already accepted that Article 282 EC (now Article 335 TFEU) is, despite the phrase ‘[i]n each of the Member States’ in that provision, ‘… the expression of a general principle and states that the Community has legal capacity and is, to that end, to be represented by the Commission’. (41) The Court there relied also on the fact that the Commission must ensure that the Treaty provisions and the measures taken pursuant thereto are applied (Article 211 EC, now the second sentence of Article 17(1) TEU). As a result, the Court dismissed an appeal against a judgment of the Court of First Instance (42) which had declared inadmissible the annulment proceedings lodged by cigarette manufacturers against a Commission decision to initiate proceedings before the courts of a third State (the USA) concerning these manufacturers’ alleged involvement in a system of smuggling in the territory of the European Community. The Commission had commenced those US proceedings without prior approval by the Council. (43)
107. In Reynolds Tobacco, the Commission’s competence under those provisions was thus to decide, without the Council’s prior approval, to commence proceedings before the courts of a third State and to define the scope and the substance of the legal action brought. The Court appeared to accept that all those elements constitute ‘representation’ of the EU by the Commission. As I see it, that necessarily implies that the Court did not regard the role of the Commission, as one of the EU’s main political institutions, to be comparable to that of a lawyer (the Commission) representing his client (the EU).
108. The Court made it clear that the EU’s representation by the Commission exists to give effect to the legal personality of the EU by acting in legal proceedings. Unlike the Council and the Austrian Government, I see no valid reason why the extent of the Commission’s competence thus to represent the EU should differ depending on the forum before which the EU participates as a party to the judicial proceedings.
109. Nor am I convinced by the Council’s contention that, contrary to the situation in Reynolds Tobacco, the written statements submitted by the Commission to ITLOS do not pertain to its role as ‘guardian of the Treaties’ under the second sentence of Article 17(1) TEU.
110. True, in Reynolds Tobacco the civil action in the United States sought essentially to obtain compensation from the tobacco companies in respect of their alleged participation in smuggling cigarettes within the European Community, thereby eluding the payment of custom duties and VAT. The Commission was therefore acting to protect the integrity of the customs union and the financial interests of the European Community. (44)
111. However, the fact that, when submitting written statements to ITLOS in Case No 21, the Commission did not seek to obtain similar immediate practical consequences for the functioning of the internal market and the budget of the EU does not mean that it was not acting in accordance with its mandate under the second sentence of Article 17(1) TEU.
112. First, whilst ITLOS advisory proceedings are necessarily different in nature from a civil action seeking the payment of financial compensation for loss, both may generate outcomes that have consequences for the EU. Both may therefore require the Commission to take ‘appropriate initiatives’ and to ‘promote the general interests of the [EU]’.
113. Second, the Court has already confirmed that the Commission’s remit as ‘guardian of the Treaties’ includes ensuring the correct implementation by a third State of the obligations it has assumed under an agreement concluded with the EU, using the means provided for by the agreement or by the decisions taken pursuant thereto, (45) including the procedure for settling disputes. (46) Consistent therewith, I see no reason of principle for excluding representation in international judicial proceedings from the Commission’s competence.
114. Third, the questions submitted to ITLOS for its advisory opinion concerned the interpretation of an international agreement concluded by the EU (UNCLOS), the EU’s bilateral fisheries agreements with third States (in particular, with five members of the SRFC) and the UN Fish Stocks Agreement. All these international instruments form an integral part of the EU legal order and are binding on the institutions. Moreover, the specific questions put related to the issue of concurrent coastal State jurisdiction and flag State jurisdiction to secure sound conservation of marine biological resources, particularly in the context of the fight against IUU fishing – an area in which the EU has adopted specific secondary legislation on the basis of pre-existing international rules. (47) The fact that, in the course of such proceedings, additional aspects may be raised relating to general issues (here, the jurisdiction of ITLOS to give advisory opinions and the admissibility of the questions referred) is inherent in any legal proceedings.
115. I therefore consider that Article 335 TFEU, taken in conjunction with the second sentence of Article 17(1) TEU, provided the Commission with an adequate legal basis for submitting written and oral statements to ITLOS on behalf of the EU.
Conclusion 116. In light of all the foregoing considerations and of Articles 138 and 140 of the Court’s Rules of Procedure concerning the allocation of costs, I propose that the Court should:
– dismiss the action of the Council of the European Union; – order the Council to pay its own costs and those of the European Commission; – order the Austrian, Czech, Finnish, French, Greek, Lithuanian, Netherlands, Portuguese, Spanish and the United Kingdom Governments to bear their own costs.
1 – Original language: English.
2 – Done at Montego Bay, 10 December 1982, 1833 UNTS 3. UNCLOS entered into force on 16 December 1994. See Council Decision 98/392/EC of 23 March 1998 concerning the conclusion by the European Community of the United Nations Convention of 10 December 1982 on the Law of the Sea and the Agreement of 28 July 1994 relating to the implementation of Part XI thereof (OJ 1998 L 179, p. 1).
3 – Council Decision 98/414/EC of 8 June 1998 on the ratification by the European Community of the Agreement for the implementing of the provisions of [UNCLOS] relating to the conservation and management of straddling stocks and highly migratory fish stocks (OJ 1998 L 189, p. 14).
4 – The 1995 Convention signed in Dakar was amended on 14 July 1993 at Praia, Cape Verde. The text of the Convention, as amended, is available only in French and may be consulted at: http://spcsrp.org/Documents.
5 – Decision C(2013) 4989 final (not published; ‘the decision of 5 August 2013’).
6 – See, for example, judgment in Spain v Council, C‑141/05, EU:C:2007:653, paragraph 29.
7 – See, for example, judgment in France v Commission, C‑233/02, EU:C:2004:173, paragraph 26; see also the considerations set out by Advocate General Jacobs in his Opinion in Italy v Commission, C‑301/03, EU:C:2005:550, points 61 to 81.
8 – Order in Brüggemann v ESC, 248/86, EU:C:1987:429, paragraph 6.
9 – Compare, in a different context, the rationale underlying the line of case-law based on the judgment in Foglia, 104/79, EU:C:1980:73.
10 – Which reads: ‘By Decision C(2013)4989 of 5 August 2013 the Commission decided to submit observations on behalf of the [EU] on the request from a sub-regional entity … for an advisory opinion to [ITLOS]. Under the principle of loyal cooperation the competent working group of the Council is to be informed.’
11 – See points 8 and 9 above.
12 – In contrast, a number of intervening Member States argue that Article 335 TFEU is not applicable in the current case, notably because the wording of that article only confers on the Commission the task of representing the EU in certain legal proceedings brought before the courts of the Member States.
13 – See Articles IV:2 and IV:3 of the Agreement Establishing the World Trade Organization and Articles 16(4) and 17(14) of the Understanding on Rules and Procedures Governing the Settlement of Disputes.
14 – Judgment in Germany v Council, C‑399/12, EU:C:2014:2258, paragraph 52 and case-law cited.
15 – The term ‘act’ (rather than ‘decision’) is also used in other language versions of Article 218(9) TFEU that I have examined (see, in particular, ‘acte’ in the French, ‘actos’ in the Spanish, ‘Akte’ in German, ‘akty’ or ‘actów’ in Polish, ‘atos’ in Portuguese, ‘säädoksiä’ in Finnish, ‘akter’ in Swedish); and (as in English) is not used in those languages when the provisions of the Treaties mention courts or tribunals. See, for example, Article 67(4) TFEU: ‘… the principle of mutual recognition of judicial and extrajudicial decisions in civil matters’; Article 256(1) TFEU: ‘Decisions given by the General Court …’ and Article 267 TFEU: ‘Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy …’.
16 – See, for example, judgments in Köbler, C‑224/01, EU:C:2003:513, paragraph 26, and European Community, C‑199/05, EU:C:2006:678, paragraph 33.
17 – See judgment in Germany v Council, C‑399/12, EU:C:2014:2258, paragraphs 63 and 64.
18 – As is the pattern with Association Agreements, the EEC-Turkey Association Council is composed of representatives of both the European Union and Turkey. Article 22 of the EEC-Turkey Association Agreement (OJ 1973 C 113, p. 2) confers a ‘power of decision’ on the Association Council for the attainment of the objectives laid down by that agreement.
19 – See judgment in Sevince, C‑192/89, EU:C:1990:322, paragraphs 17 to 24.
20 – See, inter alia, Dashwood, A., ‘External Relations Provisions of the Amsterdam Treaty’, 35 CMLRev. (1998), p. 1019, at 1026, and Martenczuk, B., ‘Decisions of Bodies Established by International Agreements and the Community Legal Order’, in Kronenberger, V., (ed.), The European Union and the International Legal Order: Discord or Harmony?, TMC Asser Press, The Hague, 2001, p. 141, at 157.
21 – The Court therefore treated acts to be adopted by such bodies as envisaged agreements within the meaning of what is now Article 218(11) TFEU, thus enabling it to review their compatibility with the Treaties prior to their adoption. See Opinion 2/92, EU:C:1995:83, paragraph II-8, in relation to the Third Revised Decision on national treatment of the Council of the Organisation for Economic Cooperation and Development. See also Opinion of Advocate General Cruz Villalón in Germany v Council, C‑399/12, EU:C:2014:289, point 44.
22 – See paragraph 26 of the Commission’s opinion ‘Reinforcing political union and preparing for enlargement’ (COM(96) 90 final, 28 February 1996) on holding the 1996 Intergovernmental Conference for amending the Treaties which noted that the EU was ‘ill-equipped to conduct negotiations in international organisations and take part in their activities, as it is increasingly called upon to do. … The [EU]’s negotiating position is weakened in many cases’. The Commission therefore proposed that ‘the Treaty should include provisions explicitly designed to enable the EU to speak with one voice and thus defend all relevant interests more effectively’.
23 – See, to that effect, Opinion of Advocate General Kokott in United Kingdom v Council, C‑81/13, EU:C:2014:2114, point 97.
24 – See point 17 above.
25 – Council Regulation No 3286/94 of 22 December 1994 laying down Community procedures in the field of common commercial policy in order to ensure the exercise of the Community’s rights under international trade rules, in particular those established under the auspices of the World Trade Organisation (OJ 1994 L 349, p. 71), as last amended by Regulation (EU) No 37/2014 of 15 January 2014 of the European Parliament and of the Council amending certain regulations relating to the common commercial policy as regards the procedures for the adoption of certain measures (OJ 2014 L 18, p. 1). Under Article 13, the Commission is, inter alia, empowered, following a complaint by EU enterprises, industries or their associations, to adopt decisions relating to the initiation and conduct of WTO dispute settlement proceedings, after having informed the Member States.
26 – According to the WTO’s website (https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm), the EU has acted (as of 16 June 2015) as a complainant in 95 cases, as a respondent in 82 cases and intervened as a third party in 149 cases.
27 – Article 218(8) TFEU specifies that the Council must act by qualified majority throughout the procedure. The same is of course true of Article 16(3) TEU.
28 – Judgment in Germany v Council, C‑399/12, EU:C:2014:2258.
29 – Touched on briefly at point 65 above.
30 – I note in this regard that the Council appears to accept (at least for the present) that such choices can validly be made by the Commission when initiating dispute settlement proceedings in compliance with the procedural requirements laid down in the TBR and in Article 3 of Decision 98/414 (relating to the UN Fish Stocks Agreement), without infringing Article 16(1) TEU. The Council has not explained why ITLOS advisory proceedings (or any other international judicial proceedings for that matter) should be regarded differently.
31 – See point 13 above. When ratifying UNCLOS on behalf of the EU, the Council relied on, inter alia, Article 113 EC (common commercial policy) and Article 228(2) and (3) EC (conclusion of international agreements). The Council also relied on Article 300(2) and (3) EC (conclusion of international agreements) when it adopted the most recent Council regulations ratifying the fisheries agreements with the SRFC States. The earlier regulations were based solely on the Treaty provisions relating to the Common Fisheries Policy.
32 – The EU has not yet chosen one or more of the means for the settlement of disputes concerning the interpretation or application of UNCLOS as laid down in Article 287 UNCLOS. In accordance with Article 7 of Annex IV to UNCLOS, that means that the EU is deemed to have accepted the arbitration procedure.
33 – See, for example, judgment in Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 73.
34 – In accordance with Article 30 of Council Regulation (EC) No 1005/2008 of 29 September 2008 establishing a Community system to prevent, deter and eliminate illegal, unreported and unregulated fishing, amending Regulations (EEC) No 2847/93, (EC) No 1936/2001 and (EC) No 601/2004 and repealing Regulations (EC) No 1093/94 and (EC) No 1447/1999, the Commission has adopted an EU list of IUU vessels (regularly revised) which is based on the lists established by Regional Fisheries Management Organisations (‘RFMO’): see Commission Regulation (EU) No 486/2010 of 28 May 2010 establishing the EU list of vessels engaged in illegal, unreported and unregulated fishing (OJ 2010 L 131, p. 22). The EU has also implemented RFMO measures concerning some States: see, for example, Council Regulation (EC) No 826/2004 of 26 April 2004 prohibiting imports of Atlantic blue-fin tuna (Thunnus thynnus) originating in Equatorial Guinea and Sierra Leone and repealing Regulation (EC) No 2092/2000 (OJ 2004 L 127, p. 19), which implements the recommendations of the International Commission for the Conservation of Atlantic Tunas (ICCAT), to which the EU is a Contracting Party.
35 – See also my Opinion in Joined Cases Parliament and Commission v Council, C‑103/12 and C‑165/12, EU:C:2014:334 (‘Venezuelan fisheries’), points 107 and 108.
36 – Similarly the European Parliament, which, in accordance with Article 14(1) TEU, ‘… exercises functions of political control and consultation as laid down in the Treaties’, cannot rely on that expression of its competence to expand its role with respect to international agreements for which Article 218 TFEU provides. See, in that regard, judgment in Parliament v Council, C‑658/11, EU:C:2014:2025 (‘Mauritius transfer of suspected pirates’), paragraphs 54 and 55.
37 – See judgments in Parliament v Council, C‑133/06, EU:C:2008:257 (‘refugee status’), paragraph 54, and Commission v Council, C‑28/12, EU:C:2015:282 (‘double mixity case’), paragraphs 41 and 42.
38 – Judgment in Parliament v Council, C‑48/14, EU:C:2015:91 (‘radioactive substances case’), paragraphs 57 and 58.
39 – See further points 103 to 115 below as regards the scope and extent of the Commission’s powers under Article 335 TFEU.
40 – See also judgment in Reynolds Tobacco and Others v Commission, C‑131/03 P, (‘Reynolds Tobacco’), EU:C:2006:541, paragraph 94.
41 – Judgment in Reynolds Tobacco and Others v Commission, C‑131/03 P, EU:C:2006:541, paragraph 94.
42 – Judgment in Philip Morris International v Commission, T‑377/00, T‑379/00, T‑380/00, T‑260/01 and T‑272/01, EU:T:2003:6.
43 – The Court was fully aware of that fact: the Council had specifically drawn attention to it in its statement in intervention in support of the Commission.
44 – See judgment in Philip Morris International v Commission, T‑377/00, T‑379/00, T‑380/00, T‑260/01 and T‑272/01, EU:T:2003:6, paragraphs 1 to 3.
45 – Judgment in C.A.S. v Commission, C‑204/07 P, EU:C:2008:446, paragraph 95 (concerning the Association Agreement with Turkey) and order in Mugraby v Council and Commission, C‑581/11 P, EU:C:2012:466, paragraph 68 (concerning the Euro-Mediterranean Agreement establishing an Association between the European Community and its Member States, of the one part, and the Republic of Lebanon, of the other part, signed in Luxembourg on 17 June 2002 and approved on behalf of the European Community by Article 1(1) of Council Decision 2006/356/EC of 14 February 2006 (OJ 2006 L 143, p. 1)).
46 – See judgment in Kaufring and Others v Commission, T‑186/97, T‑187/97, T‑190/97 to T‑192/97, T‑210/97, T‑211/97, T‑216/97 to T‑218/97, T‑279/97, T‑280/97, T‑293/97 and T‑147/99, EU:T:2001:133, paragraph 270.
47 – See, for example, point 88 above. |
EU:T:2016:29800011177T
JUDGMENT OF THE GENERAL COURT (Sixth Chamber)
12 May 2016 ( *1 )
‛EAGGF — Guarantee Section — EAGF and EAFRD — Expenditure excluded from financing — Cattle and sheep sectors — Flat-rate financial correction — One-off correction — Articles 48 and 69 of Regulation (EC) No 1782/2003 — Special entitlements — Obligation to state reasons’
In Case T‑384/14,
Italian Republic, represented by G. Palmieri and B. Tidore, acting as Agents,
applicant,
v
European Commission, represented by P. Rossi and D. Bianchi, acting as Agents,
defendant,
ACTION for partial annulment of Commission Implementing Decision 2014/191/EU of 4 April 2014 on excluding from European Union financing certain expenditure incurred by the Member States under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF), under the European Agricultural Guarantee Fund (EAGF) and under the European Agricultural Fund for Rural Development (EAFRD) (OJ 2014 L 104, p. 43), in so far as it excludes certain expenditure incurred by the Italian Republic,
THE GENERAL COURT (Sixth Chamber),
composed of S. Frimodt Nielsen, President, F. Dehousse and A.M. Collins (Rapporteur), Judges,
Registrar: J. Palacio González, Principal Administrator,
having regard to the written part of the procedure and further to the hearing on 10 December 2015,
gives the following
Judgment ( )
…
Procedure and forms of order sought
By application lodged at the Court Registry on 3 June 2014, the Italian Republic brought the present action.
Upon hearing the report of the Judge-Rapporteur, the Court (Sixth Chamber) decided to open the oral procedure.
The parties presented oral argument and replied to the Court’s oral questions at the hearing on 10 December 2015.
The Italian Republic claims that the Court should:
—
annul the contested decision in so far as it applies to it financial corrections of EUR 5026453.43 and EUR 1860259.60;
—
order the Commission to pay the costs.
The Commission contends that the Court should:
—
dismiss the action as unfounded;
—
order the Italian Republic to pay the costs.
Law
The Italian Republic invokes against the contested decision pleas alleging, in essence, an infringement of the EU rules regarding the CAP, an infringement of essential procedural requirements on account of a failure to state reasons, and an infringement of several general principles of Union law, including the principles of proportionality, of legality and of legal certainty, in so far as the Commission applied financial corrections, first, in the context of the additional payments within the meaning of Article 69 of Regulation No 1782/2003 and, secondly, in the context of the determination of special entitlements within the meaning of Articles 47 and 48 of that regulation.
During the hearing, the Italian Republic declared that it was withdrawing the plea alleging an incorrect application of the flat-rate correction of EUR 3477225 in so far as it was based on a failure to comply with the criteria for accreditation as a paying agency. Therefore, the subject matter of the present proceedings is limited to the lawfulness of the Commission’s application of Articles 47, 48 and 69 of Regulation No 1782/2003 to justify the financial corrections of EUR 1860259.60 and EUR 5026453.43 respectively.
Basic considerations
At the outset, it should be noted that the EAGGF and the Fund only finance expenditure incurred in accordance with EU law in the context of the common organisation of agricultural markets (judgments of 8 May 2003 in Spain v Commission, C‑349/97, ECR, EU:C:2003:251, paragraph 45; 24 February 2005 in Greece v Commission, C‑300/02, ECR, EU:C:2005:103, paragraph 32; and 12 September 2012 in Greece v Commission, T‑356/08, EU:T:2012:418, paragraph 12).
In that regard, it is clear from the rules relating to the EAGGF and the Fund that the Member States are required to organise a series of administrative and on-the-spot checks to ensure that the substantive and formal conditions for granting aid are correctly observed. If no comprehensive system of checks exists or if the system introduced by a Member State is defective to the point of giving rise to doubts as to compliance with those conditions, the Commission is entitled to disallow certain expenditure incurred by the Member State in question (judgments of 12 June 1990 in Germany v Commission, C‑8/88, ECR, EU:C:1990:241, paragraphs 20 and 21; 14 April 2005 in Spain v Commission, C‑468/02, EU:C:2005:221, paragraph 36; and 30 September 2009 in Portugal v Commission, T‑183/06, EU:T:2009:370, paragraph 31).
It is also apparent from the case-law that, even if the relevant rules on the granting of premiums do not expressly require Member States to introduce supervisory measures and inspection procedures, such as those mentioned by the Commission during the clearance of the accounts of the EAGGF and the Fund, nevertheless that obligation may follow, in some cases implicitly, from the fact that under the rules relating to the EAGGF and to the Fund, it is for the Member States to organise an effective system of inspection and supervision (judgments in Spain v Commission, cited in paragraph 29 above, EU:C:2005:221, paragraph 35; of 24 April 2008 in Belgium v Commission, C‑418/06 P, ECR, EU:C:2008:247, paragraph 70; and of 4 September 2009 in Austria v Commission, T‑368/05, EU:T:2009:305, paragraph 76).
As regards the rules on the burden of proof in the field of the clearance of accounts, in order to prove an infringement of the rules on the CAP, the Commission is not required to demonstrate exhaustively that the checks carried out by the national authorities are inadequate, or that the figures submitted by them are incorrect, but to adduce evidence of serious and reasonable doubt on its part regarding those checks or figures. The reason for this mitigation of the burden of proof on the Commission is that it is the Member State which is best placed to collect and verify the data required for the clearance of the accounts of the Fund (judgments of 11 January 2001 in Greece v Commission, C‑247/98, ECR, EU:C:2001:4, paragraphs 7 to 9; of 1 July 2009 in Spain v Commission, T‑259/05, EU:T:2009:232, paragraph 112, and Greece v Commission, cited in paragraph 28 above, EU:T:2012:418, paragraph 13).
The management of the financing of the Fund is principally in the hands of the national administrative authorities responsible for ensuring that the Union rules are strictly observed. That system, based on trust between national and Union authorities, does not involve any systematic supervision by the Commission, which, moreover, would in practice be quite unable to carry it out. Only the Member State is in a position to know and determine precisely the information necessary for drawing up the accounts of the Fund, since the Commission is not close enough to obtain the information it needs from the economic operators (judgments of 1 October 1998 in Ireland v Commission, C‑238/96, ECR, EU:C:1998:451, paragraph 30; 7 July 2005 in Greece v Commission, C‑5/03, ECR, EU:C:2005:426, paragraph 97; and 17 October 2012 in Spain v Commission, T‑491/09, EU:T:2012:550, paragraph 25).
Consequently, it is for the Member State to adduce the most detailed and comprehensive evidence that its checks or data are accurate and, if appropriate, that the Commission’s statements are incorrect (judgment in Greece v Commission, cited in paragraph 28 above, EU:T:2012:418, paragraph 13).
The Member State concerned, for its part, cannot rebut the Commission’s findings by mere assertions which are not substantiated by evidence of a reliable and operational supervisory system. If it is not able to show that the Commission’s findings are inaccurate, the latter amount to evidence liable to give rise to serious doubts as to the existence of an adequate and effective series of supervisory measures and inspection procedures (judgments of 28 October 1999 in Italy v Commission, C‑253/97, ECR, EU:C:1999:527, paragraph 7; Spain v Commission, cited in paragraph 28 above, EU:C:2003:251, paragraph 48; of 12 July 2011 in Slovenia v Commission, T‑197/09, EU:T:2011:348, paragraph 40, and Greece v Commission, cited in paragraph 28 above, EU:T:2012:418, paragraph 35).
It is in the light of those considerations that it is necessary to examine the pleas put forward by the Italian Republic in support of the action in so far as it refers to the two categories of financial corrections applied in the contested decision.
…
The plea concerning the one-off correction relating to the determination and payment of special entitlements provided for in Articles 47 and 48 of Regulation No 1782/2003
The Italian Republic claims that it correctly applied Articles 43 and 48 of Regulation No 1782/2003 in all cases of transfer or succession of payment entitlements from one farmer to another, referred to in the contested decision. According to it, those rights to special payments were correctly calculated by keeping separate, on the one hand, the reference amount of livestock farming activities and, on the other hand, the entitlements to payments connected with hectarage. The system of redistribution of those entitlements is compatible with EU legislation since it complies with the requirement of traceability of payment entitlements.
The Commission contests the arguments of the Italian Republic.
First of all, it should be pointed out that, in paragraph 4.16 of the application, the Italian Republic states that the contested decision is unlawful ‘as a result of an infringement of the general principles of proportionality, legality, legal certainty, legitimate expectations and the duty to state reasons’. It should be noted that, concerning the principles and duties allegedly infringed, the Italian Republic does not put forward any arguments, even in summary form. In particular, in so far as it invokes a failure to state full and adequate reasons for the contested decision without indicating which paragraphs were not properly reasoned and without specifying the elements of law and fact which would have required further explanation, the application does not comply with the requirements of Article 76(d) of the Rules of Procedure, such that those complaints must be declared inadmissible (see, to that effect, judgment of 15 October 2008 in Mote v Parliament, T‑345/05, ECR, EU:T:2008:440, paragraphs 75 to 77).
It follows that, by the present complaint, the Italian Republic must be considered to be claiming essentially an infringement of Articles 47 and 48 of Regulation No 1782/2003.
It should also be noted that the assessment of the present complaint concerns only the validity of the interpretation of Article 48 of Regulation No 1782/2003 adopted by the Commission in the contested decision, read in conjunction with the evidence adduced during the administrative proceedings. As is apparent from the discussions during the hearing, the parties disagree on the manner in which that provision should be interpreted.
The one-off correction of EUR 1860259.60 applied by the Commission in the contested decision, as a result of the undue determination and allocation of entitlements to special payments, was not subject to prior conciliation and, therefore, no explanation is presented with respect to it in the summary report. The Italian Republic’s alleged deficiency is explained in the Commission’s letters of22 December 2010 and 13 December 2012 (see paragraphs 12 and 14 above). It concerns, first, the allocation of special entitlements where there are entitlements deriving from sheep and cattle and from hectarage and, secondly, the distribution of special entitlements resulting from the olive oil sector, for the claim years 2006 to 2009. In those letters, the Commission alleges that the Italian authorities mismanaged these situations of overlapping entitlements to aid. The situations covered by the present complaint are described in those letters as follows:
—
where a farmer with special entitlements allocated on the basis of the reference period received from another farmer (by transfer or by succession) hectares and the corresponding amounts before the first year of the implementation of the single payment scheme, the value of his special entitlements was not distributed by the Italian authorities between the normal entitlements (up to EUR 5000);
—
where a farmer with normal entitlements allocated on the basis of the reference period received amounts resulting from the cattle premium without corresponding hectares from another farmer (by transfer or by succession) before the first year of the implementation of the single payment scheme, the value of special entitlements received was not allocated by the Italian authorities to his normal entitlements (up to EUR 5000).
According to the Commission, the correct application of Article 48 of Regulation No 1782/2003 required the special entitlements to be allocated to normal entitlements up to a ceiling of EUR 5000 per hectare and, next, the balance to be allocated to special entitlements. It contended, throughout the administrative proceedings, that the entitlements to additional (special) payments amounting to less than EUR 5000 could not be used independently of the single payment, but should be allocated to the normal entitlements in order to determine the entitlement to payment per hectare, that calculation being carried out by dividing the payments received during the reference period by the hectares which contributed to generating them as if those hectares had also contributed to generating the additional payments (up to the ceiling of EUR 5000). By contrast, by maintaining the normal and special entitlements (without any redistribution) separate, the Italian authorities created more special entitlements and, as a result, underestimated the value of the normal reference entitlements.
In its pleadings, the Italian Republic acknowledges that it departed, in its practice, from the application of the provisions at issue, as declared by the Commission. It claims that ‘Articles 43 and 48 were applied to the fraction of the reference amounts of each transferor farmer and to the transferee farmer for the fraction of the amounts resulting from the latter’s farming activity, by considering that everyone had the right to direct payments during the reference period’ and that ‘the Italian authorities decided not to carry out [a redistribution of entitlements to special payments] only in cases where the sum of all the reference amounts … resulted in a unit amount per hectare higher than EUR 5000’. According to it, that application is also compatible with Article 48 of Regulation No 1782/2003.
It should be noted that Article 48 of Regulation No 1782/2003, which establishes the modalities for applying the derogation provided for by Article 47 to the general rule set out in Article 43 of that regulation, must necessarily be interpreted strictly (see, by analogy, judgment of 13 December 2001 in Heininger, C‑481/99, ECR, EU:C:2001:684, paragraph 31 and the case-law cited).
First of all, the general objective pursued by Regulation No 1782/2003 should be borne in mind, namely the implementation of the single payment scheme. In the light of a literal interpretation of Article 48 of Regulation No 1782/2003, in view of the adjacent provisions, that provision applies to farmers who benefit from ‘payments giving right to payment entitlements subject to special conditions’ referred to in Article 47 of that regulation and who, during the reference period, ‘had no hectares as referred to in Article 43 [of that regulation]’ for the purposes of determining single payment entitlements or the entitlement per hectare is higher than EUR 5000. Such farmers, who either have no hectares or possess hectares with respect to which the entitlement per hectare is higher than EUR 5000, are entitled (a) to a payment equal to the (basic) ‘reference amount’ corresponding to direct payments which they enjoyed over an average period of three years and (b) to payments ‘for each EUR 5000 or fraction of the reference amount’ (that is to say, special payments) which they enjoyed over an average period of three years.
It follows that special payments are allocated at the reference amount per hectare up to EUR 5000 and, above that threshold, constitute an additional (special) payment entitlement. In that regard, Article 47(1) of Regulation No 1782/2003 provides that the amounts it lists must ‘be included in’ the reference amount under the conditions provided for in Article 48 of that regulation. It also follows from Article 47(2) of Regulation No 1782/2003 that, starting from 2007, and by way of derogation from Articles 33, 43 and 44 of that regulation, the amounts resulting from the dairy premium and additional payments (provided for in Articles 95 and 96 of Regulation No 1782/2003) are to be ‘included in’ the single payment scheme under the conditions provided for in Articles 48 to 50. Therefore, the relevant legislation establishes the principle of combination of payments under different headings in a single payment.
The Italian Republic is therefore wrong to claim that under Article 48 of Regulation No 1782/2003 there is an obligation to maintain separate all the payments derived from different entitlements. Moreover, the reference to Article 49 of that regulation, as made in the application, is also not capable of supporting the view put forward by the Italian Republic. That provision, entitled ‘Conditions’ and concerning entitlements to special payments, provides for a derogation from Articles 36(1) and 44(1) of that regulation in so far as a farmer who has such payment entitlements for which he did not have hectares in the reference period is authorised by the Member State to derogate from the obligation to provide a number of eligible hectares equivalent to the number of entitlements. That derogation is subject to the condition that the farmer maintain at least 50% of the agricultural activity exercised in the reference period expressed in livestock units. It should be noted that that provision does not provide for any alternative method for determining entitlements to special payments, or for any obligation to maintain separate the payments derived from different entitlements. Article 49(3) of Regulation No 1782/2003 states that ‘[t]he payment entitlements determined according to Article 48 shall not be modified’.
It is also necessary to reject the argument, in paragraph 32 of theReply, that the amounts referred to in the first indent to Article 48 of Regulation No 1782/2003 are ‘added’ to the reference amount. A comparison of the different language versions of Article 47(1) of that regulation, in particular the Italian, French and German versions, confirm the meaning of the words ‘included in’ (‘sono inclusi’, ‘intégrés au’, ‘in die Berechnung des Referenzbetrags aufgenommen’). In any event, the Italian Republic withdrew that argument during the hearing.
The claim that, first, the method to determine entitlements used by the Italian authorities did not lead to differences in the overall value of entitlements to payment allocated to the farmers concerned and that, secondly, concerning the special entitlements, the obligation to maintain livestock units was retained in accordance with Article 49 of Regulation No 1782/2003, cannot be accepted. Since that regulation provided for a specific method for the calculation of entitlements to payment for those purposes and in order to ensure the lawfulness of entitlements allocated in all the Member States, the Italian Republic was obliged to apply it. It follows from the above analysis that Article 48 of Regulation No 1782/2003 is obligatory and leaves the Member States no margin of discretion. Consequently, the Italian Republic cannot claim that its alternative method is equally effective, appropriate for preventing fraud, or even, more favourable to farmers (see, to that effect, judgments in Spain v Commission, cited in paragraph 44 above, EU:C:2002:192, paragraph 87 and the case-law cited, and of 28 March 2007 in Spain v Commission, T‑220/04, EU:T:2007:97, paragraph 89 and the case-law cited).
The same applies with respect to the argument that the actions of the Italian authorities did not create any risks for the Fund. It must be noted that the Italian Republic has failed to produce evidence calling into question the calculation, made by the Commission services, of the exact amounts exposing the Fund to a risk. It is apparent, first, from the minutes of the bilateral meeting of 8 February 2011 and, secondly, from the letter of 13 December 2012, that the Italian authorities, on the basis of a methodology approved by the Commission, ‘provided the calculation showing the real risk to the Fund created by the wrongful application of Articles 43 and 48 of Regulation No 1782/2003, which amounts to EUR 1813699.96 for 4 years’.
As regards the argument that the Commission failed to indicate the concrete effects of the incorrect application of Articles 43 and 48 of Regulation No 1782/2003 by the Italian authorities, it must also be rejected. In line with the findings set out in paragraph 31 above, it is for the Commission to present evidence of serious doubt and not to show that the risks materialised.
In the light of the above considerations, and in particular those set out in paragraphs 89 and 90 above, it must be held that the interpretation of Article 48 of Regulation No 1782/2003 proposed by the Italian Republic is incompatible both with its wording and its structure. In so far as all of its arguments have been rejected, it is necessary to reject as unfounded the present plea raised by the Italian Republic concerning the one-off correction relating to the determination and payment of special entitlements.
Therefore, the action must be dismissed in its entirety.
…
On those grounds,
THE GENERAL COURT (Sixth Chamber)
hereby:
1.
Dismisses the action;
2.
Orders the Italian Republic to pay the costs.
Frimodt Nielsen
Dehousse
Collins
Delivered in open court in Luxembourg on 12 May 2016.
[Signatures]
( *1 ) Language of the case: Italian.
( ) Only the paragraphs of this judgment which the Court considers it appropriate to publish are reproduced here. |
ORDER OF THE COURT (Fifth Chamber)
15 October 2014 ( *1 )
‛Reference for a preliminary ruling — Principle of the protection of legitimate expectations — National legislation providing for a reduction in pension entitlements with retroactive effect — Purely internal situation — Clear lack of jurisdiction of the Court’
In Case C‑246/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Corte dei conti, sezione giurisdizionale per la Regione Puglia (Italy), made by decision of 28 April 2014, received at the Court on 21 May 2014, in the proceedings
Vittoria De Bellis,
Diana Perrone,
Cesaria Antonia Villani
v
Istituto Nazionale di Previdenza per i Dipendenti dell’Amministrazione Pubblica (Inpdap),
THE COURT (Fifth Chamber),
composed of T. von Danwitz (Rapporteur), President of the Chamber, A. Rosas, E. Juhász, D. Šváby and C. Vajda, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having decided, after hearing the Advocate General, to give a decision by reasoned order, pursuant to Article 53(2) of the Rules of Procedure of the Court of Justice,
makes the following
Order
This request for a preliminary ruling concerns the interpretation of the principle of the protection of legitimate expectations.
The request has been made in proceedings between, on the one hand, Ms De Bellis, Ms Perrone and Ms Villani and, on the other, the Istituto Nazionale di Previdenza per i Dipendenti dell’Amministrazione Pubblica (National Provident Institution for the Employees of Public Authorities; ‘Inpdap’) concerning the pension rights of the applicants.
Legal context
Law No 241/1990
Article 1(1) Law No 241 of 7 August 1990 introducing new rules governing administrative procedure and right of access to administrative documents (GURI No 192 of 18 August 1990, p. 7), as amended by Law No 15 of 11 February 2005 (GURI No 42 of 21 February 2005, p. 4, ‘Law No 241/1990’), provides:
‘Administrative action shall pursue objectives laid down by law and be governed by the criteria of economy, efficiency, impartiality, right of access and transparency in accordance with the rules set out in this law and other provisions governing distinct procedures as well as by principles derived from the Community legal order.’
Law No 335/1995
Article 1(41) of Law No 335 of 8 August 1995 reforming the compulsory and supplementary pension scheme (ordinary supplement to GURI No 190 of 16 August 1995, ‘Law No 335/1995’), provides:
‘The legislation governing the payment of pensions to survivors of an insured pensioner under the compulsory general insurance scheme shall be extended to cover all schemes which preclude or replace this scheme. Where survivors comprise only minors, students or disabled persons, the pension percentage shall be set at 70% solely for survivors’ pensions payable from the date of entry into force of this law. The rate of the survivors’ pension may take into account the recipient’s income, subject to the limits laid down in Table F of the Annex. The payment due as a result of this combined income — including the reduced survivors’ pension — may not, in any event, be below the amount the same person would receive if his income were equal to the upper limit of the income band immediately below the band his income falls into. The limits on the combined income shall not apply where the recipient is a member of a nuclear family which includes minors, students or disabled persons within the meaning of the first sentence of this paragraph. This provision shall be without prejudice to more favourable social benefits being received at the date of entry into force of this law — adjustments towards reintegration are planned for future amendments.’
Law No 724/1994
Article 15(5) of Law No 724 of 23 December 1994 (ordinary supplement to GURI No 304 of 30 December 1994; ‘Law No 724/1994’) states:
‘The provisions relating to payment of the special additional allowance for pensions under Article 2 of Law No 324 of 27 May 1959, as subsequently amended and supplemented, are applicable only to direct pensions awarded before the 31 December 1994 and corresponding survivors’ pensions.’
Law No 296/2006
Paragraphs 774 and 776 of the Sole Article of Law No 296 of 27 December 2006 (ordinary supplement to GURI No 299 of 27 December 2006; ‘Law No 296/2006’) read as follows:
‘774.
The extension of legislation governing the payment of pensions to survivors of an insured pensioner under the compulsory general insurance scheme to cover all schemes which preclude or replace this scheme under Article 1(41) of [Law No 335/1995] must be interpreted as meaning that, with regards to survivors’ pensions payable from the date of entry into force of [Law No 335/1995], the special additional allowance that the pension owner was receiving (an integral part of the retirement pension when viewed as a whole), shall be payable at the same percentage as the survivors’ pension, regardless of the starting date of the direct pension.
...
776.
Article 15(5) of [Law No 724/1994] is repealed.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
The applicants in the main proceedings receive an ordinary retirement pension and a survivors’ pension. They have brought an action before the Corte dei conti, sezione giurisdizionale per la Regione Puglia seeking, inter alia, recognition of their right to receive the full amount of the special additional allowance and the related interest.
In the course of those proceedings, Inpdap pointed out that the applicants started receiving their survivors’ pensions after 16 August 1995. It follows from paragraph 774 of the Sole Article of Law No 296/2006 that Article 1(41) of Law No 335/1995 must be interpreted as meaning that, with regards to survivors’ pensions payable from 17 August 1995, the special additional allowance must be viewed as an integral part of the retirement pension, regardless of when the direct pension payments first started.
In essence, the Corte dei conti, sezione giurisdizionale per la Regione Puglia contends that, according to its interpretation, the Sole Article of Law No 296/2006, paragraphs 774 and 776, has abolished rights relating to survivors’ pensions under Article 15(5) of Law No 724/1994. The referring Court is of the view that the single objective of the Sole Article of Law No 296/2006, paragraphs 774 and 776, is to protect the financial interests of the Italian State. Therefore, the question arises whether the principle of the protection of legitimate expectations applies where an interpretative statute retroactively modifies provisions granting rights, to the detriment of those concerned, and whether a financial justification alone is capable of constituting an overriding reason in the public interest.
In that regard, the Corte dei conti, sezione giurisdizionale per la Regione Puglia refers to the case-law of the Corte costituzionale. Two orders — from the Corte dei conti, sezione giurisdizionale per la Regione Puglia and the Corte dei conti, sezione giurisdizionale per la Regione Siciliana, respectively — were referred to the Corte costituzionale which held, in its judgment No 74 of 12 March 2008, that the issues raised concerning the constitutionality of the Sole Article of Law No 296/2006, paragraph 774, were unsubstantiated. In addition, in judgment No 1 of 5 January 2011 regarding Law No 335/1995, the Corte costituzionale held that the principle of the protection of legitimate expectations does not apply to legal relationships pertaining to public and private pension policies. The objective of the legislature in adopting Law No 335/1995 was the harmonisation of public and private pension schemes, resulting in structural reform of public spending and fiscal balances in order to comply with Community obligations arising under the economic and financial stability pact preparing for the changeover to the single European currency.
With regard to the Court’s jurisdiction to reply to the questions referred for a preliminary ruling, the Corte dei conti, sezione giurisdizionale per la Regione Puglia points out that Article 1 of Law No 241/1990 contains a direct, unconditional renvoi to the principles of EU law authorising the Italian court to apply to the Court of Justice of the European Union for a practical interpretation where it is vital to a case. It should be noted that in Cicala (C‑482/10, EU:C:2011:868) and Romeo (C‑313/12, EU:C:2013:718) the Court held that Article 1 of Law No 241/1990 does not contain a direct, unconditional renvoi to EU law. However, the cases giving rise to those two judgments concerned the obligation to state reasons, whereas at issue in the case before the referring court is the principle of the protection of legitimate expectations, which applies in a clear and unconditional manner without being circumscribed by national law.
In those circumstances the Corte dei conti, sezione giurisdizionale per la Regione Puglia decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Must the principle of the protection of legitimate expectations be interpreted as precluding national legislation, such as [Law No 296/2006], which prescribes, without specifying whether there are any public interest justifications, that the Istituto Nazionale di Previdenza may not pay more favourable survivors’ pensions to those who started receiving a survivors’ pension after 17 August 1995 as a result of a retirement pension awarded to their spouses before 31 December 1994?
(2)
Are financial grounds capable of justifying, in the public interest, the adoption of an interpretative statute, such as the law at issue in the main proceedings?’
The jurisdiction of the Court
It should be noted from the outset that the questions referred for a preliminary ruling concern the interpretation of the principle of the protection of legitimate expectations in a purely internal situation.
In that regard, it should be recalled that the Court does not, in principle, have jurisdiction to reply to a question referred for a preliminary ruling where it is obvious that the provision of EU law referred to it for interpretation is incapable of applying (see, to that effect, Caixa d’Estalvis i Pensions de Barcelona, C‑139/12, EU:C:2014:174, paragraph 41 and the case-law cited).
Nevertheless, the Court has jurisdiction to give preliminary rulings on questions concerning provisions of EU law in situations where the facts of the case before the referring court fall outside the scope of EU law, but in which domestic law makes a reference to the content of the EU provisions at issue in order to determine the rules applicable to a situation which is purely internal to the Member State concerned (see, in particular, Poseidon Chartering, C‑3/04, EU:C:2006:176, paragraph 15; ETI and others, C‑280/06, EU:C:2007:775, paragraphs 22 and 26; Salahadin Abdulla and others, C‑175/08, C‑176/08, C‑178/08 and C‑179/08, EU:C:2010:105, paragraph 48; Cicala, EU:C:2011:868, paragraph 17; Nolan, C‑583/10, EU:C:2012:638, paragraph 45; and Romeo, EU:C:2013:718, paragraph 21).
Indeed, it is clearly in the European Union’s interest that, in order to forestall future differences of interpretation, provisions or concepts taken from EU law should be interpreted uniformly where, in regulating situations outside the scope of the EU measure concerned, national legislation seeks to adopt the same solutions as those adopted in that measure in order to ensure that internal situations and situations governed by EU law are treated in the same way, irrespective of the circumstances in which the provisions or concepts taken from EU law are to apply (see, in particular, Salahadin Abdulla and Others, EU:C:2010:105, paragraph 48; Volksbank România, C‑602/10, EU:C:2012:443, paragraphs 87 and 88; Nolan, EU:C:2012:638, paragraph 46; Allianz Hungária Biztosító and Others, C‑32/11, EU:C:2013:160, paragraphs 20 and 21; and Romeo, EU:C:2013:718, paragraph 22).
Such is the case where the provisions of EU law at issue have been made directly and unconditionally applicable to such situations by national law (Cicala, C‑482/10, EU:C:2011:868, paragraph 19; Nolan, EU:C:2012:638, paragraph 47; and Romeo, EU:C:2013:718, paragraph 23). However, that is not the case where national provisions allow the national court to deviate from EU rules as interpreted by the Court (see, to that effect, Kleinwort Benson, C‑346/93, EU:C:1995:85, paragraphs 16 and 18, and Romeo, EU:C:2013:718, paragraph 33 and the case-law cited).
With regard to Article 1 of Law No 241/1990, to which the Corte dei conti, sezione giurisdizionale per la Regione Puglia refers, the Court has already held that this provision does not contain a renvoi to EU law, within the meaning of the Court’s case-law cited above, enabling the Court to answer questions concerning the interpretation of EU law in purely internal disputes (see Cicala, EU:C:2011:868, and Romeo, EU:C:2013:718).
The Corte dei conti, sezione giurisdizionale per la Regione Puglia has not put forward any evidence such as to enable the Court to hold it has the jurisdiction to rule on the questions submitted. The mere fact that those questions concern the principle of the protection of legitimate expectations rather than the obligation to state reasons, as in in the cases which gave rise to the judgments in Cicala (EU:C:2011:868) and Romeo (EU:C:2013:718), does not alter this assessment.
In that regard, it should be borne in mind that, under Article 94(c) of the Court’s Rules of Procedure, a request for a preliminary ruling must contain a statement of the reasons which prompted the referring court or tribunal to inquire about the interpretation or validity of certain provisions of EU law, and the relationship between those provisions and the national legislation applicable to the main proceedings. That statement of reasons, like the summary of the relevant findings of fact required under Article 94(a) of those rules, must be of such a kind as to enable the Court to ascertain, not only whether the request for a preliminary ruling is admissible, but also whether it has jurisdiction to answer the question referred (order in Parva Investitsionna Banka and Others, C‑488/13, EU:C:2014:2191, paragraph 25).
Having regard to the above considerations, it must be held, on the basis of Article 53(2) of the Rules of Procedure, that the Court clearly lacks jurisdiction to answer the questions referred by the Corte dei conti, sezione giurisdizionale per la Regione Puglia.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby orders:
The Court of Justice of the European Union clearly has no jurisdiction to reply to the questions referred by the Corte dei conti, sezione giurisdizionale per la Regione Puglia (Italy) by decision of 28 April 2014 (Case C‑246/14).
[Signatures]
( *1 ) Language of the case: Italian. |
JUDGMENT OF THE COURT (First Chamber)
9 September 2015 ( *1 )
‛Reference for a preliminary ruling — Judicial cooperation in civil matters — Regulation (EC) No 44/2001 — Articles 1(2) and 49 — Jurisdiction and the enforcement of judgments in civil and commercial matters — Matters excluded — Family law — Regulation (EC) No 2201/2003 — Article 47(1) — Jurisdiction and the recognition and enforcement of judgments in matters of parental responsibility — Judgment concerning rights of access which imposes a periodic penalty payment — Enforcement of that penalty payment’
In Case C‑4/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Korkein oikeus (Finland), made by decision of 31 December 2013, received at the Court on 6 January 2014, in the proceedings
Christophe Bohez
v
Ingrid Wiertz,
THE COURT (First Chamber),
composed of A. Tizzano, President of the Chamber, S. Rodin, E. Levits, M. Berger (Rapporteur) and F. Biltgen, Judges,
Advocate General: M. Szpunar,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 8 January 2015,
after considering the observations submitted on behalf of:
—
Mr Bohez, by L. Koskenvuo, asianajaja,
—
the Finnish Government, by H. Leppo, acting as Agent,
—
the Spanish Government, by L. Banciella Rodríguez-Miñón, acting as Agent,
—
the Lithuanian Government, by D. Kriaučiūnas and R. Dzikovič, acting as Agents,
—
the European Commission, by A.-M. Rouchaud-Joët and E. Paasivirta, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 16 April 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Articles 1(2) and 49 of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L 12, p. 1) and of Article 47(1) of Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000 (OJ 2003 L 338, p. 1).
The request has been made in proceedings between Mr Bohez and Ms Wiertz concerning the enforcement in Finland of a penalty payment imposed by a decision given by a Belgian court in order to ensure compliance with the rights of access granted to Mr Bohez in respect of his children.
Legal context
EU law
Regulation No 44/2001
Article 1(1) and (2) of Regulation No 44/2001, which concerns the scope of the regulation, provides:
‘1. This Regulation shall apply in civil and commercial matters whatever the nature of the court or tribunal. ...
2. This Regulation shall not apply to:
(a)
the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills and succession;
...’
Article 45(2) of Regulation No 44/2001, which forms part of Chapter III entitled ‘Recognition and enforcement’, provides:
‘Under no circumstances may the foreign judgment be reviewed as to its substance.’
Article 49 of that regulation, which is also in Chapter III, provides:
‘A foreign judgment which orders a periodic payment by way of a penalty shall be enforceable in the Member State in which enforcement is sought only if the amount of the payment has been finally determined by the courts of the Member State of origin.’
Regulation No 2201/2003
Regulation No 2201/2003 repealed and replaced Council Regulation (EC) No 1347/2000 of 29 May 2000 on jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility for children of both spouses (OJ 2000 L 160, p. 19).
Recital 2 in the preamble to Regulation No 2201/2003 recalls that the principle of mutual recognition of judicial decisions is the cornerstone for the creation of a genuine judicial area and that, in that regard, ‘visiting rights’ [rights of access] have been identified as a priority.
Article 1 of the regulation defines the scope of the directive as follows:
‘1. This Regulation shall apply, whatever the nature of the court or tribunal, in civil matters relating to:
…
(b)
the attribution, exercise, delegation, restriction or termination of parental responsibility.
2. The matters referred to in paragraph 1(b) may, in particular, deal with:
(a)
rights of custody and rights of access;
...’
In accordance with Article 26 of Regulation No 2201/2003 ‘[u]nder no circumstances may a judgment be reviewed as to its substance’.
As regards the enforceability of judgments concerning rights of access, Article 28(1) of the regulation provides:
‘A judgment on the exercise of parental responsibility in respect of a child given in a Member State which is enforceable in that Member State and has been served shall be enforced in another Member State when, on the application of any interested party, it has been declared enforceable there.’
In certain circumstances judgments concerning rights of access may be automatically enforceable. The first subparagraph of Article 41(1) of Regulation No 2201/2003 provides in that regard:
‘The rights of access … granted in an enforceable judgment given in a Member State shall be recognised and enforceable in another Member State without the need for a declaration of enforceability and without any possibility of opposing its recognition if the judgment has been certified in the Member State of origin in accordance with paragraph 2.’
Article 47(1) of the regulation specifies that the enforcement procedure is governed by the law of the Member State of enforcement.
National law
Belgian law
Under Belgian law, penalty payments are governed by Articles 1385bis to 1385nonies of the Judicial Code (code judiciaire). Article 1385bis of the Code states:
‘On the application of one of the parties, the court may order the other party to pay a sum of money, known as a penalty payment, if the principal obligation laid down in the judgment has not been performed, without prejudice to damages, where appropriate. …’
Article 1385ter of the Judicial Code provides:
‘The court may set the penalty payment at a fixed amount or at an amount determined by unit of time or by breach. In the last two cases, the court may also set an amount above which the order to pay the penalty payment shall cease to have effect.’
Under Article 1385quater of the Judicial Code, the enforceable instrument on the basis of which the penalty payment may be recovered is the judgment imposing the penalty and the beneficiary does not need to have the penalty payment quantified prior to enforcement.
The beneficiary of the penalty payment has the burden of proving that the conditions under which it falls due are met. In the event of a challenge by the debtor, the beneficiary must produce evidence to establish the breaches alleged. It will then be for the court dealing with the enforcement proceedings to decide whether the conditions under which the penalty payment falls due are met.
Finnish law
Under Finnish law, penalty payments imposed to ensure compliance with rights of access are governed by the Law on the enforcement of decisions on child custody and rights of access (Lapsen huoltoa ja tapaamisoikeutta koskevan päätöksen täytäntöönpanosta annettu laki; ‘TpL’), and by the Law on penalty payments (Uhkasakkolaki).
Under Paragraph 16(2) of the TpL, after a judgment concerning rights of access has been delivered, the court before which a case is brought concerning the enforcement of those rights may require the respondent to comply with the judgment or else be liable for a penalty payment.
Under Paragraph 18(1) and (2) of the TpL the penalty payment imposed is, as a rule, a fixed amount. If circumstances so warrant, the penalty may, however, be structured as cumulative amounts.
Penalty payments are always paid to the State, not to the other party.
Under Paragraph 19(1) and (2) of the TpL, on a fresh application the court may order payment of the penalty imposed if it considers that there are grounds for so doing. Payment of the penalty may not be ordered where the party subject to the obligation shows that he had good reason for failing to perform the obligation, or where the obligation has been performed in the intervening period.
Paragraph 11 of the Law on penalty payments provides that the court may reduce the amount of the penalty payment originally imposed if the principal obligation has in substance been performed, if the ability of the party subject to the obligation to pay has significantly deteriorated or if there are other good reasons for reducing the amount.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Mr Bohez and Ms Wiertz were married in Belgium in 1997 and had two children. They divorced in 2005 and Ms Wiertz moved to Finland.
On 28 March 2007, the rechtbank van eerste aanleg te Gent (Court of First Instance, Ghent (Belgium)), gave judgment concerning custody, residence, rights of access and maintenance in respect of those children (‘the judgment of 28 March 2007’). The court also supplemented its judgment with a penalty payment intended to ensure compliance with the rights of access granted to Mr Bohez. That penalty payment was set at EUR 1000 per child, which was to be paid to Mr Bohez for every day of the child’s non-appearance. The maximum amount of the penalty payment was set at EUR 25000.
Mr Bohez applied to the Finnish courts for an order requiring Ms Wiertz to pay him the penalty payment imposed in the judgment of 28 March 2007, or for a declaration that the judgment was enforceable in Finland. In support of his application, he argued before the Itä-Uudenmaan käräjäoikeus (District Court, Itä Uusimaa (Finland)) that numerous access visits had not taken place and that, as a result, the maximum amount of the penalty payment set in the judgment had already been reached. Relying on the fact that, under Belgian law, recovery of penalty payments is effected directly by the authorities responsible for enforcing judicial decisions, without there being any need for fresh court proceedings, Mr Bohez submitted that his application had to be considered to be seeking recovery of a monetary claim that has fallen due and, on that account, to fall within the scope of Regulation No 44/2001.
Ms Wiertz contended that the order that she pay the penalty had not been definitively confirmed by the Belgian courts and that the judgment of 28 March 2007 was therefore not enforceable. There had been no determination by the authorities as to the existence of breaches capable of giving rise to the obligation to pay the penalty.
In its judgment of 8 March 2012, the Itä-Uudenmaan käräjäoikeus found that Mr Bohez’s application did not relate to the enforcement of a judgment on rights of access, but only to the enforcement of a penalty payment imposed to ensure compliance with that judgment. It concluded that in so far the application concerned the enforcement of a judgment laying down a monetary obligation, it fell within the scope of Regulation No 44/2001. However, pointing out that the judgment of 28 March 2007 provided only for a periodic penalty payment the amount of which had not been finally determined, contrary to the requirements of Article 49 of Regulation No 44/2001, the Itä-Uudenmaan käräjäoikeus held that Mr Bohez’s application was inadmissible.
The Helsingin hovioikeus (Court of Appeal, Helsinki), to which Mr Bohez appealed, confirmed, by judgment of 16 August 2012, that the application was inadmissible. The grounds of that judgment were based, however, on a different analysis from that of the court at first instance. Taking the view that M. Bohez’s application pertained to the enforcement of a judgment concerning rights of access, the Helsingin hovioikeus held that, having regard to Article 1(2)(a) of Regulation No 44/2001, the application did not fall within the scope of that regulation, but rather within that of Regulation No 2201/2003. Therefore, in accordance with Article 47(1) of Regulation No 2201/2003, the enforcement procedure would be governed, in this case, by Finnish law, namely the TpL.
M. Bohez brought an appeal before the Korkein oikeus (Supreme Court), arguing that the judgment of 16 August 2012 of the Helsingin hovioikeus should be set aside and reiterating the heads of claim put forward at first instance.
In those circumstances the Korkein oikeus decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Is Article 1(2) of … Regulation [No 44/2001] to be interpreted as meaning that cases concerning the enforcement of a penalty payment (astreinte) imposed to ensure compliance with the principal obligation in a case concerning child custody or rights of access are outside the scope of the regulation?
(2)
If the cases set out in the preceding paragraph fall within the scope of … Regulation [No 44/2001], is Article 49 of [that] regulation to be interpreted as meaning that a periodic penalty payment which is enforceable as such in the amount stated in the State in which judgment was given, but whose final amount may be changed on the application or arguments of the party subject to the penalty payment, is enforceable in a[nother] Member State only if its amount has been separately determined in the State in which judgment was given?
(3)
If cases such as those identified above are outside the scope of … Regulation [No 44/2001], is Article 47(1) of … Regulation [No 2201/2003] to be interpreted as meaning that penalties and protective measures concerning child custody and rights of access fall within the enforcement procedure referred to in that provision which is governed by the legislation of the Member State of enforcement, or can they form part of the judgment concerning child custody and rights of access which is enforceable in another Member State under … Regulation [No 2201/2003]?
(4)
When enforcement of a penalty payment is sought in another Member State, is it a requirement that the amount of the penalty payment to be enforced has been finally determined separately in the Member State in which judgment was given, even if … Regulation [No 44/2001] does not apply in the enforcement proceedings?
(5)
If a periodic penalty payment imposed as a means to ensure compliance with rights of access is enforceable in another Member State without the amount of the penalty payment to be enforced having separately been finally determined:
(a)
does the enforcement of the penalty payment nevertheless require a review of whether the failure to comply with rights of access was based on obstacles which it was essential to take into consideration on account of the rights of children, and
(b)
which court has jurisdiction to examine such factors, more specifically,
(i)
is the jurisdiction of the court of the State of enforcement always limited solely to an examination of whether the alleged failure to comply with rights of access has occurred for reasons which are expressly set out in the judgment in the main proceedings, or
(ii)
does it follow from the protection of the rights of children in the Charter of Fundamental Rights of the European Union that the court of the State of enforcement has a more extensive right or obligation to examine whether the failure to comply with rights of access was based on grounds which it was essential to take into consideration in order to safeguard the rights of children?’
Consideration of the questions referred
The first question
By its first question, the referring court asks, in essence, whether Article 1 of Regulation No 44/2001 must be interpreted as meaning that that regulation applies to the enforcement in a Member State of a penalty payment which was imposed in a judgment, given in another Member State, concerning rights of custody and rights of access in order to ensure that the holder of the rights of custody complies with those rights of access.
In that regard, it should be recalled that the scope of Regulation No 44/2001 is limited to ‘civil and commercial matters’. That scope is determined essentially according to the factors characterising the nature of the legal relationships between the parties to the action or the subject-matter of the action (see judgment in Realchemie Nederland, C‑406/09, EU:C:2011:668, paragraph 39 and the case-law cited).
More particularly, as regards interim measures, the Court considers that their inclusion in the scope of Regulation No 44/2001 is determined not by their own nature but by the nature of the rights that they serve to protect (see judgment in Realchemie Nederland, C‑406/09, EU:C:2011:668, paragraph 40 and the case-law cited).
Thus, as regards the enforcement in a Member State of an order to pay a fine, which has been imposed by a court of another Member State, for the purpose of ensuring compliance with a prohibition laid down in a judgment given in that Member State in civil and commercial matters, the Court has stated that the nature of that right of enforcement depends on the nature of the subjective right, for infringement of which enforcement was ordered (see, to that effect, judgment in Realchemie Nederland, C‑406/09, EU:C:2011:668, paragraph 42).
In the present case, it is apparent from Article 1385bis of the Belgian Judicial Code, on the basis of which the court of the State of origin imposed the penalty payment at issue in the main proceedings, that that measure can be seen as an order, made on the application of one of the parties, requiring the other party to pay a sum of money in the event of that other party failing to perform his or her principal obligation. It follows that penalty payments are ancillary to that principal obligation.
Moreover, the documents before the Court make it clear that the purpose of the penalty payment at issue in the main proceedings is to ensure that rights of access granted, in the same judgment, by the court of the State of origin are effective. That penalty payment is intended to exert financial pressure on the person who has custody of the child so that that person cooperates in giving effect to the rights of access.
Article 1(2)(a) of Regulation No 44/2001 expressly excludes from the scope of that regulation the status of natural persons, a notion which encompasses the exercise of parental responsibility over the person of a child.
It was because of that exclusion and in order to fill that gap that Regulations Nos 1347/2000 and 2201/2003 were successively enacted, the scope of each of those regulations encompassing, inter alia, matters of parental responsibility. Those matters include, as Article 1(2)(a) of Regulation No 2201/2003 makes clear, rights of custody and rights of access.
In those circumstances, it must be found that the penalty payment whose enforcement is sought in the main proceedings is an ancillary measure which serves to protect a right which falls not within the scope of Regulation No 44/2001, but rather within that of Regulation No 2201/2003.
The answer to the first question is therefore that Article 1 of Regulation No 44/2001 must be interpreted as meaning that that regulation does not apply to the enforcement in a Member State of a penalty payment which is imposed in a judgment, given in another Member State, concerning rights of custody and rights of access in order to ensure that the holder of the rights of custody complies with those rights of access.
The second question
In view of the answer to the first question, there is no need to answer the second question.
The third question
By its third question, the referring court asks, in essence, whether the recovery of a penalty payment — a penalty which the court of the Member State of origin that gave judgment on the merits with regard to rights of access has imposed in order to ensure the effectiveness of those rights — must be regarded as forming part of the procedure for enforcing those rights, which, under Article 47(1) of Regulation No 2201/2003, is governed by national law, or as forming part of the same scheme as the rights of access that the penalty safeguards so that the latter must, on that basis, be declared enforceable in accordance with the rules laid down by Regulation No 2201/2003.
As is made clear in recital 2 in the preamble to Regulation No 2201/2003, mutual recognition of judgments concerning rights of access has been identified as a priority within the judicial area of the European Union. Since those judgments are regarded as particularly important, they are covered by a special scheme. Regulation No 2201/2003 provides, in Articles 28(1) and 41(1), for a simplified, even automatic, system of enforcement which is based on the principle of mutual trust.
On the basis of that mutual trust and in accordance with Article 26 of Regulation No 2201/2003, those judgments may not be reviewed as to their substance.
In the present case, the penalty payment whose enforcement is sought in the main proceedings was imposed by the court which, under Regulation No 2201/2003, had jurisdiction to give judgment on the merits with regard to rights of access.
It is true that, unlike Regulation No 44/2001, Regulation No 2201/2003, like its predecessor Regulation No 1347/2000, does not include any rule concerning penalty payments. However, as the European Commission has submitted, the fact that that issue was not addressed during the drafting of those regulations is not a ground for inferring that the intention of the EU legislature was to exclude the enforcement of penalty payments from their scope. Such a measure, inasmuch as it contributes to bringing about compliance with judgments given, under those regulations, in relation to rights of access, pertains to the objective of effectiveness pursued by Regulation No 2201/2003.
As has been stated in paragraph 35 of this judgment, the penalty payment at issue in the main proceedings is merely ancillary to the principal obligation which it safeguards, namely the obligation, incumbent on the parent to whom custody has been granted, to cooperate in giving effect to the rights of access granted by the court of the State of origin, which has jurisdiction as to the substance of the case.
Enforcement of that penalty payment is, therefore, directly linked to the existence of both that principal obligation and a breach thereof.
In view of that link, a penalty payment imposed in a judgment concerning rights of access cannot be considered in isolation as a self-standing obligation, but must be considered together with the rights of access which it serves to protect and from which it cannot be dissociated.
Recovery of the penalty payment must therefore fall under the same scheme of enforcement as the rights of access which are to be safeguarded, namely the rules laid down in Articles 28(1) and 41(1) of Regulation No 2201/2003.
If the scheme of enforcement of penalty payments were separated from the scheme applicable to rights of access so as to bring it, as the Finnish and Lithuanian Governments have suggested, within the ambit of the enforcement procedure itself, which, under Article 47(1) of Regulation No 2201/2003, is governed by the law of the Member State of enforcement, that would amount to allowing the court of that State to verify whether there has been a breach of rights of access.
Such a review, which would be conducted in accordance with the rules of the State of enforcement and would entail an assessment, by the court of that State, of the circumstances of the case, would run counter to the intention of the EU legislature to establish, in respect of judgments given in that sphere, a uniform and simplified scheme of enforcement, which does not permit any interference in the substance of the case by the court dealing with enforcement and is based on the trust placed in the court of the State of origin as the court designated as having jurisdiction to take the decision relating to rights of access.
In those circumstances, the answer to the third question is that recovery of a penalty payment — a penalty which the court of the Member State of origin that gave judgment on the merits with regard to rights of access has imposed in order to ensure the effectiveness of those rights — forms part of the same scheme of enforcement as the judgment concerning the rights of access that the penalty safeguards and the latter must therefore be declared enforceable in accordance with the rules laid down by Regulation No 2201/2003.
The fourth question
By its fourth question, the referring court asks whether, in the context of Regulation No 2201/2003, a foreign judgment which orders a periodic penalty payment is enforceable in the State in which enforcement is sought only if the amount of the payment has been finally determined by the courts of the Member State of origin.
It is apparent from the documents before the Court that the periodic penalty payment whose enforcement is sought in the main proceedings was set by the court of the State of origin at EUR 1000 for each breach of the rights of access, subject to a ceiling of EUR 25000. It is also apparent from those documents that, under Article 1385quater of the Belgian Judicial Code, the beneficiary of the penalty payment does not have to apply to the court for a final determination of the amount of the penalty payment prior to it being enforced. Belgian law differs on that point from the rules in force in other Member States, notably from Finnish law, under which, pursuant to Paragraph 19(1) and (2) of the TpL, the beneficiary must ask the court to set the final amount of the penalty payment before being able to apply for enforcement thereof.
In order to address the difficulties that might result from differences between the laws of the Member States on this point, Article 43 of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (OJ 1978, L 304, p. 36) included the rule that a foreign judgment which orders a periodic payment by way of a penalty is to be enforceable in the Member State in which enforcement is sought only if the amount of the payment has been finally determined by the courts of the Member State of origin (see the report by Dr Schlosser on the Convention of 9 October 1978 on the Association of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters and to the Protocol on its interpretation by the Court of Justice (OJ 1979, C 59, p. 71, point 213). That rule has been restated in the same terms in Article 49 of Regulation No 44/2001.
Neither Regulation No 2201/2003 nor its predecessor, Regulation No 1347/2000, includes any equivalent rule. However, as the Advocate General has observed in point 81 of his Opinion, a requirement, in the context of Regulation No 2201/2003, for quantification of a periodic penalty payment prior to its enforcement is consistent with the sensitive nature of rights of access.
As has been recalled in paragraph 40 of this judgment, the importance of rights of access, which are essential for the protection of the right of a child to maintain a personal relationship and direct contact with both his or her parents, which is laid down in Article 24(3) of the Charter, prompted the EU legislature to provide for a specific scheme in order to facilitate enforcement of judgments concerning rights of access. That scheme is based on the principle of mutual trust between Member States in the fact that their respective national legal systems are capable of providing an equivalent and effective protection of fundamental rights, recognised at EU level, in particular, in the Charter (judgment in Aguirre Zarraga, C–491/10 PPU, EU:C:2010:828, paragraph 70), and precludes any review of the judgment given by the court of the State of origin.
Should the holder of rights of access granted in a Member State make an application — on the basis that effect has not been given to those rights — for enforcement in another Member State of a penalty payment whose amount has not been finally determined by the court of the State of origin, it would be contrary to the system put in place by Regulation No 2201/2003 to allow the court of the State of enforcement to be involved in the determination of the final sum to be paid by the person who, since he or she had custody of the child, was obliged to cooperate in giving effect to the rights of access. A determination of that kind entails a review of the breaches alleged by the holder of the rights of access. Such a review, which is of the utmost importance in terms of the best interests of the child, entails not only establishing the number of non-appearances of the child, but also an assessment of the reasons for those breaches. Only the court of the Member State of origin, as the court having jurisdiction as to the substance of the matter, is entitled to make assessments of that kind.
Consequently, in such a situation, it is for the beneficiary of the penalty payment to use the procedural remedies available in the Member State of origin to obtain a document quantifying the final amount of the penalty.
Accordingly, the answer to the fourth question is that, in the context of Regulation No 2201/2003, a foreign judgment which orders a periodic penalty payment is enforceable in the Member State in which enforcement is sought only if the amount of the payment has been finally determined by the courts of the Member State of origin.
The fifth question
In view of the answer to the fourth question, there is no need to answer this question.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (First Chamber) hereby rules:
1.
Article 1 of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as meaning that that regulation does not apply to the enforcement in a Member State of a penalty payment which is imposed in a judgment, given in another Member State, concerning rights of custody and rights of access in order to ensure that the holder of the rights of custody complies with those rights of access.
2.
Recovery of a penalty payment — a penalty which the court of the Member State of origin that gave judgment on the merits with regard to rights of access has imposed in order to ensure the effectiveness of those rights — forms part of the same scheme of enforcement as the judgment concerning the rights of access that the penalty safeguards and the latter must therefore be declared enforceable in accordance with the rules laid down by Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000.
3.
In the context of Regulation No 2201/2003, a foreign judgment which orders a periodic penalty payment is enforceable in the Member State in which enforcement is sought only if the amount of the payment has been finally determined by the courts of the Member State of origin.
[Signatures]
( *1 ) Language of the case: Finnish. |
OPINION OF ADVOCATE GENERAL
SZPUNAR
delivered on 3 February 2015 ( )
Case C‑5/14
Kernkraftwerke Lippe-Ems GmbH
v
Hauptzollamt Osnabrück
(Request for a preliminary ruling from the Finanzgericht Hamburg (Germany))
‛Reference for a preliminary ruling — Legislation of a Member State imposing a duty on nuclear fuel — Compatibility with the national constitution and EU law — Directive 2003/96/EC — Articles 2 and 14 — Directive 2008/118/EC — Article 1 — Article 107 TFEU — Articles 93 EA, 191 EA and 192 EA’
Introduction
1.
Does EU law preclude a Member State from introducing duty on the use of fissile material, to be borne by operators of nuclear power stations? This is, in essence, the question which the Finanzgericht Hamburg (Finance Court, Hamburg) has referred to the Court.
2.
There are several aspects to this question. It concerns the provisions of the TFEU, those of the EAEC Treaty, and the relationship between those treaties. It will also be necessary to consider the harmonised system of excise duty on energy products and electricity.
3.
Finally, or, to be precise, before proceeding any further, it will be necessary to examine the interface between the preliminary reference procedure and procedures for reviewing constitutionality within the Member States.
The legal framework
EU law
4.
Articles 107 TFEU and 267 TFEU and Articles 93 EA, 191 EA and 192 EA are the provisions of primary law which make up the legal framework of this matter. They are sufficiently well-known for it to be unnecessary for me to quote them.
5.
The harmonised system of excise duty on energy products and electricity is based on Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC, ( ) and Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity. ( ) The first directive lays down the general rules of the excise duty system, while the second contains more specific provisions governing the taxation of energy products and electricity.
6.
Articles 1 and 2 of Directive 2003/96 provide:
‘Article 1
Member States shall impose taxation on energy products and electricity in accordance with this Directive.
Article 2
1. For the purposes of this Directive, the term “energy products” shall apply to products:
(a)
falling within CN codes 1507 to 1518, if these are intended for use as heating fuel or motor fuel;
(b)
falling within CN codes 2701, 2702 and 2704 to 2715;
(c)
falling within CN codes 2901 and 2902;
(d)
falling within CN code 2905 11 00, which are not of synthetic origin, if these are intended for use as heating fuel or motor fuel;
(e)
falling within CN code 3403;
(f)
falling within CN code 3811;
(g)
falling within CN code 3817;
(h)
falling within CN code 3824 90 99 if these are intended for use as heating fuel or motor fuel.
2. This Directive shall also apply to: Electricity falling within CN code 2716.
3. When intended for use, offered for sale or used as motor fuel or heating fuel, energy products other than those for which a level of taxation is specified in this Directive shall be taxed according to use, at the rate for the equivalent heating fuel or motor fuel.
In addition to the taxable products listed in paragraph 1, any product intended for use, offered for sale or used as motor fuel, or as an additive or extender in motor fuels, shall be taxed at the rate for the equivalent motor fuel.
In addition to thepeb taxable products listed in paragraph 1, any other hydrocarbon, except for peat, intended for use, offered for sale or used for heating purposes shall be taxed at the rate for the equivalent energy product.
...’
7.
Under Article 14(1)(a) of Directive 2003/96:
‘In addition to the general provisions set out in Directive 92/12/EEC on exempt uses of taxable products, and without prejudice to other Community provisions, Member States shall exempt the following from taxation under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse:
(a)
energy products and electricity used to produce electricity and electricity used to maintain the ability to produce electricity. However, Member States may, for reasons of environmental policy, subject these products to taxation without having to respect the minimum levels of taxation laid down in this Directive ...’
8.
Article 1 of Directive 2008/118 provides:
‘1. This Directive lays down general arrangements in relation to excise duty which is levied directly or indirectly on the consumption of the following goods (hereinafter “excise goods”):
(a)
energy products and electricity covered by Directive 2003/96/EC;
...
2. Member States may levy other indirect taxes on excise goods for specific purposes, provided that those taxes comply with the Community tax rules applicable for excise duty or value added tax as far as determination of the tax base, calculation of the tax, chargeability and monitoring of the tax are concerned, but not including the provisions on exemptions.
3. Member States may levy taxes on:
(a)
products other than excise goods;
...
However, the levying of such taxes may not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’
German law
9.
The duty at issue in the main proceedings was introduced by the law of 8 December 2010 on excise duty on nuclear fuel (Kernbrennstoffsteuergesetz ‘KernbrStG’). ( ) Under that law, nuclear fuel used for the commercial production of electricity is subject to the duty on nuclear fuel. Nuclear fuel is to be understood as referring to plutonium 239 and 241 and uranium 233 and 235. The rate of taxation is fixed per gram of fuel, at EUR 145. The duty falls due when the fuel is used for the first time in a nuclear reactor and a chain reaction is triggered. It is payable by the operator of the plant for producing electricity by nuclear fission (nuclear power station).
The facts of the main proceedings, the questions referred and the proceedings before the Court of Justice
10.
Kernkraftwerke Lippe-Ems GmbH, a company governed by German law, is the operator of a nuclear power station in Lingen (Germany). In a tax return dated 13 July 2011, it declared the sum of EUR 154117745 in respect of duty on nuclear fuel, relating to the fuel used in its reactors in June of that year. At the same time, it brought an action before the referring court against the competent tax authority, Hauptzollamt Osnabrück, challenging the legality of the duty in question under EU law.
11.
In parallel proceedings involving another nuclear power station operator, the referring court sought a decision from the Bundesverfassungsgericht (the German Federal Constitutional Court) concerning the constitutionality of the KernbrStG. The available information indicates that these proceedings are still ongoing.
12.
In those circumstances, the Finanzgericht Hamburg stayed the proceedings and referred the following questions to the Court for a preliminary ruling:
‘(1)
Does the second sentence, in conjunction with the first sentence, [b], of Article 267 TFEU justify a court of a Member State in referring to the Court of Justice of the European Union questions on the interpretation of EU law which have been put to the national court in connection with the legality of a national law, even if the national court not only has doubts concerning the legality of the national law under EU law, but is also certain that the national law is inconsistent with the national Constitution and therefore, in a parallel case, the national court has already sought a decision from the Constitutional Court which, under national law, alone has jurisdiction to decide on the constitutionality of laws, but the Constitutional Court has not yet given a decision?
If question 1 is answered in the affirmative:
(2)
Do Directives 2008/118 and 2003/96, which were adopted for the harmonisation of excise duty and for energy products and electricity in the Union, preclude the introduction of a national duty which is levied on nuclear fuels used for the commercial production of electricity? Does this depend on whether the national duty can be expected to be passed on to consumers by means of the electricity price and, if appropriate, what is meant by “passed on”?
(3)
Can an undertaking resist a duty which a Member State imposes in order to raise revenue on the use of nuclear fuels for the commercial production of electricity, by objecting that the levying of the duty constitutes aid contrary to EU law under article 107 TFEU?
If the answer to the previous question is in the affirmative:
Does the KernbrStG, under which a tax for raising revenue is imposed only on undertakings which produce electricity commercially by using nuclear fuels, constitute State aid within the meaning of Article 107 TFEU? What circumstances are to be taken into account in considering whether other undertakings which are not taxed in the same way are in a similar factual and legal situation?
(4)
Is the levying of the German nuclear fuel duty inconsistent with the provisions of the EAEC Treaty?’
13.
The request for a preliminary ruling was received by the Court on 7 January 2014. Written observations were submitted by the parties in the main proceedings, the German and Finnish Governments and the European Commission. The same parties were represented at the hearing, which took place on 4 November 2014.
Analysis
14.
The first question concerns the admissibility of the reference for a preliminary ruling. I will therefore consider it first, before addressing the substantive questions in the order in which they have been submitted.
The first question
15.
By its first question, the referring court asks in essence whether it may make a reference for a preliminary ruling under Article 267 TFEU, notwithstanding the fact that there are ongoing national proceedings for review of the constitutionality of the provisions of national law which form the legal basis of the individual measure at issue in the main proceedings (as it happens, those proceedings were instituted by the same referring court, but that is of little importance). According to the explanation provided by the referring court, if the Bundesverfassungsgericht were to declare the KernbrStG unconstitutional, without limiting its decision so that it took effect only for the future, the tax return at issue in the main proceedings would be annulled automatically, which would put an end to the main proceedings and deprive the questions referred of any purpose.
16.
It should be observed at the outset that, having regard to the established case-law of the Court, there would not appear to be any room for doubt as to the admissibility of the reference for a preliminary ruling in this matter.
17.
It could certainly be objected that, in the circumstances of the present case, the questions referred are hypothetical, as the issue as to their relevance depends on the outcome of the national proceedings reviewing the constitutionality of the provisions in question: if those provisions are found to be invalid with retrospective effect, the issue of interpretation of EU law will fall away. However, that is not the approach the Court takes to the interaction between the preliminary ruling procedure and procedures for the review of constitutionality.
18.
First, it is apparent from the case-law of the Court that, while it might be convenient for questions of purely national law to be settled at the time the reference is made to the Court, national courts have the widest discretion in referring matters to the Court if they consider that a case pending before them raises questions involving interpretation of provisions of EU law, or consideration of their validity, necessitating a decision on their part. ( )
19.
Thus, a national court which, in a case concerning EU law, considers that a provision of national law is not only contrary to EU law, but also unconstitutional, does not lose the right or escape the obligation, under Article 267 TFEU, to refer questions to the Court on the interpretation or validity of EU law, by reason of the fact that a declaration that a rule of national law is unconstitutional requires a reference to the constitutional court. The effectiveness of EU law would be in jeopardy if the existence of an obligation to refer a matter to a constitutional court could prevent a national court, in a case governed by EU law, from exercising the right conferred on it by Article 267 TFEU to refer questions to the Court concerning the interpretation or validity of EU law, in order to enable it to decide whether or not a provision of national law was compatible with that EU law. ( )
20.
Secondly, according to settled case-law, in proceedings under Article 267 TFEU, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine, in the light of the particular circumstances of each case, both the need for a preliminary ruling to enable it to give judgment, and the relevance of the questions which it submits to the Court. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ( )
21.
In this matter, as I see it, that is not the case. To my mind, there can be no doubt that the questions referred relate to the actual facts of the main proceedings, or that the information provided by the referring court is sufficient.
22.
As to whether the issue raised is hypothetical, given the uncertainty as to the outcome of the parallel proceedings before the constitutional court — both in terms of the decision of the constitutional court itself and its temporal effects — it is clear that the questions referred cannot be characterised as hypothetical simply on the basis that those proceedings are ongoing. Clearly, there are a number of circumstances in which the main proceedings may come to an end before the Court has ruled on the questions referred, perhaps the most obvious being the withdrawal of the application. Among those possible circumstances is a declaration by the constitutional court that the provisions of national law on which the subject matter at issue in the main proceedings are based are invalid. In such a case, it is for the referring court to give due effect to such a decision and, in particular, to determine whether it is appropriate to pursue the request for a preliminary ruling, to amend it, or to withdraw it. ( ) However, in no case may the possibility of such an outcome — the likelihood of which will be even greater where a procedure for review of constitutionality has been set in motion — be enough to render the questions referred hypothetical.
23.
In this regard it is also appropriate to draw the referring court’s attention to the rules in Article 100 of the Rules of Procedure of the Court of Justice, which entered into force on 1 November 2012, as to the circumstances in which the Court remains seised of a request for a preliminary ruling. Under that provision, the withdrawal of a request for a preliminary ruling may be taken into account until notice of the date of delivery of the judgment has been served on the interested persons referred to in Article 23 of the Statute of the Court of Justice of the European Union.
24.
Third, and lastly, the Court has also had occasion to observe that the preliminary ruling procedure and national procedures for review of constitutionality have different purposes and legal effects. A ruling by the constitutional court that a provision of national law is unconstitutional normally leads to the removal of that provision from the legal system. Depending on the national system in question, such removal may take effect ex nunc or ex tunc, or even from a time determined by the constitutional court itself. Where the matter has come before the constitutional court in the context of an actual dispute which is the subject of proceedings before a national court, it may be that the provision in question, although found to be invalid, is applicable to the party which initiated the constitutional review. The situation is entirely different in the case of the preliminary ruling procedure. As the Court has put it, a conflict between a provision of national law and a directly applicable provision of the Treaty (found to exist by the referring court, following the Court’s decision on the order for reference) is to be resolved by the national court applying EU law, if necessary by refusing to apply the conflicting national provision, and not by a declaration that the national provision is invalid, the powers of authorities, courts and tribunals in that regard being a matter to be determined by each Member State. ( )
25.
I should add, although it does not affect the answer to the question referred, that in the present case, according to the information provided by the referring court, the matter before the constitutional court concerns an alleged breach of domestic jurisdictional rules, and thus an issue which differs from that of the possible incompatibility between the KernbrStG and the provisions of EU law referred to above.
26.
I therefore propose that the Court should answer the first question to the effect that a national court may make a reference for a preliminary ruling under Article 267 TFEU, notwithstanding the fact that there are ongoing national proceedings for review of the constitutionality of the provisions of national law which form the legal basis of the individual measure at issue in the main proceedings.
The second question
27.
By its second question, the referring court asks, in essence, whether Directives 2003/96 and 2008/118 preclude the levying of the duty at issue in the main proceedings. It also wishes to ascertain whether the answer to this question depends on whether the duty in question can be passed on to consumers of electricity.
28.
The referring court does not specify, in the wording of the question referred, the provisions of Directives 2003/96 and 2008/118 which could, potentially, preclude the duty. However, it is clear from the order for reference that the issues are, in particular, first, whether nuclear fuel falls within the exemption provided for in Article 14(1)(a) of Directive 2003/96, and second, whether the duty can be considered to be an indirect tax on electricity, which would make it potentially incompatible with Article 1(2) of Directive 2008/118. The effect of the fact that it is possible to pass on the duty in question falls to be considered as part of this second issue.
29.
The second question referred is thus divided into two parts, which I will consider separately.
Directive 2003/96
– Preliminary observations on the applicability of Directive 2003/96 to nuclear fuel
30.
Nuclear fuel is covered by the EAEC Treaty. ( ) It is therefore appropriate to consider whether the taxation of such a product may be governed by provisions of secondary legislation adopted on the basis of the EC Treaty. ( ) If this is answered in the negative, will no purpose be served in analysing the first part of the second question.
31.
When Directive 2003/96 was adopted, the relationship between the EC and EAEC Treaties were governed by Article 305(2) of the EC Treaty, which provided that ‘[t]he provisions of [the EC Treaty] shall not derogate from those of the [EAEC Treaty]’. ( ) However, this rule, which gives the EAEC Treaty the same legal status as the EC Treaty, does not seem to me to resolve the question of the applicability of provisions of secondary legislation adopted pursuant to the EC Treaty within the field covered by the EAEC Treaty. There are two possible approaches to this issue. ( )
32.
The first consists in treating the two communities as completely separate and autonomous in their respective fields. On that approach, acts adopted on the basis of the EC Treaty would not be applicable within the area covered by the EAEC Treaty, and vice versa. Taken in conjunction with the principle of conferral of powers, this would mean that all legislative action falling within the area covered by one of the treaties would require a legal basis within that same treaty. However, the EAEC Treaty does not cover nearly as much ground as the EC Treaty. As a sectoral treaty, it was limited from the outset to those legal instruments which, at the time of its adoption, seemed necessary for the development of the European nuclear industry (for example, it does not provide for any general power to harmonise national legislation). Furthermore, unlike the EC Treaty, its scope has not been substantially expanded by successive amending treaties.
33.
The adoption of such a strictly ‘dualist’ approach would thus give rise to serious problems, at a time when EU law covers areas as varied as competition, tax and the environment, and there is no justification for excluding goods or activities covered by the EAEC Treaty from intervention by the European legislature.
34.
I prefer the second approach, according to which the scope of the EC Treaty, which is intended to be of general application, covers all goods, services and activities, whereas the EAEC Treaty lays down specific rules only if the characteristics of the nuclear industry so require. On this approach, secondary legislation adopted on the basis of the EC Treaty may be applied to goods and activities covered by the EAEC Treaty, unless that treaty provides otherwise. I am aware of the legal problems that this approach would also entail, but it seems to me that these are easily surmountable, and in any event they have no impact on the present case.
35.
Furthermore, this approach appears to be supported by case-law. In opinion 1/94, the Court held that ‘[s]ince the [EAEC] Treaty contains no provisions relating to external trade, there is nothing to prevent agreements concluded pursuant to Article 113 of the EC Treaty from extending to international trade in [EAEC] products’. ( ) In relation to the ECSC Treaty, the Court has held that the EEC Treaty ‘can apply to products covered by the ECSC Treaty in so far as the matters arising are not the subject of provisions in the ECSC Treaty’. ( ) It seems to me that that can perfectly well be applied to the EAEC Treaty. It is true that the Court has recently linked the applicability of a provision of the EC Treaty in an area covered by the EAEC Treaty on the basis that the provision constitutes a general rule of EU law. ( ) Nevertheless, it seems to me that the situation under consideration in that case was different from that at issue in the case before the referring court. First, it concerned the direct application of a provision of the EC Treaty within the area covered by the EAEC Treaty, and not whether secondary legislation adopted on the basis of the EC Treaty may be applied to goods covered by the EAEC Treaty. Secondly, the fact that the court held that such a fundamental principle of the European legal order as that prohibiting discrimination on grounds of nationality was applicable in the area covered by the EAEC Treaty does not necessarily mean, in my view, that only general principles laid down in the EC Treaty may be applied in situations governed by the EAEC Treaty.
36.
Finally, the approach that I advocate seems to have been followed in the practice adopted by the institutions for a considerable time. Indeed, acts adopted solely on the basis of the EC Treaty, such as Directive 85/337/EEC, ( ) Directive 98/34/EC ( ) or, in the area of tax, Directive 2006/112/EC, ( ) apply without distinction to goods and activities covered by the EC Treaty (now the TFEU) and the EAEC Treaty. Accordingly I do not see any formal obstacle to the proposition that the provisions of Directive 2003/96 may also, in theory, be applicable to nuclear fuel.
– Direct application of Directive 2003/96 to nuclear fuel
37.
Article 1 of Directive 2003/96 requires Member States to impose excise duty on energy products and electricity. Energy products are defined in Article 2(1) of the directive, by reference to combined nomenclature codes ( ) relating to a certain number of products, essentially coal, natural gas and mineral oils, as well as certain derived products. Article 1(2) adds electricity to this list. Nuclear fuel as referred to in the KernStG thus does not figure among the listed products.
38.
Under the second and third subparagraphs of Article 2(3) of Directive 2003/96, all products used as motor fuel, and all other hydrocarbons used as heating fuel, except for peat, are also subject to the duty. ( )
39.
Thus, in stating the products which are subject to excise duty, Article 2 of Directive 2003/96 also defines the scope of the directive. ( )
40.
Article 14(1)(a) of Directive 2003/96 exempts ‘energy products and electricity used to produce electricity’ from the duty. In this case, therefore, it is necessary to determine whether this exemption covers nuclear fuel. For the reasons set out below, I do not think that this is the case.
41.
First, Article 14(1)(a) of Directive 2003/96 refers expressly to ‘energy products’. This term is given a precise definition in Article 2(1) of the directive in an exhaustive list of products which are clearly designated by their combined nomenclature codes. That being the case, the term cannot have a different meaning in Article 14 from that given to it in Article 2. It would be an affront to legal logic to contend that the legislature had used the same term, in the same text, with two different meanings.
42.
It is of course true that, in addition to the products listed in Article 2(1) of Directive 2003/96, excise duty applies to other products used as motor fuel and other hydrocarbons used as heating fuel. Logically, the exemptions provided for in Article 14 of that directive must therefore also apply to those two categories of products, namely hydrocarbons used as heating fuel to produce electricity. However, the nuclear fuel at issue in this case is not a hydrocarbon but consists of specific isotopes of plutonium and uranium. ( )
43.
Secondly, as I have already observed in point 32 of this opinion, the scope of Directive 2003/96 is defined by Article 2. It follows that Article 14 cannot apply, beyond that scope, to products not falling within it, exempting them from a duty to which they were never subject.
44.
It is thus clear in my opinion that Directive 2003/96, and in particular Article 14(1)(a), is not applicable to nuclear fuel.
– Application by analogy
45.
The referring court also raises the issue of whether Directive 2003/96, or at least Article 14(1)(a) of that directive, may be applied to nuclear fuel by analogy. I must admit that I find it difficult to see how this could be the case. The provision referred to creates an exemption from excise duty and thus cannot be applied, even by analogy, to products which are not subject to the duty. It would first be necessary to bring nuclear fuel within the scope of Directive 2003/96. In my view, however, it is utterly inconceivable for a product to be subjected, by analogy, to a tax which is not applicable to that product. Moreover, there is no valid analogy to be drawn in this respect between nuclear fuel and the products subject to excise duty. The object of Directive 2003/96 is not to tax products used to produce electricity, but to tax energy products, as defined in the directive, regardless of how they are used. Accordingly, the fact that nuclear fuel was not included within those rules does not represent a lacuna which must be filled by having recourse to analogy.
46.
At the very most, it could be suggested that the line of case-law established in Braathens ( ) could be applied by analogy to the present case. The reasoning would be as follows: In that judgment, the Court was required to interpret a provision of the directive which preceded Directive 2003/96, ( ) concerning the exemption of fuel supplied for the purpose of air navigation (now Article 14(1)(b) of Directive 2003/96). The Court held that such an exemption freed the exempt products not only from excise duty, but also from other national taxes which might normally be imposed on excise goods. ( ) The Court stated that such national taxes would render the exemption laid down by Directive 92/81 entirely ineffective. ( ) That same exemption from national taxes should apply to energy products used to produce electricity, which are exempt from excise duty under Article 14(1)(a) of Directive 2003/96. If energy products used to produce electricity cannot be subject to national taxes, the same must apply, by analogy, to other products which, although not energy products within the meaning of Directive 2003/96, are also used to produce electricity, such as nuclear fuel.
47.
It seems to me that this reasoning is flawed, however. Article 14(1)(a) of Directive 2003/96 does not lay down any general principle exempting products used to produce electricity. The directive establishes a harmonised system of taxation for energy products and electricity, and the exemption of energy products used to produce electricity has to be viewed in that strict context. ( )Braathens concerned a product falling within the area covered by Directive 92/81, which was expressly exempted. Its purpose was simply to ensure the effectiveness of that exemption, not to broaden its scope. A wider interpretation would encroach on the scope of Directive 2003/96, interfere with its objective of harmonisation and infringe the power of Member States to impose indirect taxes outside the harmonised area, a power which is reaffirmed in Article 1(3)(a) of Directive 2008/118.
48.
In conclusion, I am of the opinion that a duty on the use of nuclear fuel by nuclear power stations does not fall within the scope of Directive 2003/96, and consequently that directive does not preclude the imposition of such a duty.
Directive 2008/118
49.
By the second part of its second question, the referring court asks whether the duty at issue may be regarded as an indirect tax on electricity. I should say at the outset that, if that were the case, the duty would be contrary to Directive 2008/118, read in conjunction with Directive 2003/96. However, I do not think that the duty can be characterised as an indirect tax on electricity.
– Whether it is possible to introduce supplementary national taxes on excise goods
50.
Article 1(2) of Directive 2008/118 permits Member States to levy other indirect taxes on excise goods (including electricity) for specific purposes, provided that those taxes comply with the EU tax rules applicable to excise duty or value added tax. Those rules concern, amongst other things, determination of the tax base, calculation of the tax, chargeability and monitoring.
51.
According to the referring court, the duty at issue in the main proceedings is not levied for specific purposes, as the associated revenue is allocated to the federal budget. In any event, assessing the purpose of a duty is a matter for the national authorities and courts, although they must take into account the criteria laid down in the case-law of the Court, which are extremely strict. ( ) If the national court finds that the duty in question does not meet those criteria, it cannot be said to comply with Article 1(2) of Directive 2008/118.
52.
As to compliance with applicable EU tax rules, it seems to me that the duty at issue in the main proceedings does not satisfy this requirement either. In the main proceedings, of course, the only relevant rules are those relating to excise duty, as the duty at issue is not comparable to value added tax in any respect.
53.
It is undoubtedly true that, according to the case-law of the Court, Article 1(2) of Directive 2008/118 requires compliance only with the general scheme of taxation under EU law. ( ) Nevertheless, even in terms of its general scheme, the duty at issue does not seem to me to comply with the rules applicable to excise duty on electricity.
54.
First, it clearly departs from those rules in so far as concerns the tax base. The tax base for excise duty is the product subject to excise duty itself — in other words, a certain amount of electricity — whereas the tax base for the duty at issue is nuclear fuel — in other words a factor in the production process — and it might be possible to establish the relationship between that factor and a given amount of electricity only by means of a further calculation.
55.
Secondly, excise duty on electricity is not chargeable until the electricity is supplied to consumers, ( ) whereas the duty at issue becomes chargeable the moment the nuclear fuel is used in the reactor, that is, even before the electricity is produced. This is not merely a difference of timing, as the identity of the person liable for payment is also different. In the case of excise duty, the person liable for payment is the distributor or redistributor of the electricity, whereas in the case of the duty at issue, it is the producer. This also means that, if the electricity is exported to another Member State, the duty at issue is collected in the State of production (Germany), whereas excise duty on the electricity is collected in the State of consumption. ( )
56.
Third, and lastly, supervision of payment of the duty at issue requires the person liable to complete a tax return at the time of the chargeable event. However, it may be inferred from the case-law cited above ( ) that Article 1(2) of Directive 2008/118 does not allow taxes to be introduced which require operators to attend to formalities other than those laid down by EU rules relating to excise duty or value added tax.
57.
I am therefore of the opinion that if the duty at issue in the main proceedings were to be regarded as an indirect tax on electricity, it would not meet the requirements set out in Article 1(2) of Directive 2008/118. However, I do not believe it can be regarded as such.
– Whether the duty at issue may be characterised as an indirect tax on electricity
58.
The referring court raises the issue of whether the duty in question may be regarded as an indirect tax on electricity, on the basis that it is proportionate to the quantity of electricity produced using a given quantity of nuclear fuel. However, I do not think that proportionality of that kind is sufficient in that regard.
59.
In order for a tax to be regarded as a tax on a specific product, it must be imposed on consumption of that product. This may occur either directly ( ) or indirectly, by incorporation of the tax in the product price. Taxes levied at the production stage, as the duty at issue might be if it were regarded as a tax on electricity, can fall only into the second category, as they apply at a time when the taxed product does not yet exist.
60.
The duty at issue in the main proceedings clearly constitutes an expense forming part of the production costs of nuclear power stations. Those costs form part of the price which those power stations charge for electricity. However, this does not seem to me to be sufficient for the duty at issue to be treated as a tax on electricity. As the Commission rightly pointed out, such reasoning would lead to all taxes and duties borne by producers of electricity being treated as indirect taxes on electricity, such as corporation tax, the basis for the assessment of which (namely taxable profit) is also proportionate, to some extent, to the amount of electricity produced. ( )
61.
In order for a tax levied in advance (at the production stage) to be regarded as being imposed on the consumption of a product, the exact amount of the tax must be included in the price of each amount of the product released for consumption, so that the tax is neutral for the producer or distributor who, as the taxable person, serves only as a conduit between the consumer, who bears the economic burden of the tax, and the tax authority.
62.
This does not seem to be possible, however, in the case of a tax which is levied only on some electricity producers. Electricity is a particular kind of product, which exists only in the form of voltage in the grid. Once it has been produced and has entered the grid, it is no longer possible to distinguish the electricity generated by a particular producer from that generated by another. While the prices charged by individual producers for supplying electricity to the grid may therefore differ to a certain extent, the price of its subsequent supply to consumers cannot reflect this difference. Consumers pay a single price for electricity generated by all producers. It would therefore be impossible to identify the amount of the duty at issue paid by consumers in respect of a given amount of electricity. The duty cannot therefore be characterised as a tax on electricity.
63.
Finally, as regards the last issue raised in the referring court’s second question, the decisive factor is not whether it is possible in abstracto to pass the duty on to consumers (and thus characterise it as an indirect tax), but the fact that it is impossible to pass it on in the specific case of the electricity market.
64.
Accordingly, the duty at issue in the main proceedings is not an indirect tax on electricity, and it is not therefore covered by Article 1(2) of Directive 2008/118. Rather, it is a tax on a product other than excise goods within the meaning of Article 1(3)(a). That provision simply requires that the levying of such a tax must not give rise to any formalities connected with the crossing of frontiers. In so far as the duty at issue does not involve any such formalities, it is not precluded by Directive 2008/118.
Answer to the second question
65.
In my opinion, having regard to the considerations set out above, the second question should be answered to the effect that Directives 2003/96 and 2008/118 do not preclude a duty which is levied on nuclear fuel and which is imposed on the use of that fuel for the production of electricity.
The third question
66.
By its third question, the referring court asks first, in essence, whether a person liable for payment of the levy at issue in the main proceedings could challenge its application on the ground that it constitutes State aid which is incompatible with the internal market within the meaning of Article 107(1) TFEU. It then asks whether the duty may in fact be characterised as State aid. Notwithstanding the order in which the referring court has presented its questions, I think it is appropriate to begin with this second point.
67.
According to settled case-law of the Court, a tax measure may constitute State aid within the meaning of Article 107(1) TFEU. ( ) This will be the case where the beneficiaries of the tax measure are granted favourable tax treatment as a result of the mitigation of burdens normally borne by the budget of an undertaking. Furthermore, the measure must be of such a kind as to favour ‘certain undertakings or the production of certain goods’ over others, which, in the light of the objective pursued by the regime in question, are in a comparable legal and factual situation. ( ) Hence, in assessing such measures, among the four cumulative criteria set out in the FEU Treaty provision in question, it is that of selective advantage which is crucial.
68.
According to the Court, the determination of the reference framework has a particular importance in the case of tax measures, since the very existence of an advantage may be established only when compared with ‘normal’ taxation. ( ) It is therefore appropriate to investigate whether a normal system of taxation exists, under which other producers of electricity are treated favourably by comparison with nuclear power stations.
69.
It is common ground that no general system under which tax is payable prior to the production of electricity exists under German law. However, in certain circumstances, the imposition of a new tax on only some of the undertakings whose situation is comparable can have the same effect as an exemption from an existing tax. ( ) Is it, then, possible to conceive of a general system of taxation under which all producers of electricity are taxed in the same way on the electricity they produce? ( )
70.
Electricity has the particular characteristic that it can be produced using several very different techniques: combustion of fossil fuels (coal, natural gas or oil) or their derived products, nuclear reaction, or the use of various renewable sources of energy — water, wind, solar energy, geothermal energy etc.
71.
It therefore seems to me to be impossible to create a system of advance taxation which would take account of all those production processes equally. ( ) In other words, the undertakings producing electricity using these different technologies are not in a comparable factual situation as regards the potential for advance payment of tax. All they have in common is their final product — electricity. As I have stated in point 64 of this Opinion, the duty at issue is not a tax, even an indirect tax, on electricity. The imposition of such a tax on electricity at the production stage would also be contrary to the combined provisions of Directives 2003/96 and 2008/118. ( )
72.
The fact that there is no advance tax on the production of electricity by means other than nuclear power does not, therefore, constitute an advantage with respect to a general system of taxation, as no such system can exist. The duty at issue in the main proceedings is thus a tax of a specific kind, which may only be applied to the nuclear sector.
73.
Given that such a general system under which producers of electricity are taxed in advance is not a conceivable reference framework, the fact that no such system is imposed on producers cannot be regarded as mitigating a burden normally borne by the budget of an undertaking.
74.
Producers of electricity which use a source of energy other than nuclear fuel thus do not benefit, in relation to a general system, from special tax treatment which could be characterised as State aid. Consequently, it is not necessary — nor is it relevant — to consider whether the undertakings in question are in a factual and legal situation which, in the light of the objectives pursued by a system of taxation used as a reference framework, is comparable.
75.
It should also be added that the various methods of producing electricity also differ in terms of their environmental costs, their effect on the labour market, the extent to which they are detrimental to human health, public security, etc. Thus, even though undertakings using these different methods are in competition with each other to a certain extent, as their product — electricity — is the same, ( ) they are not in the same factual situation. Public authorities may therefore take measures which they consider appropriate in relation to one of those electricity production sectors, and this will not automatically constitute selective State aid benefiting the other sectors. ( )
76.
Accordingly the third question should be answered to the effect that the fact that the duty at issue in the main proceedings is applicable only to undertakings producing electricity commercially using nuclear fuel does not constitute State aid within the meaning of Article 107(1) TFEU. It is therefore unnecessary to examine whether an undertaking could challenge such aid with a view to claiming exemption from the tax.
The fourth question
77.
By its fourth question, the referring court asks whether the provisions of the EAEC Treaty preclude the duty in question, without specifying, in the wording of the question, which particular provisions are at issue. However, it is apparent from the grounds of the order for reference that the question relates specifically to Articles 93 EA, 191 EA and 192 EA.
78.
On reading those grounds, it seems to me that the referring court’s doubts as to whether the duty at issue complies with those EAEC provisions are based on the fact that, under national law, the duty is regarded and classified as a tax on a product — namely nuclear fuel. However, in reality that duty, which is calculated on the basis of the quantity of nuclear fuel, is of a hybrid nature. It is levied at the time the fuel is used to produce electricity, this being the only taxed use. ( ) The operator of the nuclear power station is the person liable for payment, and also bears the economic burden of the tax. At the same time, the taxed nuclear fuel is essential to the operation of nuclear power plants, as there is no alternative product. In other words the operator of a power station has the choice of either using the taxed product, or of ceasing its activity. From that point of view, the duty at issue is more akin in its effect to a tax on the economic activity of operators of nuclear power stations, than to a true tax on a product. When seen in that light, in my opinion there is less doubt as to whether the duty complies with the provisions of the EAEC Treaty cited above.
79.
First, Article 93 EA prohibits all customs duties, charges having equivalent effect and quantitative restrictions on imports and exports between Member States in respect of the products listed in Annex IV to the EAEC Treaty, which include various nuclear fuels. This article is thus, broadly speaking, the equivalent of what are now Articles 30 TFEU and 34 TFEU. According to the observations of the applicant in the main proceedings, as all nuclear fuel used in Germany is imported, the duty at issue applies only to imported products, increasing the cost of using those products. It is thus a charge which is equivalent in effect to a customs duty.
80.
I do not think, however, that it is useful to assess the duty at issue in the light of Article 93 EA. As I observed in point 78 above, it should be regarded as a tax on the production of electricity, and it is, at most, the cost of that activity which is increased by the duty. ( ) The purpose of Article 93 EA, however, is to protect free trade in goods, not to protect the activities undertaken using those goods.
81.
Furthermore, I very much doubt that it is possible to speak of genuine trade or movement in this context. Among the products governed by the EAEC Treaty, nuclear fuel (‘special fissile materials’) has a special status. Under Articles 57 EA to 59 EA, the agency created by the EAEC Treaty has a monopoly on the acquisition of such materials within the Community, and, under Article 86 EA, they remain the property of the Community. Article 87 EA provides that Member States, persons and undertakings have only a right of use and consumption.
82.
Finally, as the German government stated in its observations, a tax which is manifestly of a fiscal nature and is not levied by reason of the frontiers of the Member State which introduced it being crossed, is part of a general system of internal taxation for the purposes of Article 110 TFEU, and is not a tax equivalent in effect to a customs duty. The fact that such a tax is actually imposed solely on imported products, because there is no domestic production, is not such as to justify its classification as a charge having equivalent effect, rather than a domestic tax, since it is part of a general system of internal taxation applied systematically to products in accordance with objective criteria irrespective of the origin of the products. Article 110 TFEU cannot be invoked against domestic taxes on imported products where there is no similar or competing domestic production. In particular, it does not provide a basis for censuring the excessiveness of the level of taxation which Member States might adopt for particular products, in the absence of any discriminatory or protective effect. ( )
83.
The duty at issue in the main proceedings is not linked to the crossing of frontiers and applies equally to all the goods concerned, which are, as the applicant in the main proceedings has stated in its observations, all imported, as there is no domestic production. Accordingly, this duty should be regarded as a domestic duty and not as a charge equivalent in effect to a customs duty. Given its non-discriminatory nature, it cannot be considered to be contrary to Article 110 TFEU, and there is no need to analyse whether this provision is applicable within the field covered by the EAEC Treaty.
84.
I am therefore of the opinion that the duty at issue is not covered by Article 93 EA.
85.
Secondly, Article 191 EA provides that within the territories of the Member States, the Community enjoys the privileges and immunities set out in the Protocol on the privileges and immunities of the European Union. The referring court questions whether that article, read in conjunction with the first paragraph of Article 3 of that protocol, which exempts the EU and its assets from all direct taxes, precludes the duty at issue by reason of the rules governing the ownership of special fissile materials, mentioned in point 81 of this Opinion.
86.
In my opinion, the answer is necessarily in the negative. Once again, the duty at issue applies to the activity of operators of nuclear power stations after they have acquired a right of use in respect of nuclear fuel. It is those operators who are liable for payment of the duty and they bear the economic burden, the Community not being concerned in any way.
87.
At the hearing, the applicant in the main proceedings once again asserted that, under German tax law, excise goods serve as security for the payment of the tax imposed on them. Accordingly the Community, as the owner of nuclear fuel, could be called on as a guarantor for payment of the duty owed by the person liable, which would infringe Article 3 of the Protocol (No 7) on the privileges and immunities of the European Union. Even if that were the case — which the Court is not in a position to verify in these proceedings, as no details are provided in that regard either in the order for reference or in the parties’ observations — I do not think that any finding that the system for guaranteeing payment of a national tax is incompatible with EU law could lead automatically to the tax itself being regarded as invalid under EU law. At the very most, it is the guarantee that would be disregarded, where necessary, by the national courts.
88.
Accordingly, Article 191 EA does not, in my opinion, preclude the duty at issue.
89.
Thirdly, under the second paragraph of Article 192 EA, Member States are required to abstain from any measure which could jeopardize the attainment of the objectives of the EAEC Treaty. Among the objectives of the treaty, it is that of ensuring that all users receive a regular and equitable supply of nuclear fuels, set out in Article 2(d) EA, which the referring court mentions specifically in the order for reference.
90.
However, as I have already observed, the duty at issue does not relate to the supply of nuclear fuel, but to its use. Furthermore, as the referring court itself observes, the objective set out in Article 2(d) EA is given more concrete expression in Article 52 EA. Besides establishing an agency whose principal function is precisely to ensure supply, that article prohibits all practices designed to ensure a privileged position for certain users. Plainly, the duty at issue does not have that effect.
91.
More generally, Article 1 EA assigns to the Community the general task of creating the conditions necessary for the speedy establishment and growth of nuclear industries. The steps to be taken in carrying out that task are set out in Article 2 EA. Nowhere does the EAEC Treaty require Member States to introduce or develop nuclear energy as such, still less nuclear energy exempt from all taxes.
92.
I therefore consider that the provisions of the EAEC Treaty do not preclude a tax on nuclear fuel, imposed on the use of such fuel for the purposes of producing electricity.
Conclusion
93.
In the light of the above, I propose that the Court should answer the Finanzgericht Hamburg’s questions as follows:
(1)
A national court may make a reference for a preliminary ruling under Article 267 TFEU notwithstanding the fact that there are ongoing national proceedings for review of the constitutionality of the provisions of national law which form the legal basis of the individual measure at issue in the main proceedings.
(2)
Neither Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity, nor Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC, preclude a duty which is levied on nuclear fuel and which is imposed on the use of that fuel for production of electricity.
(3)
The fact that such a duty is applicable only to undertakings producing electricity commercially using nuclear fuel does not constitute State aid within the meaning of Article 107(1) TFEU. It is therefore unnecessary to consider whether an undertaking could challenge such aid with a view to claiming exemption from the tax.
(4)
The provisions of the EAEC Treaty do not preclude such a duty.
( ) Original language: French.
( ) OJ 2009 L 9, p. 12.
( ) OJ 2003 L 283, p. 51.
( ) BGBl. 2010 I, p. 1804.
( ) See, in particular, judgments in Melki and Abdeli (C‑188/10 and C‑189/10) EU:C:2010:363, paragraph 41) and A (C‑112/13, EU:C:2014:2195, paragraph 35 and the case-law cited).
( ) See, in particular, judgments in Melki and Abdeli (EU:C:2010:363, paragraph 45) and A (EU:C:2014:2195, paragraph 38).
( ) See, in particular, in the context of a declaration of unconstitutionality of the same national provisions which were the subject of the order for reference, judgment in Filipiak (C‑314/08, EU:C:2009:719, paragraphs 40 to 42).
( ) See, to this effect, judgment in Cartesio (C‑210/06, EU:C:2008:723, paragraph 96) and order in Nationale Loterij (C‑525/06, EU:C:2009:179, paragraph 11). See also paragraph 30 of the recommendations to national courts and tribunals in relation to the initiation of preliminary ruling proceedings (OJ 2012, C 338, p. 1).
( ) See judgment in Filipiak (EU:C:2009:719, paragraph 82).
( ) It constitutes ‘special fissile materials’ according to the terminology of the EAEC treaty.
( ) Directive 2003/96 was adopted before the entry into force of the Treaty of Lisbon. Its legal basis is Article 93 EC (now Article 113 TFEU).
( ) Currently, following the entry into force of the Treaty of Lisbon, there is an analogous provision in Article 106a(3) of the EAEC Treaty. Article 106a(1) contains an express list of the Articles of the TFEU which apply to the EAEC Treaty, but this relates solely to institutional provisions.
( ) See Cusack, T. F., ‘A Tale of Two Treaties: an Assessment of the Euratom Treaty in Relation to the EC Treaty’, Common Market Law Review, No 40/2003, pp. 117 to 142 (particularly p. 127).
( ) EU:C:1994:384, paragraph 24.
( ) Judgment in Hopkins and Others (C‑18/94, EU:C:1996:180, paragraph 14 and the case-law cited).
( ) Judgment in ČEZ (C‑115/08, EU:C:2009:660, paragraphs 87 to 91).
( ) Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment (OJ 1985 L 175, p. 40).
( ) Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations (OJ 1998 L 204, p. 37).
( ) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).
( ) Within the meaning of Commission Regulation (EC) No 2031/2001 of 6 August 2001, amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 2001 L 279, p. 1).
( ) The first subparagraph of Article 2(3) of Directive 2003/96 does not expand the range of products subject to excise duty. It concerns only the method of determining the rate of tax in respect of products other than those for which the level of taxation is specified in the directive.
( ) Its scope is also limited by the derogations provided for by Article 2(4) of Directive 2003/96, which are not relevant to the present case.
( ) Furthermore, in my view, it is not even a fuel. In reality the term ‘nuclear fuel’ is an oversimplification, as the actual operation of a nuclear power station is based on a self-sustained chain reaction and not, as in a conventional power station, the combustion of a product.
( ) C‑346/97, EU:C:1999:291.
( ) Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on mineral oils (OJ 1992 L 316, p. 12).
( ) This possibility arises from Article 1(2) of Directive 2008/118 (see also point 51 of this Opinion).
( ) See judgment in Braathens (EU:C:1999:291, paragraph 24).
( ) See points 41 to 44 of this Opinion.
( ) Judgment in Transportes Jordi Besora (C‑82/12, EU:C:2014:108, paragraphs 27 to 32).
( ) Judgment in EKW and Wein & Co (C‑437/97, EU:C:2000:110, paragraph 47).
( ) First subparagraph of Article 21(5) of Directive 2003/96. See also Commission v Poland (C‑475/07, EU:C:2009:86, paragraph 50).
( ) Judgment in Commission v Poland (EU:C:2009:86, paragraph 56).
( ) Judgment in EKW and Wein & Co (EU:C:2000:110, paragraph 46).
( ) As was the case in Braathens (EU:C:1999:291), which concerned a tax levied after consumption of the taxed goods, directly from the consumer, who was also the tax payer. It is, moreover, this feature which, in my view, makes it difficult to adopt the existence of a direct and inextricable link between the consumption of the taxed product and the chargeable event, as was found to exist by the Court in Braathens, as the criterion to be used in characterising the duty at issue in the present proceedings, which concern a duty levied before consumption on the producer.
( ) While, in the traditional classification, corporation tax is a direct tax, as soon as it is applied to a product, such as electricity, it becomes indirect. The reasoning is the same as that applied to the duty at issue.
( ) Judgment in Banco Exterior de España (C‑387/92, EU:C:1994:100, paragraph 14).
( ) Judgment in Commission and Spain v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraphs 71 and 75 and the case-law cited).
( ) Judgment in Portugal v Commission (C‑88/03, EU:C:2006:511, paragraph 56).
( ) Judgment in Ferring (C‑53/00, EU:C:2001:627, paragraph 20).
( ) I do not share the opinion of the applicant in the main proceedings, set out in its observations, to the effect that only producers of electricity which do not generate emissions of carbon dioxide (CO2) (namely, those using nuclear power and renewable energy sources) should be included in this comparison. Whether CO2 is emitted or not has nothing to do with advance payment of tax. By the same logic, nuclear energy, which generates ‘nuclear waste’ requiring expensive processing, could be distinguished from renewable sources, which are neutral from an environmental point of view.
( ) It should be added that, since fossil fuels are energy products within the meaning of Directive 2003/96, their taxation is prohibited by Article 14(1)(a) of that directive.
( ) See points 50 to 57 of this Opinion.
( ) Only to a certain extent, as the electricity market is not fully competitive. Like any energy market, it is also strongly dependent on political decisions.
( ) An example of such a measure is the system of greenhouse gas emission allowances, which addresses the environmental impact of the combustion of fossil fuels.
( ) Thus, other possible uses of the same material, such as medical or scientific uses, are not subject to the duty at issue.
( ) The situation is thus the converse of that considered in Schöttle (20/76, EU:C:1977:26), cited by the applicant in the main proceedings, in which a tax on an activity (transport) was characterised as an indirect tax on goods.
( ) See, in particular, judgment in De Danske Bilimportører (C‑383/01, EU:C:2003:352, paragraphs 34, 35 and 38). |
JUDGMENT OF THE GENERAL COURT (Sixth Chamber)
30 September 2015 ( *1 )
‛Community trade mark — Opposition proceedings — Application for the Community figurative mark BASmALI — Earlier non-registered trade mark or earlier sign BASMATI — Relative ground for refusal — Article 8(4) of Regulation (EC) No 207/2009’
In Case T‑136/14,
Tilda Riceland Private Ltd, established in Gurgaon (India), represented by S. Malynicz, Barrister, N. Urwin and D. Sills, Solicitors,
applicant,
v
Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by P. Geroulakos and P. Bullock, acting as Agents,
defendant,
the other party to the proceedings before the Board of Appeal of OHIM being
Siam Grains Co. Ltd, established in Bangkok (Thailand),
ACTION brought against the decision of the Fourth Board of Appeal of OHIM of 18 December 2013 (Case R 1086/2012-4) relating to opposition proceedings between Tilda Riceland Private Ltd and Siam Grains Co. Ltd,
THE GENERAL COURT (Sixth Chamber),
composed of S. Frimodt Nielsen, President, F. Dehousse (Rapporteur) and A.M. Collins, Judges,
Registrar: J. Palacio González, Principal Administrator,
having regard to the application lodged at the Court Registry on 24 February 2014,
having regard to the response lodged at the Court Registry on 23 July 2014,
further to the hearing on 21 April 2015,
gives the following
Judgment
Background to the dispute
On 4 November 2003, Siam Grains Co. Ltd filed an application for registration of a Community trade mark with the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) pursuant to Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1), as amended (replaced by Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1)).
Registration as a mark was sought for the following figurative sign:
The goods in respect of which registration was sought are in Class 30 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond to the following description: ‘Long rice’.
The Community trade mark application was published in Community Trade Marks Bulletin No 37/2004 of 13 September 2004.
On 10 December 2004, United Riceland Private Ltd, now Tilda Riceland Private Ltd, the applicant, filed a notice of opposition pursuant to Article 42 of Regulation No 40/94 (now Article 41 of Regulation No 207/2009) to registration of the trade mark applied for in respect of the goods referred to in paragraph 3 above.
The opposition was based on the earlier non-registered trade mark or the earlier sign BASMATI, used in the course of trade in relation to rice.
The ground relied on in support of the opposition was that set out in Article 8(4) of Regulation No 40/94 (now Article 8(4) of Regulation No 207/2009). The applicant claimed, in particular, that it was entitled under the applicable law in the United Kingdom to prevent, by means of an action for passing off, use of the mark applied for.
On 28 January 2008, the Opposition Division rejected the opposition in its entirety. It found, in particular, that the applicant had failed to submit documents describing how the rice which that company exports to the United Kingdom is marketed. Accordingly, the applicant had failed to prove that it had acquired the goodwill necessary to succeed under the law of passing off in the United Kingdom.
On 20 March 2008, Tilda Riceland Private filed a notice of appeal with OHIM, pursuant to Articles 57 to 62 of Regulation No 40/94 (now Articles 58 to 64 of Regulation No 207/2009), against the decision of the Opposition Division.
By decision of 19 March 2009, the First Board of Appeal of OHIM dismissed the appeal. In essence, it found that, under Article 8(4) of Regulation No 40/94, the opponent had to show that it was the proprietor of the right on which the opposition was based. In the case before it, however, the applicant had not shown that it was the proprietor of the right relied on. In particular, the Board of Appeal found that the term ‘basmati’ was not a trade mark or sign covered by proprietary rights, but simply the common designation of a variety of rice. It took the view that the term ‘basmati’ is generic. Furthermore, the Board of Appeal pointed out that the property protected by an action for passing off does not relate to the sign at issue but to the goodwill. The Board of Appeal concluded that the applicant had failed to show that it had ownership of the term ‘basmati’ and that, accordingly, the opposition did not fulfil the condition, provided for in Regulation No 40/94, relating to the existence of a proprietary right.
By judgment of 18 January 2012 in Tilda Riceland Private v OHIM — Siam Grains (BASmALI), T‑304/09, ECR, EU:T:2012:13, the General Court annulled the Board of Appeal’s decision of 19 March 2009. The Court held that the Board of Appeal had erred in rejecting the opposition on the ground that the applicant had not proved that it was the proprietor of the sign in question, without analysing specifically whether the applicant had acquired rights over that sign in accordance with the law of the United Kingdom (paragraph 29 of the judgment).
Following the judgment in BASmALI, cited in paragraph 11 above, EU:T:2012:13, the case was reallocated to the Fourth Board of Appeal of OHIM.
By decision of 18 December 2013 (‘the contested decision’), the Fourth Board of Appeal of OHIM dismissed the appeal. It found, in essence, that the applicant had not provided any evidence that the name ‘basmati’ had been used as a distinctive sign in the course of trade. In those circumstances, the Board of Appeal did not examine whether the applicant had acquired any rights over that sign according to the law of the United Kingdom.
Forms of order sought
The applicant claims that the Court should:
—
annul the contested decision;
—
order OHIM to pay the costs.
OHIM contends that the Court should:
—
dismiss the action;
—
order the applicant to pay the costs.
Law
In support of the action, the applicant relies on a single plea in law, alleging infringement of Article 8(4) of Regulation No 207/2009.
First, the applicant submits that the sign BASMATI is distinctive inasmuch as it identifies a specific type of rice with a reputation on account of its quality, fragrance and other properties. The applicant states that it filed evidence in that regard before OHIM. It maintains that the Board of Appeal appears to be adding a requirement that proprietorship in the sign has to be exclusive. It submits that, in that context, the sign BASMATI is not different from the signs CHAMPAGNE or SWISS CHOCOLATE and can be protected by an action for passing off in exactly the same way. The applicant maintains that, having regard to the evidence in the present case, the sign BASMATI satisfies all the criteria for protection under the law of the United Kingdom. Secondly, the applicant takes the view that as a foreign producer and exporter of the goods in question, it is the owner of the goodwill in the sign BASMATI (together with other traders), even though another company actually markets the goods in the United Kingdom. It submits that the Board of Appeal overlooked the evidence which it put forward in the course of the administrative procedure. Thirdly, the applicant submits that the fact that there are multiple traders using their own distinctive trade marks along with the sign BASMATI does not undermine the distinctiveness of that sign.
OHIM concedes that the approach taken by the Board of Appeal, albeit in line with the established notion of distinctiveness under EU law, is difficult to reconcile with the peculiar features of the extended form of passing-off and with the decisions taken by the United Kingdom courts. It maintains that the evidence which the applicant placed on the file does not, however, prove that basmati rice is perceived by the United Kingdom public as having a ‘distinct reputation’ in the light of its special qualities, a criterion which stems from the case-law of the United Kingdom. OHIM concedes that the Board of Appeal did not make any express reference in that regard. It maintains that it is, however, apparent from the Board of Appeal’s analysis that, if the Board of Appeal had expressly addressed that issue, it would have concluded that the evidence filed did not support a finding of ‘distinct reputation’ attached to the sign Basmati. Lastly, for the sake of completeness, OHIM submits that the applicant did not show that it was the owner of goodwill or that it had suffered damage in that regard. OHIM concludes that, even assuming that the Board of Appeal’s position might not be correct as regards whether the traditional notion of distinctiveness as identifying the commercial origin of the goods also applies in a scenario of extended passing-off, the evidence on record is insufficient to show that the relevant United Kingdom public perceives the sign Basmati as having a ‘distinct reputation’.
It must be pointed out that, under Article 8(4) of Regulation No 207/2009, the proprietor of a non-registered trade mark or of another sign used in the course of trade of more than mere local significance may file a notice of opposition to the registration of a Community trade mark where and to the extent that, pursuant to the Community legislation or the law of the Member State governing that sign, first, rights to that sign were acquired prior to the date of application for registration of the Community trade mark or the date of the priority claimed for the application for registration of the Community trade mark and, secondly, that sign confers on its proprietor the right to prohibit the use of a subsequent trade mark.
Furthermore, to the extent that the applicant relies in support of its opposition on the action for passing off provided for under the law of the United Kingdom, it should be noted that the law of the Member State which is applicable in the present case is the Trade Marks Act 1994, section 5(4) of which provides, inter alia:
‘A trade mark shall not be registered if, or to the extent that, its use in the United Kingdom is liable to be prevented –
(a)
by virtue of any rule of law (in particular, the law of passing off) protecting an unregistered trade mark or other sign used in the course of trade …’
It follows from that provision, as interpreted by the national courts, that the opponent must establish, in accordance with the legal rules governing actions for passing off, as laid down by the law of the United Kingdom, that three conditions are satisfied, namely, first, the goodwill acquired (that is to say, the attractive force which brings in custom) by the non-registered trade mark or the sign at issue; secondly, misrepresentation on the part of the proprietor of the subsequent trade mark; and, thirdly, damage caused to that goodwill (see judgment in BASmALI, cited in paragraph 11 above, EU:T:2012:13, paragraph 19 and the case-law cited).
It also follows from the decisions of the United Kingdom courts that a sign used to designate goods or services may have acquired a reputation on the market for the purposes of the law applicable to passing off, even though it is used by several traders in the course of business (Chocosuisse Union des fabricants suisses de chocolat & Ors v Cadbury Ltd. [1999] EWCA Civ 856). That ‘extended’ form of passing off, recognised by the United Kingdom courts, accordingly enables several traders to have rights over a sign which has acquired a reputation on the market (judgment in BASmALI, cited in paragraph 11 above, EU:T:2012:13, paragraph 28).
The Board of Appeal pointed out that the conditions relating to the use of the name ‘basmati’ in the course of trade and to the significance of that sign had to be interpreted in the light of the uniform standards of EU law. In that regard, the Board of Appeal stated that, to fulfil the requirement of use in the course of trade, an unregistered trade mark or a sign had to be used as a distinctive element in that it had to serve to identify an economic activity engaged in by its proprietor. In the case before it, the Board of Appeal found that the evidence placed on the file did not support the conclusion that the applicant had used the name ‘basmati’ as a distinctive sign in the course of trade and that, therefore, one of the conditions for the application of Article 8(4) of Regulation No 207/2009 was not met.
Although the contested decision is worded ambiguously, it is apparent from that decision that the Board of Appeal took the view that any possible distinctiveness of the sign BASMATI had to enable the applicant to distinguish its goods from those of other undertakings, including those which also market basmati rice. That is apparent, in particular, from paragraph 33 of the contested decision in which the Board of Appeal states clearly that the fact that basmati rice is marketed under various trade marks ‘rules out the possibility’ that the term ‘basmati’ as such could be perceived as an element ‘that distinguishes rice from one undertaking from rice of other undertakings’. Furthermore, in paragraphs 25 and 31 of the contested decision, the Board of Appeal pointed out that the basmati rice exported by the applicant to the United Kingdom was not marketed by the applicant but by another company. In addition, in paragraph 27 of the contested decision, the Board of Appeal stated that the name of an agricultural product, the importation of which had been subject to certain regulations on account of the common agricultural policy of the European Union, was understood as designating the characteristics of the product ‘and not its commercial origin’. The Board of Appeal also referred to the ‘commercial origin’ of the goods at issue in paragraphs 29 and 32 of the contested decision. Furthermore, in paragraph 31 of the contested decision, the Board of Appeal found that the ‘trade mark used’ for ‘identifying’ the rice produced by the applicant is TILDA and not the term ‘basmati’. As a basis for its finding, the Board of Appeal pointed out that the evidence put before it showed that the term ‘basmati’ had been used in combination with trade marks or company names.
In other words, the Board of Appeal took the view that the distinctiveness of the sign at issue had to result from its function of identifying the commercial origin of the goods. OHIM confirmed that reading of the contested decision at the hearing.
However, the approach which the Board of Appeal took in the contested decision is, in that regard, contrary to Article 8(4) of Regulation No 207/2009.
It is indeed true, as the Board of Appeal points out, that, under Article 8(4) of Regulation No 207/2009, the sign at issue must be used as a distinctive element in that it must serve to identify an economic activity engaged in by its proprietor (judgment of 29 March 2011 in Anheuser-Busch v Budějovický Budvar, C‑96/09 P, ECR, EU:C:2011:189, paragraph 149).
However, that cannot mean that the function of the use of a sign, under Article 8(4) of Regulation No 207/2009, should be exclusively that of identifying the commercial origin of the goods or services at issue. In reaching that conclusion, the Board of Appeal, as the applicant maintains, in essence, in its written pleadings, laid down a condition which is not provided for by Article 8(4) of Regulation No 207/2009.
It must be pointed out in that regard, that Article 8(4) of Regulation No 207/2009 covers non-registered trade marks and any ‘[other] sign’ used in the course of trade. In that context, and in the absence of any indication to the contrary, the function of the use of the sign at issue may, in the light of the nature of that sign, lie not only in the identification by the relevant public of the commercial origin of the goods concerned, but also, inter alia, in the identification of their geographical origin and the special qualities inherent in them (see, to that effect, judgment in Anheuser-Busch v Budějovický Budvar, cited in paragraph 27 above, EU:C:2011:189, paragraph 147) or of the characteristics on which their reputation is based, which OHIM, moreover, observes in its written pleadings. The sign at issue, in the light of its nature, may thus be classified as a distinctive element if it serves to identify the goods or services of one undertaking in relation to those of another undertaking, but also, inter alia, if it serves to identify certain goods or services in relation to other similar goods or services. The approach applied by the Board of Appeal therefore effectively excludes signs which are used by a number of traders or which are used in association with trade marks from the benefit of Article 8(4) of Regulation No 207/2009, even though that provision does not provide for such an exclusion. That is true, for example, of geographical indications which are not registered in the European Union and which may benefit from the provisions of Article 8(4) of Regulation No 207/2009. That is also true of signs which, although they are not registered, may be protected by virtue of an action for passing off. The Board of Appeal itself, moreover, pointed out that an action for passing off concerned signs which made it possible to distinguish one category of goods in relation to ‘other similar goods’ (paragraph 19 of the contested decision). It must also be borne in mind that the extended form of passing-off, which is recognised by the United Kingdom courts, enables a number of traders to have rights over a sign which has acquired a reputation on the market.
In that context, certain signs, although they are used by a number of traders or in association with trade marks, may be distinctive elements if they make it possible to identify the economic activity engaged in by their proprietors. It must, moreover, be pointed out, in that regard, that the Board of Appeal stated, citing the Oxford English Dictionary, that basmati rice was ‘a superior variety of Indian rice, characteristically light and fragrant when cooked’.
It must be added that, although the applicant’s goods are indeed marketed under the trade mark TILDA, as the Board of Appeal stated in paragraph 25 of the contested decision, OHIM’s file shows that the term ‘basmati’ also appears very clearly on the packaging of those goods. It is common ground in that regard, as the Board of Appeal stated in paragraph 25 of the contested decision, that the applicant sold ‘Indian Basmati … rice’ to another company. Furthermore, in that context, it is irrelevant, for the reasons which have already been stated, that the applicant’s goods which were exported to the United Kingdom were marketed in that territory by another company and not by the applicant itself, since the function of the use of the sign at issue is not necessarily that of identifying the commercial origin of the goods concerned. Furthermore, there is nothing to suggest that, under Article 8(4) of Regulation No 207/2009, an opponent ought to show that he has himself marketed his goods in the territory concerned.
Consequently, the reasons which the Board of Appeal gave in support of the rejection of the opposition do not permit the inference that the sign at issue has not been used as a distinctive element which serves to identify an economic activity engaged in by the applicant.
OHIM’s other arguments are not capable of invalidating that finding. In particular, as regards the claim which OHIM put forward in its written pleadings that the evidence submitted would not in any event have enabled the Board of Appeal to conclude that the sign BASMATI had acquired a ‘distinct reputation’ in the relevant territory or that the applicant is the owner of goodwill or has suffered damage in that regard, it is common ground that those questions were not examined by the Board of Appeal. It must be borne in mind that, in accordance with Article 65(2) of Regulation No 207/2009, the General Court carries out a review of the legality of the decisions of OHIM (see, to that effect, judgment of 5 July 2011 in Edwin v OHIM, C‑263/09 P, ECR, EU:C:2011:452, paragraph 52). If it holds that such a decision, called into question in an action brought before it, is vitiated by illegality, it must annul it. It may not, however, dismiss the action while substituting its own reasoning for that of the competent adjudicating body of OHIM which is the author of the contested act (judgment of 25 March 2009 in Kaul v OHIM — Bayer (ARCOL), T‑402/07, ECR, EU:T:2009:85, paragraph 49, and judgment of 9 September 2010 in Axis v OHIM — Etra Investigación y Desarrollo (ETRAX), T‑70/08, ECR, EU:T:2010:375, paragraph 29). It follows that the arguments which OHIM set out in its written pleadings cannot result in the dismissal of the action.
In view of all of those factors, the applicant’s single plea in law must be upheld and, consequently, the contested decision must be annulled.
Costs
Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
As OHIM has been unsuccessful, inasmuch as the contested decision is annulled, and the applicant has sought an order for costs against it, OHIM must be ordered to bear its own costs and to pay those incurred by the applicant.
On those grounds,
THE GENERAL COURT (Sixth Chamber)
hereby:
1.
Annuls the decision of the Fourth Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 18 December 2013 (Case R 1086/2012-4);
2.
Orders OHIM to bear its own costs and to pay those incurred by Tilda Riceland Private Ltd.
Frimodt Nielsen
Dehousse
Collins
Delivered in open court in Luxembourg on 30 September 2015.
[Signatures]
( *1 ) Language of the case: English. |
JUDGMENT OF THE GENERAL COURT (Third Chamber, Extended Composition)
7 December 2018 ( *1 )
(State aid – Aid implemented by Belgium in favour of the ARCO Group financial cooperatives – Guarantee scheme protecting the shares of individual members of those cooperatives – Decision declaring the aid incompatible with the internal market and prohibiting the payment of the amounts guaranteed to the members – Subject matter of the dispute – Recovery – Proportionality)
In Case T‑664/14,
Kingdom of Belgium, represented by C. Pochet and J.-C. Halleux, acting as Agents, and by J. Meyers, lawyer,
applicant,
v
European Commission, represented by L. Flynn and B. Stromsky, acting as Agents,
defendant,
APPLICATION based on Article 263 TFEU and seeking annulment of Article 2(4) of Commission Decision 2014/686/EU of 3 July 2014 on State aid SA.33927 (12/C) (ex 11/NN) implemented by Belgium – Guarantee scheme protecting the shares of individual members of financial cooperatives (OJ 2014 L 284, p. 53),
THE GENERAL COURT (Third Chamber, Extended Composition),
composed of S. Frimodt Nielsen (Rapporteur), President, V. Kreuschitz, I.S. Forrester, N. Półtorak and E. Perillo, Judges,
Registrar: G. Predonzani, Administrator,
having regard to the written procedure and further to the hearing on 22 November 2017,
gives the following
Judgment
Background to the dispute
ARCO companies
Arcofin SCRL, Arcopar SCRL and Arcoplus (‘the ARCO companies’) are recognised, limited liability financial cooperatives (‘the financial cooperatives’) governed by Belgian law. Those cooperatives, all three of which are in the process of being liquidated, were established in the 1930s with a view to coordinating the cooperative activities of the Mouvement ouvrier chrétien and of the Algemeen Christelijk Werknemersverbond and to providing financial support to those activities, by investing in particular in tasks of a social nature.
The ARCO companies have more than 800000 members, 99 % of whom are natural persons (‘the cooperative members’). According to the Kingdom of Belgium, the average share held by the cooperative members is in the region of EUR 2000.
In 2001, Arcofin became the principal shareholder of Dexia SA, in which it held 15 % of the capital. On 3 October 2008, it participated in the bailout of Dexia by subscribing, in the amount of EUR 350000000, to a capital increase totalling EUR 6000000000. The ARCO companies have not issued new shares since 2008. Between 2008 and 2011 they lost 7 % of their cooperative members.
On 8 December 2011, the voluntary liquidation of the ARCO companies was approved at the companies’ general meetings.
Measure at issue
On 10 October 2008, the Belgian Government announced, by way of a press release from the secretariat of the Minister for Finance, its intention to extend to insurance companies and to financial cooperatives the existing guarantee scheme for depositors in credit institutions and to increase the amount of that guarantee to EUR 100000. Provision was thus made that the participation of those new undertakings in a guarantee fund would be on a voluntary basis. That intention was submitted to the Belgian Parliament in a draft law presented on 14 October 2008, which was adopted as a matter of urgency the following day (loi du 15 octobre 2008 portant des mesures visant à promouvoir la stabilité financière et instituant en particulier une garantie d’État relative aux crédits octroyés et aux autres opérations effectuées dans le cadre de la stabilité financière (Law of 15 October 2008 on measures to promote financial stability and introducing in particular a State guarantee on credits granted and other operations conducted in the context of financial stability) (Moniteur belge, 17 October 2008, p. 55634).
In a joint press release of 21 January 2009, the Belgian Prime Minister and Minister for Finance confirmed the commitment which had been given by the previous government to offer a guarantee scheme to the non-institutional members of financial cooperatives. That scheme was to include, inter alia, the following elements:
–
the payment by the companies concerned of a guarantee premium;
–
the commitment of the institutional members to retain their shareholding throughout the guarantee period;
–
a limitation of the ‘annual compensation’ for members, both individual (cooperative members) and institutional;
–
an additional financial contribution paid by the companies concerned where the dividends received exceed a minimum threshold;
–
detailed rules to be drawn up allowing the authorities to receive a share of the capital gains if the guarantee scheme is withdrawn.
The Belgian Parliament subsequently adopted the loi du 14 avril 2009 modifiant la loi du 2 août 2002 relative à la surveillance du secteur financier et aux services financiers (Law of 14 April 2009 amending the Law of 2 August 2002 on supervision of the financial sector and financial services) (Moniteur belge, 21 April 2009, p. 32106) to allow the government to establish a guarantee system for the benefit, inter alia, of the members of recognised cooperatives which are either under the prudential supervision of the National Bank of Belgium or have invested at least half of their assets in an institution subject to such supervision, which is the case as regards financial cooperatives such as the ARCO companies.
Those legislative provisions were reproduced in point 3 of Article 36/24(1) of the loi du 22 février 1998 fixant le statut organique de la Banque nationale de Belgique (Law of 22 February 1998 establishing the organic statute of the National Bank of Belgium), as amended. Adopted on the basis of that article, the arrêté royal du 10 octobre 2011 modifiant l’arrêté royal du 14 novembre 2008 portant exécution de la loi du 15 octobre 2008 et modifiant la loi du 2 août 2002 (Royal Decree of 14 November 2008 implementing the Law of 15 October 2008 and amending the Law of 2 August 2002) (Moniteur belge, 12 October 2011, p. 62641) allowed those financial cooperatives which wished to do so to seek to join the guarantee scheme envisaged by the preceding measures. The companies opting to join that scheme were required to pay, into a special fund for the protection of deposits, life insurance and the capital of recognised cooperatives (‘the special fund’), established by the arrêté royal du 14 novembre 2008 portant exécution de la loi du 15 octobre 2008 et modifiant la loi du 2 août 2002 relative à la surveillance du secteur financier et aux services financiers (Royal Decree of 14 November 2008 implementing the Law of 15 October 2008 and amending the Law of 2 August 2002 on supervision of the financial sector and financial services) (Moniteur belge, 17 November 2008, p. 4088), an annual contribution corresponding to 0.15 % of the total amount guaranteed and an entry fee equating to 0.1 % of that amount. The guarantee was to apply only if the company were to go insolvent or in the event of default established by the Belgian financial supervisory authority. Only the paid-up capital subscribed by natural persons prior to the entry into force of the Royal Decree of 10 October 2011 was covered by the guarantee, up to an amount of EUR 100000 for each natural person. The guarantee would be paid by the special fund or, if the financial resources of that fund are exhausted, by the Caisse des dépôts et consignations (Deposit and Consignment Office, Belgium).
On 13 October 2011, the ARCO companies applied to join the guarantee scheme. That application was approved by the Belgian Council of Ministers on 15 October 2011, and the approval was made public on that same day. The ARCO companies’ application to join the scheme was officially accepted by the arrêté royal du 7 novembre 2011 octroyant une garantie afin de protéger le capital de sociétés coopératives agréées (Royal Decree of 7 November 2011 granting a guarantee to protect the capital of recognised cooperatives) (Moniteur belge, 18 November 2011, p. 68640), which entered into force on 14 October 2011 pursuant to Article 3 of that royal decree (‘the guarantee’ or ‘the measure at issue’). No other financial cooperative applied to join the guarantee scheme.
The ARCO companies therefore paid the prescribed sums into the special fund. Their membership of the guarantee scheme was subject to several conditions, inter alia that there would be no new public offering of new shares to natural persons, that the rate of interest on the funds invested would be limited and that institutional members would commit not to withdraw the capital which they had invested. The Royal Decree of 7 November 2011 also specified that the special fund would be required to compensate cooperative members only after the issuance of the final order of the liquidation, as (potentially) approved by the general meeting of the ARCO companies.
As stated in paragraph 4 above, the ARCO companies entered into voluntary liquidation on 8 December 2011.
Administrative procedure
On 7 November 2011, the Kingdom of Belgium notified the European Commission of the guarantee.
By letter of 6 December 2011, the Commission informed the Kingdom of Belgium that it was of the view that the guarantee could constitute unlawful State aid incompatible with the internal market and asked the Kingdom of Belgium to refrain from taking any further steps to implement the guarantee. The Belgian authorities responded to that correspondence by a letter of 22 December 2011.
By decision of 3 April 2012, the Commission decided to open the formal examination procedure laid down in Article 108(2) TFEU in relation to the guarantee (‘the opening decision’). On 19 July 2012, the opening decision, entitled ‘State aid SA.33927 (2012/C) (ex 2011/NN) – Guarantee scheme protecting the shares of individual members of financial cooperatives – Invitation to submit comments pursuant to Article 108(2) TFEU’, was published in the Official Journal of the European Union (OJ 2012 C 213, p. 64). Furthermore, in that decision, the Commission enjoined the Kingdom of Belgium, pursuant to Article 11(1) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1), to continue to refrain from implementing the measure at issue until its decision on the compatibility of that measure with the internal market.
The Kingdom of Belgium submitted comments on the opening decision on 18 June 2012. By letters of 5 December 2012 and 20 September 2013, it responded to questions which had been put to it by the Commission.
On 17 August 2012, the ARCO companies also submitted their observations to the Commission. Those observations were communicated by the Commission to the Kingdom of Belgium, which informed the Commission by letter of 16 October 2012 that those observations did not call for any comments on its part.
Contested decision
On 3 July 2014, the Commission adopted Decision 2014/686/EU on State aid SA.33927 (12/C) (ex 11/NN) implemented by Belgium – Guarantee scheme protecting the shares of individual members of financial cooperatives (OJ 2014 L 284, p. 53, ‘the contested decision’). In that decision, it found that the guarantee constituted State aid granted to the ARCO companies and that that aid, unlawfully implemented by the Kingdom of Belgium, was incompatible with the internal market (Article 1 of the contested decision).
In the contested decision, the Commission found that the ARCO companies were the real beneficiaries of the aid at issue and that that aid was comprised of a series of measures consisting in the announcement of 10 October 2008 (see paragraph 5 above), the press release of 21 January 2009 (see paragraph 6 above) and the ARCO companies’ membership of the guarantee scheme (recitals 80 to 90 of the contested decision).
In that regard, the Commission took the view that the guarantee had afforded the ARCO companies a selective advantage in that it had enabled them to attract or preserve funds. Furthermore, the selectivity of that advantage is established since only financial cooperatives were eligible for it. In any event, the Commission found the guarantee granted to investors who had acquired shares in the ARCO companies, a guarantee which, given the amounts involved, covered all the sums invested, to be disproportionate, thus precluding any justification of the measure at issue in the light of the criteria defined to assess whether advantages may be justified by the general scheme of the tax system, even assuming those criteria are applicable in the present case (recitals 100 to 107 of the contested decision). Having examined the other criteria laid down in Article 107(1) TFEU, the Commission thus came to the conclusion that the guarantee constituted State aid within the meaning of that provision (recital 110 of the contested decision).
In addition, with regard to the compatibility of the aid at issue with the internal market, the Commission found that the only legal basis which could be applied in the present case was Article 107(3) TFEU. However, it took the view that the measure at issue was neither appropriate, nor necessary, nor proportionate to the objective of remedying a serious disturbance in the Belgian economy and that, therefore, it could not be considered compatible with the internal market (recitals 111 to 129 of the contested decision).
Finally, the Commission determined a method for the calculation of the amount of the advantage to be recovered from the ARCO companies and asked the Kingdom of Belgium to provide it with the necessary information. It also stated that, pursuant to Article 108(3) TFEU, it considered it to be justified to require that Member State to continue to refrain from making any payment to the cooperative members under the guarantee (recitals 130 to 142 of the contested decision).
Accordingly, in the contested decision, the Commission ordered the Kingdom of Belgium to recover from the ARCO companies the undue advantage from which, in the Commission’s opinion, they had benefited (Article 2(1) of the contested decision). In addition, the Commission required the Kingdom of Belgium to withdraw the legislation and the regulations underlying the guarantee (recital 143 of the contested decision) and prohibited it from implementing the guarantee in favour of the cooperative members (Article 2(4) of the contested decision). That prohibition forms the subject matter of the present action.
National proceedings and request for a preliminary ruling to assess the validity of the contested decision
Challenge to the guarantee before the national court
In December 2011 and January 2012, three actions were brought by natural persons, by the Organisme voor de financiering van pensioenen Ogeo Fund (Ogeo Fund pension fund body) and by the Gemeente Schaarbeek (Commune of Schaerbeek, Belgium) before the Conseil d’État (Council of State, Belgium). Those actions sought the annulment of the Royal Decrees of 10 October (see paragraph 8 above) and 7 November 2011 (see paragraph 9 above). To that end, the applicants claimed, in essence, that those royal decrees infringed the principle of equality enshrined in the Belgian Constitution, in so far as they created a difference in treatment between cooperative members, who are able to benefit from the guarantee scheme established in particular by those royal decrees, and shareholders, being natural persons, of other companies close to the financial sector, who are excluded from that scheme.
Taking the view that the Royal Decrees of 10 October and 7 November 2011 had their basis in Article 36/24 of the Law of 22 February 1998 (see paragraph 8 above), that, therefore, they were part of the limitations which the Belgian legislature had itself established and that the difference in treatment invoked resulted from a legislative norm, the Conseil d’État (Council of State) referred several questions to the Cour constitutionnelle (Constitutional Court, Belgium) for a preliminary ruling on the compatibility of that article with the Belgian Constitution.
In order to give a ruling on those questions, the Cour constitutionnelle (Constitutional Court) considered it necessary first to settle the question of the compatibility of Article 36/24 of the Law of 22 February 1998 with EU law. To that end, it referred six questions to the Court of Justice for a preliminary ruling in Case C‑76/15, five of which concerned the validity of the contested decision and the obligations arising in the present case for the Kingdom of Belgium from Article 108(3) TFEU.
Judgment of 21 December 2016, Vervloet and Others (C‑76/15)
The purpose of the first question referred to the Court for a preliminary ruling was to assess the compatibility of the guarantee in the light of Articles 2 and 3 of Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes (OJ 1994 L 135, p. 5), as amended by Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/EEC and 93/6/EEC and Directives 94/19, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and 2002/87/EC in order to establish a new organisational structure for financial services committees (OJ 2005 L 79, p. 9). The second question referred for a preliminary ruling concerned the validity of the contested decision. The four remaining questions related to the compatibility of the guarantee with the obligations arising for the Member States from Article 108(3) TFEU.
In response to the questions put by the Cour constitutionnelle (Constitutional Court), the Court of Justice gave the judgment of 21 December 2016, Vervloet and Others (C‑76/15, EU:C:2016:975), the operative part of which reads as follows:
‘1.
Articles 2 and 3 of Directive [94/19] must be interpreted as not requiring Member States to adopt a scheme to guarantee shares in [financial cooperatives], such as that at issue in the main proceedings, and as not precluding Member States from adopting such a scheme, in so far as that scheme does not undermine the practical effectiveness of the deposit-guarantee scheme that the directive requires Member States to establish, which is a matter to be determined by the referring court, and provided that it complies with the FEU Treaty, in particular with Articles 107 and 108 TFEU.
2.
The examination of the questions referred for a preliminary ruling … has disclosed nothing capable of affecting the validity of [the contested decision].
3.
Article 108(3) TFEU must be interpreted as precluding a guarantee scheme such as that at issue in the main proceedings, in so far as the latter was put into effect in infringement of the obligations arising from that provision.’
Subsequent developments in national law
By judgment of 15 June 2017, the Cour constitutionnelle (Constitutional Court) found Article 36/42 of the Law of 22 February 1998 to be unconstitutional. The Cour constitutionnelle (Constitutional Court) based its decision inter alia on the finding by the Court of Justice that the measure at issue constituted unlawful State aid.
By judgment of 6 March 2018, the Conseil d’État (Council of State) annulled the Royal Decrees of 10 October (see paragraph 8 above) and 7 November 2011 (see paragraph 9 above).
Case T‑711/14
By application lodged at the Registry of the Court on 7 October 2014 (Case T‑711/14), the ARCO companies brought an action for annulment of the contested decision. In their action, the ARCO companies contested, inter alia, both the assessment by the Commission that the measure at issue constituted State aid of which they were beneficiaries and the assessment that the aid at issue could not be declared compatible with the internal market. The ARCO companies also challenged the prohibition imposed on the Kingdom of Belgium from paying the amounts guaranteed to the cooperative members; that prohibition forms the subject matter of these proceedings.
By order of 9 February 2018, Arcofin and Others v Commission (T‑711/14, not published, EU:T:2018:80), the Court dismissed that action as being in part manifestly inadmissible and in part lacking any foundation in law. In particular, the action brought by the ARCO companies, in so far as it sought to challenge the prohibition imposed on the Kingdom of Belgium from paying the amounts guaranteed to the cooperative members on completion of the liquidation, was dismissed as manifestly inadmissible, since those companies had no interest in bringing proceedings against the provision contested by the Kingdom of Belgium in the present action.
Procedure and forms of order sought by the parties
Written part of the procedure
By application lodged at the Registry of the Court on 15 September 2014, the Kingdom of Belgium brought the present action.
By decision of 12 October 2015, adopted pursuant to Article 69(a) of the Rules of Procedure of the General Court, finding, firstly, that the question referred for a preliminary ruling by the Cour constitutionnelle (Constitutional Court) in Case C‑76/15 (see paragraphs 23 to 26 above) concerned the validity of the contested decision and asked the Court to assess a substantial proportion of the arguments advanced by the ARCO companies in Case T‑711/14 and taking the view, secondly, that the resolution of the present dispute was liable to depend on the outcome of the action brought by those companies, after the parties were heard in accordance with Article 70(1) of the Rules of Procedure, the President of the Sixth Chamber of the General Court stayed the proceedings in the present case until the Court of Justice had delivered its judgment.
That stay of the proceedings ended on the delivery, on 21 December 2016, of the judgment in Vervloet and Others (C‑76/15, EU:C:2016:975) (see paragraph 27 above).
Following a change in the composition of the Chambers of the Court, the Judge-Rapporteur was assigned to the Third Chamber, to which the present case was therefore assigned.
On the same day, pursuant to Article 89(3)(a) of the Rules of Procedure, the Court (Third Chamber) asked the parties to state the conclusions which, in their view, should be drawn for the present case from the delivery of the judgment of 21 December 2016, Vervloet and Others (C‑76/15, EU:C:2016:975).
The parties complied with that measure of organisation of procedure within the time limit which they had been set.
By measure of organisation of procedure of 26 June 2017, adopted pursuant to Article 89(3)(a) of the Rules of Procedure, the Court (Third Chamber) asked the parties to state inter alia:
–
which conclusions under national law should, in their view, be drawn from the declaration of the invalidity of Article 36/24 of the Law of 22 February 1998 by the Cour constitutionnelle (Constitutional Court);
–
which effects annulment of the contested decision by the Court would be likely to entail, taking into account the answer given to the previous question.
The parties answered those questions within the time limits which they had been set.
By measure of organisation of procedure of 12 September 2017, adopted pursuant to Article 89(3)(a) of the Rules of Procedure, the Court (Third Chamber) inter alia:
–
asked the Kingdom of Belgium to set out its view on certain elements of the answers given by the Commission to the questions referred to in paragraph 38 above;
–
asked the Kingdom of Belgium once more about the legal consequences of and the benefit which would be provided by any annulment by the Court of Article 2(4) of the contested decision, in the light of the declaration of the invalidity of Article 36/24 of the Law of 22 February 1998 by the Cour constitutionnelle (Constitutional Court).
The Kingdom of Belgium answered those questions within the time limits which it had been set and the Commission was given the opportunity to submit observations on those responses.
On a proposal from its Third Chamber, the Court decided, pursuant to Article 28 of the Rules of Procedure, to refer the case to a chamber sitting in extended composition.
Oral part of the procedure
Acting on a proposal from the Judge-Rapporteur, the Court (Third Chamber, Extended Composition) decided to open the oral part of the procedure.
The parties presented oral argument and answered the questions put by the Court at the hearing on 22 November 2017.
By letter of 13 March 2018, the Kingdom of Belgium informed the Court of the delivery by the Conseil d’État (Council of State) of the judgment of 6 March 2018 referred to in paragraph 29 above.
By document lodged on 14 March 2018, the Commission applied for a declaration that there is no need to adjudicate.
By order of the Third Chamber, Extended Composition, of the Court of 23 March 2018, the oral part of the procedure was reopened. As a result, the documents referred to in paragraphs 45 and 46 above were placed in the case file and the parties were asked to submit any observations they might have on those documents. By measure of organisation of procedure adopted pursuant to Article 89(3)(b) of the Rules of Procedure, the Commission was asked to set out its view on certain arguments advanced by the Kingdom of Belgium in the letter of 13 March 2018 (see paragraph 45 above).
The parties submitted their observations and answered the questions within the prescribed periods.
By measure of organisation of procedure of 20 April 2018, adopted pursuant to Article 89(3)(b) of the Rules of Procedure, the Commission was asked to set out its view on certain arguments advanced by the Kingdom of Belgium in the observations which the latter had submitted on the application for a declaration that there is no need to adjudicate made by the Commission (see paragraph 46 above).
The Commission complied with that measure of organisation of procedure within the prescribed periods.
Observations submitted spontaneously by the Kingdom of Belgium on the Commission’s responses were placed in the case file.
The oral part of the procedure was closed on 15 May 2018.
Forms of order sought by the parties
The Kingdom of Belgium claims that the Court should:
–
annul Article 2(4) of the contested decision;
–
order the Commission to pay the costs.
The Commission contends, in essence, that the Court should:
–
find that, since the dispute has become devoid of purpose, there is no longer any need to adjudicate on the action;
–
in the alternative, dismiss the action;
–
in any event, order the Kingdom of Belgium to pay the costs.
Law
The subject matter of the dispute
According to the Commission, the annulment by the Conseil d’État (Council of State), in the judgment of 6 March 2018 referred to in paragraph 29 above, of the Royal Decrees of 10 October (see paragraph 8 above) and 7 November 2011 (see paragraph 9 above) deprives any annulment of Article 2(4) of the contested decision of any legal effect. In the Commission’s view, the Kingdom of Belgium’s inability to pay the amounts guaranteed to the cooperative members is no longer the result of the prohibition contained in the contested provision but rather of the retroactive disappearance, within the Belgian national legal order, of the acts which formed the legal basis of such payment. The Commission infers from the foregoing that the present dispute has become devoid of purpose and asks the Court to find that there is therefore no longer any need to adjudicate.
The Kingdom of Belgium opposes that request.
The circumstances in which the European Union judicature is led to declare that an action brought before it is devoid of purpose and, therefore, to find that there is no need to adjudicate were clarified in the judgment of 7 June 2007, Wunenburger v Commission (C‑362/05 P, EU:C:2007:322, paragraphs 41 to 45 and 47 to 53). In that regard, it should be recalled that the objective of the dispute must continue until the final decision, failing which there will be no need to adjudicate, which presupposes that the action must be liable, if successful, to procure an advantage to the party bringing it (see judgment of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraph 42 and the case-law cited). Accordingly, although the Kingdom of Belgium is justified in maintaining that the Member States are not required to demonstrate that they have an interest in bringing proceedings against the provisions the annulment of which is sought by them, the fact remains that, even when proceedings are brought before it by a Member State, the European Union judicature must find that there is no need to adjudicate on the action where the annulment sought is incapable of producing legal effects (see, to that effect, judgment of 24 November 2005, Italy v Commission, C‑138/03, C‑324/03 and C‑431/03, EU:C:2005:714, paragraph 25).
In that regard, on the one hand, the Court of Justice has clarified that an action brought against an act withdrawn by the body which adopted it in the course of proceedings became devoid of purpose (see, to that effect, judgment of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraphs 47 and 48). However, on the other hand, the Court has also explained that an action brought against an act vitiated by unlawfulness which is liable to recur in the future in circumstances independent from the case in question still had a purpose (judgment of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraph 52).
In the first place, it must be stated that Article 2(4) of the contested decision has not been withdrawn and, therefore, has not disappeared with retroactive effect. It follows that, if the Court were to find that the dispute had become devoid of purpose and that there is no longer any need to adjudicate on the action because the annulment of that provision would have no legal effects, Article 2(4) of the contested decision would nevertheless remain part of the EU legal order.
In the second place, as the Commission rightly argues without being contradicted on this point by the Kingdom of Belgium, the annulment by the Conseil d’État (Council of State) of the Royal Decrees of 10 October and 7 November 2011 made it impossible to implement the guarantee which was provided for by those legal acts, irrespective of the prohibition laid down in Article 2(4) of the contested decision. It follows that the Commission is justified in asserting that the annulment of Article 2(4) of the contested decision would not allow the Kingdom of Belgium to implement the guarantee as provided for in the Royal Decrees of 10 October and 7 November 2011, which formed the legal basis of that guarantee.
In the third place, however, the Kingdom of Belgium is, for its part, justified in submitting that maintaining in force Article 2(4) of the contested decision within the EU legal order is not without significance. Accordingly, the possible annulment of that provision would certainly not be devoid of any legal effect.
It is clear from the exchanges between the parties after the hearing that the Kingdom of Belgium is considering, in conjunction with the Commission, measures of equivalent effect to the contested guarantee which seek to mitigate, for the cooperative members, the consequences of the liquidation of those companies. However, although the Commission states, first, that it is not opposed in principle to any mechanism for the compensation of the cooperative members and, secondly, that there are other grounds for its opposition to the measures submitted to it and in relation to which informal negotiations have begun, the fact remains that, in its response of 7 May 2018, it mentioned a risk of ‘the contested decision being circumvented’. It follows that it cannot be ruled out that the contested decision may continue to produce legal effects.
In addition, it should be recalled that the implementation in good faith by the Member States of the decisions adopted by the Commission in relation to State aid constitutes application of the principle of sincere cooperation laid down in Article 4(3) TEU and assumes that the Member States will make the necessary efforts to overcome any difficulties whilst fully observing the Treaty provisions, in particular the provisions on aid (see, to that effect, judgment of 11 May 2005, Saxonia Edelmetalle and ZEMAG v Commission, T‑111/01 and T‑133/01, EU:T:2005:166, paragraph 124 and the case-law cited). Thus, notwithstanding the risk of infringement proceedings faced by the Kingdom of Belgium if the Commission were to take the view that the measures put in place by it for the benefit of the former cooperative members of the ARCO companies constitute a circumvention of the prohibition laid down in Article 2(4) of the contested decision, it follows from the principle of sincere cooperation that that Member State should itself refrain from any conduct which may constitute such circumvention in the event that the contested provision were to remain in force. It follows that the annulment of that provision, if the present action were to prove to be well-founded, would not be devoid of legal effects.
Finally, it should be noted that, in recital 140 of the contested decision and in the arguments advanced by it on the merits to justify the legality of Article 2(4) of the contested decision, the Commission contends that the mere finding that an aid measure is incompatible with the internal market is sufficient to justify the Member State being ordered to take steps to abolish the measure at issue. Accordingly, on that issue, the Commission adopted a general and abstract position, the justifications for which are independent from the circumstances of the case. It follows that, if the Court were to come to the conclusion that such a requirement is unlawful, there would be a need to adjudicate on the present dispute to prevent similar unlawfulness from recurring in the future (see, to that effect, judgment of 7 June 2007, Wunenburger v Commission, C‑362/05 P, EU:C:2007:322, paragraphs 50 to 52).
It is apparent from the foregoing that it is by no means established that the annulment of Article 2(4) of the contested decision would be devoid of any legal effect and that, therefore, the Commission is unjustified in asserting that the present action has become devoid of purpose. It follows that the Commission’s application that the Court find that there is no longer any need to adjudicate must be rejected.
The lawfulness of Article 2(4) of the contested decision
Under Article 2(4) of the contested decision, the Kingdom of Belgium is required to continue to refrain, with effect from the date of notification of that decision, from making any payments under the guarantee scheme. That definitive prohibition must be understood in the context of the letter of 6 December 2011 (see paragraph 13 above) and the opening decision (see paragraph 14 above), which both contained a provisional prohibition of similar scope pending the adoption of the contested decision. Furthermore, in recital 143 of the contested decision, the Commission found that the recovery of the aid at issue required the withdrawal by the Kingdom of Belgium of the legislation and the regulations which formed the legal basis of the guarantee.
According to the Kingdom of Belgium, a prohibition on making payments such as that decided on by the Commission in Article 2(4) of the contested decision is conceivable in two situations only. In the first situation, the beneficiaries of the payments made under the guarantee, that is to say the cooperative members, must have been identified as the beneficiaries of the State aid declared incompatible with the internal market, which is not the case here. Failing that, in order to be justified, the prohibition on the payment of the amounts guaranteed must be necessary in order to achieve the objective of abolishing the effects of the State aid found to be incompatible with the internal market.
The Kingdom of Belgium submits that, by prohibiting as a matter of principle the payment of the guarantee to the cooperative members without establishing whether that prohibition was a necessary measure in order to reverse the effects of the aid from which the ARCO companies benefited, the Commission confused the abolition of the selective advantage granted, for which provision is made in Article 108(2) TFEU, with the abolition of the legal act on the basis of which the advantage at issue was granted. In addition, the abolition of the act on the basis of which the undue advantage is granted is justified only in cases in which such abolition is necessary in order to eliminate the distortions of competition caused by the unlawful or incompatible aid. The obligation laid down by the Commission is thus disproportionate.
The Commission disputes those claims.
Under Article 108(2) TFEU, if, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market having regard to Article 107 TFEU or that such aid is being misused, it is to decide that the State concerned is to abolish or alter such aid within a period of time to be determined by the Commission.
Thus, according to settled case-law, the logical consequence of a finding that aid is unlawful is to remove it by means of recovery in order to restore the situation previously obtaining (see judgment of 8 December 2011, Residex Capital IV, C‑275/10, EU:C:2011:814, paragraph 33 and the case-law cited).
The main objective pursued in recovering unlawfully paid State aid is to eliminate the distortion of competition caused by the competitive advantage which such aid affords. In this way, by repaying the aid, the beneficiary forfeits the advantage which it had over its competitors on the market, and the situation prior to the payment of the aid is restored (see judgment of 8 December 2011, Residex Capital IV, C‑275/10, EU:C:2011:814, paragraph 34 and the case-law cited).
In the present case, the parties are in disagreement as to whether or not the recovery of the advantage from which the ARCO companies unduly benefited entails the abolition of the guarantee, that is to say the prohibition on making any payment to the cooperative members, in the event that the liquidation proceedings, opened prior to the adoption of the contested decision, were to result in the loss for those members of the value of their shares in full or in part.
It is therefore necessary, first of all, to recall the characteristics of the unlawful State aid identified by the Commission in the contested decision, and then the measures prescribed by the Commission to ensure its recovery. Secondly, it will be necessary to assess the merits both of the arguments by which the Kingdom of Belgium takes the view that the prohibition on paying the amounts guaranteed to the cooperative members is disproportionate and of the justifications advanced by the Commission to defend the validity of that prohibition.
The State aid identified in the contested decision
As a preliminary point, it should be recalled that the measure examined in the contested decision consists in a guarantee covering the amounts invested by individuals in shares in the capital of the ARCO companies. Since those companies had joined the mechanism established by the Belgian Government (see paragraph 9 above), the amounts invested in their capital by their members, being natural persons, were therefore guaranteed up to EUR 100000 (see paragraph 8 above). According to the mechanism established, a guarantee fund had to provide assistance, following completion of the liquidation operations, if the capital remaining would not enable each cooperative member to recover the funds invested up to a limit of EUR 100000.
It should also be recalled that the ARCO companies entered into voluntary liquidation on 8 December 2011, that is to say at the beginning of the administrative procedure which led to the adoption of the contested decision.
In the contested decision, the Commission found that the measure at issue contained an element of State aid in favour of the ARCO companies. According to the Commission, guaranteeing their shares encouraged the cooperative members not to withdraw their investments in the capital of those companies. In those circumstances, the companies benefited from a selective advantage financed by public funds. The Commission found that the measure at issue met all the State aid criteria and that that aid could not be justified by the objective of remedying a serious disturbance in the Belgian economy since that measure was neither appropriate, nor necessary, nor proportionate to such an objective.
In addition, the Commission, having found that that aid had been implemented before it decided on the aid’s classification and on its possible compatibility with the internal market, took the view that the aid was therefore unlawful. That analysis was confirmed by the Court in the judgment of 21 December 2016, Vervloet and Others (C‑76/15, EU:C:2016:975) (see paragraph 27 above).
The action brought against the contested decision by the ARCO companies having been dismissed by the order of 9 February 2018, Arcofin and Others v Commission (T‑711/14, not published, EU:T:2018:80) (see paragraphs 30 and 31 above), and since an appeal was not lodged against that order, the assessments made in the contested decision and reproduced in paragraphs 77 and 78 above must be regarded as having become final.
Accordingly, having held, first, that the measure at issue contained an element of State aid of which the ARCO companies were the beneficiaries and, secondly, that that aid was incompatible with the internal market and had been implemented before it was able to conduct its preliminary examination, the Commission was justified in ordering the Kingdom of Belgium to effect recovery of that aid.
It is therefore necessary to recall the measures prescribed by the Commission in the contested decision, it being understood that the only contested measure is the prohibition on making payment of the amounts guaranteed to the cooperative members, namely the individual members of the ARCO companies (see paragraph 2 above).
The measures prescribed for the recovery of the aid at issue
It should be recalled, as has been set out in paragraph 22 above, that, in order to ensure the recovery of the unlawful aid found to be incompatible with the internal market, as identified in the contested decision, the Commission laid down two measures.
First, the Commission ordered the Kingdom of Belgium, using a formula the principles of which were determined by the Commission, to assess the amount of the advantage from which the ARCO companies had benefited and to enter a claim in that amount in the liabilities of the liquidation account of those companies. Those arrangements for the recovery of the aid at issue are not contested by the Kingdom of Belgium, which considers that that measure is sufficient to ensure that competition is restored.
Secondly, the Commission also ordered the Kingdom of Belgium to refrain from paying the amounts guaranteed to the cooperative members. In that regard, the parties are in disagreement as to whether the Commission was justified in issuing that injunction against the Kingdom of Belgium.
It follows from the case-law referred to in paragraphs 71 and 72 above that the answer to that question turns on whether that injunction was proportionate to the objective of recovering the unlawful aid found to be incompatible with the internal market. In other words, the task now is to determine whether that injunction was appropriate and necessary to restore the competitive situation previously obtaining, that is to say to neutralise, as far as concerns the beneficiaries identified by the Commission in the contested decision, the competitive advantage as assessed in that decision.
The proportionality of the prohibition on paying the amounts guaranteed to the cooperative members
In the first place, it should be recalled that only the ARCO companies were identified as beneficiaries of the aid at issue in the contested decision. The competitive advantage from which those companies benefited was assessed to be aid to maintain their existing capital. According to the contested decision, that advantage took the form of a means of encouragement, by virtue of the very existence of the guarantee, which had the effect of deterring the cooperative members from withdrawing the shares invested in the capital of the companies. It is, however, established that the cooperative members themselves were not deemed to be beneficiaries of State aid in the contested decision.
In those circumstances, the Kingdom of Belgium is justified in maintaining that the entry in the liabilities of the liquidation account of the ARCO companies of a claim of an amount corresponding to the value of the sole advantage identified by the Commission in the contested decision, in accordance with Article 2(1) of that decision, was sufficient to neutralise that advantage and, accordingly, to restore the competitive situation which the grant of the aid at issue had distorted (see, to that effect, judgment of 2 July 2002, Commission v Spain, C‑499/99, EU:C:2002:408, paragraphs 37 and 38).
In the second place, as has just been recalled, it should be observed that the only element of State aid identified by the Commission in the contested decision is the competitive advantage which the guarantee afforded the ARCO companies. However, the Commission did not find that the cooperative members were themselves the beneficiaries of State aid and did not classify as such the guarantee in so far as that guarantee conferred an advantage on the cooperative members. It follows that the prohibition imposed on the Kingdom of Belgium from making the payments provided for by the guarantee cannot be regarded, as such, as directly pursuing the objective of recovering State aid from its beneficiaries.
In the third place, it must be observed that, since the opening of the liquidation proceedings, the guarantee no longer acts as an incentive for the members of the ARCO companies, with the result that, since that time, they have ceased to benefit from the advantage identified in the contested decision on account of the existence of the guarantee. As the parties confirmed at the hearing, the opening of the liquidation proceedings prevents the cooperative members from withdrawing their shares. Furthermore, in that regard, the Commission itself, in determining the formula intended to value the advantage afforded to the ARCO companies, calculated that advantage only up until the opening of the liquidation proceedings, which, moreover, results in those companies’ exit from the market. It follows that the abolition of the guarantee which the Commission requested that the Kingdom of Belgium undertake was destined to have no effect on the competitive situation of the companies identified as the beneficiaries of the aid at issue and could not contribute to restoring the situation previously obtaining.
It thus follows from the foregoing that the prohibition on paying the amounts guaranteed to the cooperative members is not an appropriate measure to achieve the objective of restoring the competitive situation distorted by the grant of the State aid identified in the present case in the contested decision.
None of the justifications advanced by the Commission, either in the contested decision or in the course of the proceedings before the Court, is capable of calling that assessment into question.
The justifications advanced by the Commission
In the first place, in recitals 137 to 142 of the contested decision, the Commission justified the prohibition on paying the amounts guaranteed by the need, stemming in its view from Article 108(2) TFEU, to abolish any measure containing an element of State aid incompatible with the internal market. In addition, in its pleadings, the Commission advanced systemic considerations, which would entail not treating a Member State which, as in the present case, failed to notify the contested measure prior to its implementation less severely than a Member State which had complied with the obligation to give prior notification of any measure which may include an element of State aid.
In that regard, it should be observed from the outset that the view taken by the Commission appears to stem from a confusion between the concept of State aid, which is not formal in nature but is rather defined by the satisfaction of the criteria laid down in Article 107(1) TFEU, and the legal provision forming the basis for it and giving expression to it. It is settled case-law that Article 107 TFEU defines State aid in relation to its effects (see judgment of 13 February 2003, Spain v Commission, C‑409/00, EU:C:2003:92, paragraph 46 and the case-law cited).
In addition, it should be observed, as Advocate General Kokott noted in point 28 of the Opinion delivered by her in the case which gave rise to the judgment of 8 December 2011, Residex Capital IV (C‑275/10, EU:C:2011:814), that, in contrast to the position under EU antitrust law as laid down in Article 101(2) TFEU, the provisions of the Treaties of the European Union on State aid do not expressly state what legal consequences, affecting the validity of acts, are to follow from a breach of the duty to notify and of the prohibition on putting aid measures into effect laid down in the third sentence of Article 108(3) TFEU. It is true that it cannot be ruled out that the disappearance of the measure by which State aid is granted may constitute, as a general rule, the most appropriate means of neutralising the competitive advantage granted. However, in those cases in which, as in the present case, the competitive advantage identified as State aid benefits a third party (the ARCO companies) as compared with the direct beneficiaries of the contested measure (the cooperative members), the disappearance of the measure itself can be justified only where that appears to be necessary in order to restore the competitive situation which would have prevailed if the State aid from which that third party benefited had not been granted (see, to that effect, judgment of 8 December 2011, Residex Capital IV, C‑275/10, EU:C:2011:814, paragraphs 44 and 45). However, in the present case, as stated in paragraph 90 above, the prohibition on paying the amounts guaranteed to the cooperative members is not an appropriate measure to achieve the objective of restoring the competitive situation distorted by the grant of the State aid identified in the present case in the contested decision.
In the second place, the Commission argues that the cooperative members cannot be regarded as third parties as compared with the ARCO companies. However, such an argument is unconvincing.
First, it should be recalled that, in the contested decision, the Commission at no point regarded the cooperative members as benefiting from the aid at issue. For example, it is clear from Section 4.1 of the contested decision that the only ‘real beneficiaries’ are the ARCO companies and that the State aid identified in Section 4.3 of that decision consists exclusively in the competitive advantage from which those companies benefited.
Secondly, it is established that the ARCO companies are limited liability companies and that, therefore, neither their assets nor their object can be confused with the interests of their members. Furthermore, in the order of 9 February 2018, Arcofin and Others v Commission (T‑711/14, not published, EU:T:2018:80), the Court upheld the plea of inadmissibility raised by the Commission in relation to the fifth plea in law of the action, taking the view that the ARCO companies’ interest in bringing proceedings and that of the cooperative members were separate. It follows that the Commission is not justified in asserting that their mere status as members of the companies benefiting from the aid at issue was sufficient to justify the advantage from which those companies benefited, the recovery of which was guaranteed, in accordance with Article 2(1) of the contested decision, by the entry of a claim by the State in the liabilities of the liquidation account, being recovered, in addition, from the cooperative members.
In the third place, nor can the Commission rely on the judgment of 10 November 2011, Elliniki Nafpigokataskevastiki and Others v Commission (T‑384/08, not published, EU:T:2011:650), which is not a comparable precedent for the present case. First, in the case in question, the Commission had merely ordered the abolition of the contested guarantee without taking steps, as it has done in the present case, to value the advantage and order its recovery (judgment of 10 November 2011, Elliniki Nafpigokataskevastiki and Others v Commission, T‑384/08, not published, EU:T:2011:650, paragraphs 133 and 135). Secondly, the guarantee at issue in that other case was intended to protect its beneficiary from the risk of having to repay State aid unlawfully granted to a company which the beneficiary of that guarantee planned to acquire. The direct objective of that guarantee was therefore to preclude the recovery of State aid by providing for the reimbursement to the purchaser of any aid potentially recovered. On the contrary, in the present case, as is clear inter alia from paragraph 89 above, the prohibition on paying the amounts guaranteed to the cooperative members continues to have no effect on the recovery of the advantage identified in the contested decision, which was effected by the entry of a claim by the Belgian State in the liabilities of the liquidation account of the ARCO companies.
It follows from all the foregoing that, by ordering the Kingdom of Belgium to refrain from making any payments to the cooperative members under the guarantee, even though it had, moreover, ordered the recovery of the advantage identified in the contested decision by means of the entry of a claim in the liabilities of the liquidation account of the ARCO companies, which are regarded as the beneficiaries of the aid at issue, the Commission imposed a disproportionate objective on the Kingdom of Belgium in the present case and exceeded the powers conferred on it by Article 108(2) TFEU.
It follows that the Kingdom of Belgium is justified in maintaining that Article 2(4) of the contested decision is unlawful and must, therefore, be annulled.
Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Kingdom of Belgium.
On those grounds,
THE GENERAL COURT (Third Chamber, Extended Composition)
hereby:
1.
Annuls Article 2(4) of Commission Decision 2014/686/EU of 3 July 2014 on State aid SA.33927 (12/C) (ex 11/NN) implemented by Belgium – Guarantee scheme protecting the shares of individual members of financial cooperatives;
2.
Orders the European Commission to pay the costs.
Frimodt Nielsen
Kreuschitz
Forrester
Półtorak
Perillo
Delivered in open court in Luxembourg on 7 December 2018.
[Signature]
( *1 ) Language of the case: French. |
ORDER OF THE COURT (Grand Chamber)
19 September 2017 ( *1 )
(Rectification of judgment)
In Case C‑413/14 P-REC,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 26 August 2014,
Intel Corporation Inc., established in Wilmington (United States), represented by D.M. Beard QC, and by A. Parr and R. Mackenzie, Solicitors,
appellant,
the other parties to the proceedings being:
European Commission, represented by T. Christoforou, V. Di Bucci, M. Kellerbauer and N. Khan, acting as Agents,
defendant at first instance,
Association for Competitive Technology Inc., established in Washington (United States), represented by J.-F. Bellis, avocat,
Union fédérale des consommateurs — Que choisir (UFC — Que choisir),
interveners at first instance,
THE COURT (Grand Chamber),
composed of K. Lenaerts, President, A. Tizzano, Vice-President, R. Silva de Lapuerta, M. Ilešič, J. L. da Cruz Vilaça (Rapporteur), E. Juhász, M. Berger, M. Vilaras and E. Regan, Presidents of Chambers, A. Rosas, J. Malenovský, E. Levits, F. Biltgen, K. Jürimäe and C. Lycourgos, Judges,
Advocate General: N. Wahl,
Registrar: A. Calot Escobar,
after hearing the Advocate General,
makes the following
Order
On 6 September 2017, the Court (Grand Chamber) delivered the judgment in Intel v Commission (C 413/14 P, EU:C:2017:632).
That judgment contains, in the version in the language of the case, clerical errors which it is appropriate for the Court to rectify of its own motion in accordance with Article 154(1) of its Rules of Procedure, which applies to the procedure on appeal pursuant to Article 190(1) of those rules.
On those grounds, the Court (Grand Chamber) hereby orders:
1.
Paragraph 139 of the judgment of 6 September 2017, Intel v Commission (C‑413/14 P, EU:C:2017:632), in the version in the language of the case, shall be rectified as follows:
‘In that case, the Commission is not only required to analyse, first, the extent of the undertaking’s dominant position on the relevant market and, secondly, the share of the market covered by the challenged practice, as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; it is also required to assess the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market (see, by analogy, judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 29).’
2.
Paragraph 140 of that judgment, in the version in the language of the case, shall be rectified as follows:
‘The analysis of the capacity to foreclose is also relevant in assessing whether a system of rebates which, in principle, falls within the scope of the prohibition laid down in Article 102 TFEU, may be objectively justified. In addition, it has to be determined whether the exclusionary effect arising from such a system, which is disadvantageous for competition, may be counterbalanced, or outweighed, by advantages in terms of efficiency which also benefit the consumer (judgment of 15 March 2007, British Airways v Commission, C‑95/04 P, EU:C:2007:166, paragraph 86). That balancing of the favourable and unfavourable effects of the practice in question on competition can be carried out in the Commission’s decision only after an analysis of the intrinsic capacity of that practice to foreclose competitors which are at least as efficient as the dominant undertaking.’
3.
The original of this order shall be annexed to the original of the rectified judgment. A note of this order shall be made in the margin of the original of the rectified judgment.
Luxembourg, 19 September 2017.
A. Calot Escobar
Registrar
K. Lenaerts
President
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
CRUZ VILLALÓN
delivered on 8 September 2015 ( )
Case C‑489/14
A
v
B
(Request for a preliminary ruling from the
High Court of Justice of England and Wales, Family Division (United Kingdom))
‛Reference for a preliminary ruling — Judicial cooperation in civil matters — Jurisdiction, recognition and enforcement of judgments in matrimonial matters and matters of parental responsibility — Regulation (EC) No 2201/2003 — Lis pendens — Articles 16 and 19 — Judicial separation proceedings in France and divorce proceedings in the United Kingdom — Jurisdiction of the court first seised — Concept of ‘established’ jurisdiction — Expiry of judicial separation proceedings where no assignation (petition for a decree) filed within the statutory time-limits — Filing of a divorce petition in France immediately after expiry of the separation proceedings — Effect of the impossibility of issuing divorce proceedings in the United Kingdom because of the time difference between the two Member States’
1.
The present case gives the Court its first opportunity to examine, in very specific circumstances linked to the duality of the procedure for ‘undoing’ a marriage in France, the rules on lis pendens laid down by Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000. ( )
2.
The questions put by the referring court, which considers this to be a situation in which there is a conflict of jurisdiction attributable entirely to the abusive manoeuvring of the respondent in the main proceedings, a situation which it regards as pitiful, essentially relate to the concept of ‘jurisdiction’ being ‘established’ within the meaning of Article 19 of Regulation No 2201/2003. However, while the dispute in the main proceedings does indeed raise an issue of lis pendens within the meaning of Article 19, it is the interpretation of the concept of the ‘court first seised’ for the purposes of Articles 16 and 19 of Regulation No 2201/2003 that should, as I shall show in the course of my reasoning, enable the Court to provide an answer to the referring court’s queries.
I – Legal context
A – EU law
3.
Article 16 of Regulation No 2201/2003 provides:
‘1. A court shall be deemed to be seised:
(a)
at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the applicant has not subsequently failed to take the steps he was required to take to have service effected on the respondent;
or
(b)
if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the applicant has not subsequently failed to take the steps he was required to take to have the document lodged with the court.’
4.
Article 19(1) and (3) of Regulation No 2201/2003 states:
‘1. Where proceedings relating to divorce, legal separation or marriage annulment between the same parties are brought before courts of different Member States, the court second seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.
…
3. Where the jurisdiction of the court first seised is established, the court second seised shall decline jurisdiction in favour of that court.
In that case, the party who brought the relevant action before the court second seised may bring that action before the court first seised.’
B – French law
5.
Although this request for a preliminary ruling emanates from a court of the United Kingdom, it does not contain any information about the United Kingdom law applicable to the main proceedings. It does, however, mention a number of provisions of the Code of Civil Procedure (code de procédure civile), which must be set out.
6.
Article 1076 of the Code of Civil Procedure provides:
‘The spouse who presents a divorce petition may, whatever the situation, and even during appeal proceedings, substitute a petition for judicial separation.
The converse shall not apply.’
7.
Article 1111 of the Code of Civil Procedure provides:
‘Where he establishes, after having heard each spouse on the principle of the breakdown of the marriage, that the petitioner is maintaining his petition, the judge shall make an order by which he may either refer the parties, in accordance with Article 252-2 of the Civil Code, for a further conciliation attempt, or immediately authorise the spouses to institute proceedings for a decree of divorce.
In either case, he may order all or part of such interim measures as are provided for under Articles 254 to 257 of the Civil Code.
When granting authorisation to institute proceedings for a decree of divorce, the judge shall recite in his order the time-limits laid down under Article 1113 of this Code.’
8.
Article 1113 of the Code of Civil Procedure is worded as follows:
‘Within three months from the pronouncement of the order only the spouse who has presented the initial requête (request) may file an assignation (petition for a decree) for divorce.
In the event of reconciliation of the spouses, or if the proceedings for a decree of divorce have not been instituted within 30 months from the pronouncement of the order, all its provisions shall be null and void, including the authorisation to institute proceedings for a decree of divorce.’
9.
Article 1129 of the Code of Civil Procedure states:
‘The procedure in relation to judicial separation shall follow the rules laid down for the procedure in relation to divorce.’
II – The background to the main proceedings
10.
Ms A ( ) and Mr B, ( ) both of whom are French nationals, were married in France on 27 February 1997, having entered into a marriage contract under French law under the regime of séparation des biens (principle of separate property during marriage). The couple and their two children, twins born on 27 July 1999, moved to the United Kingdom in 2000, where their third child was born on 16 July 2001.
11.
In June 2010, the respondent in the main proceedings moved out of the matrimonial home and the couple has, de facto, been living separately since then.
A – The proceedings brought in France
12.
On 30 March 2011, the respondent in the main proceedings lodged a requête for judicial separation with the tribunal de grande instance (Regional Court) of Nanterre (France).
13.
The conciliation hearing, which was held on 5 September and 8 November 2011, was ultimately unsuccessful.
14.
Accordingly, on 15 December 2011, the tribunal de grande instance of Nanterre made a non-conciliation order (No RG 11/04305) declaring the breakdown of the marriage and ruling on the measures required in order to settle the family situation pending final judgment. The tribunal de grande instance of Nanterre declared, first of all, that it had jurisdiction under Article 5(2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ( ) to rule on interim measures specific to judicial separation proceedings and on the maintenance obligation under the duty of support, and declared French law to be applicable. By contrast, it declared that it did not have jurisdiction to rule on measures in relation to the children, which were within the purview of the courts of the United Kingdom. Furthermore, it authorised the spouses to institute proceedings for a decree of judicial separation. It also granted the petitioner in the main proceedings the right to stay in the family home free of charge under the duty of support, and awarded her a maintenance allowance of EUR 5000 per month, the respondent in the main proceedings being provisionally required to make mortgage and other loan repayments. Lastly, it appointed a notary to draw up a report on the couple’s assets.
15.
On 22 November 2012, the cour d’appel de Versailles (Court of Appeal of Versailles) (France), seised by the respondent in the main proceedings, delivered a judgment (No RG 12/01345) upholding in its entirety the non-conciliation order of the tribunal de grande instance of Nanterre.
16.
On 17 December 2012, the respondent in the main proceedings filed a requête for divorce which was, however, dismissed, since the judicial separation proceedings which he had brought on 30 March 2011 and had not withdrawn were still pending.
17.
On 17 June 2014, at 8.20 a.m., that is early on the first day following expiry of the 30-month period within which proceedings for a decree of judicial separation must be instituted if they are not to lapse, the respondent in the main proceedings filed a requête for divorce.
B – The proceedings brought in the United Kingdom
18.
In parallel with the judicial separation proceedings brought in France by the respondent in the main proceedings, the petitioner in the main proceedings applied, on 19 May 2011, to the Child Support Agency for child support for the children in her care.
19.
On 24 May 2011, she also filed a divorce petition and made a separate application for maintenance.
20.
On 7 November 2012, the High Court of Justice, Family Division, dismissed the divorce petition of the petitioner in the main proceedings, by consent, pursuant to Article 19 of Regulation No 2201/2003.
21.
On 6 June 2014, the petitioner in the main proceedings applied ex parte to the referring court with a view to obtaining a proleptic decree or declaration that her divorce petition, when issued, would only take effect at one minute past midnight on 17 June 2014, that is to say, at the moment when the non-conciliation order made by the family law judge in the context of the judicial separation proceedings brought in France by the respondent in the main proceedings would lapse. That application, judged to be too innovative, was, however, dismissed.
22.
On 13 June 2014, the petitioner in the main proceedings filed a second divorce petition with the referring court.
23.
On 9 October 2014, invoking Article 19 of Regulation No 2201/2003, the respondent in the main proceedings applied for the divorce petition filed by the petitioner in the main proceedings on 13 June 2014 to be dismissed as inadmissible and for the case to be struck out.
III – The questions referred for a preliminary ruling and the procedure before the Court
24.
In that context and in those circumstances, the High Court of Justice, Family Division, decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
For the purposes of Article 19(1) and (3) [of Regulation No 2201/2003], what does “established” mean, in circumstances where:
(a)
the applicant, in the proceedings in the court first seised (“the first proceedings”), takes virtually no steps in the first proceedings beyond the first court appointment, and in particular does not issue a Petition (Assignation) within the time-limit for the expiry of the Request (Requête), with the result that the first proceedings expire undetermined by effluxion of time and in accordance with the local (French) law of the first proceedings, namely 30 months after the first directions appointment;
(b)
the first proceedings expire as above very shortly (3 days) after the proceedings in the court second seised (“the second proceedings”) are issued in [the United Kingdom], with the result that there is no judgment in France nor any danger of irreconcilable judgments between the first proceedings and the second proceedings; and
(c)
by virtue of the United Kingdom’s time zone the applicant in the first proceedings would, following the lapse of the first proceedings, always be able to issue divorce proceedings in France before the applicant [in the second proceedings] could issue divorce proceedings in [the United Kingdom]?
(2)
In particular, does “established” import that the applicant in the first proceedings must take steps to progress the first proceedings with due diligence and expedition to a resolution of the dispute (whether by the Court or by agreement), or is the applicant in the first proceedings, having once secured jurisdiction under Articles 3 and 19(1), free to take no substantive steps at all towards resolution of the first proceedings as above and free thereby simply to secure a stop of the second proceedings and a stalemate in the dispute as a whole?’
25.
In its order for reference, the referring court states that situations such as that in the main proceedings, in which there are several parallel proceedings in two Member States, cannot have been in the contemplation of the authors of Regulation No 2201/2003, their objective having been to ensure that jurisdiction is swiftly established, that cases are swiftly heard and that irreconcilable judgments are avoided.
26.
The referring court emphasises that the respondent in the main proceedings is responsible, as a result of his manoeuvres, for the confusion that has reigned in the main case for four years. His desire to prevent the petitioner in the main proceedings from filing a divorce petition in the courts of the United Kingdom is demonstrated in several ways. It refers, in that regard, to the fact that he filed a divorce petition in France even though the judicial separation proceedings were still pending, and to the fact that he filed his divorce petition in France at the earliest possible opportunity, at a time when, given the time difference, it was not possible for the petitioner in the main proceedings to file such a petition in the United Kingdom.
27.
The referring court also notes that, after the judgment of the cour d’appel of 22 November 2012 upholding the non-conciliation order, the respondent in the main proceedings took no steps whatsoever to progress the judicial separation proceedings in France, being content to wait for them to lapse before filing his divorce petition. In those circumstances, the referring court is doubtful whether the jurisdiction of the French court can be considered to be ‘established’ within the meaning of Article 19 of Regulation No 2201/2003. It refers in that respect to the argument of the petitioner in the main proceedings that the simple filing of proceedings in a court cannot be sufficient. The applicant should be under an obligation to progress the proceedings with due diligence and expedition, otherwise the parties involved in divorce proceedings would have the ability to file an ‘Italian torpedo’, and prevent the expeditious resolution of disputes.
28.
The referring court states, however, that such an interpretation involves a departure not only from the wording of Article 19 of Regulation No 2201/2003, but also from the case-law relating to Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, ( ) and in particular the judgment in Gantner Electronic, ( ) in which the Court of Justice held that ‘lis pendens exists from the moment when two courts of different Contracting States are definitively seised of an action, that is to say, before the defendants have been able to put forward their arguments’.
29.
The referring court explains, lastly, that, according to the information concerning French law in its file, for a period of three months, an assignation for a decree of judicial separation can be filed only by the applicant.
30.
Although the respondent in the main proceedings stated that he had not filed an assignation for judicial separation from the petitioner in the main proceedings because he wished to obtain a divorce without prolonging the procedural timetable, he did not provide any explanation for his failure to withdraw his requête for judicial separation, which establishes his intention to prevent the petitioner in the main proceedings, for as long as possible, from seeking a divorce in the United Kingdom in order to enable all matters in dispute to be determined by one court at the earliest opportunity.
31.
The referring court also requested the Court of Justice to apply an expedited procedure to the present case pursuant to Article 105(1) of the Rules of Procedure of the Court of Justice.
32.
By order of 13 January 2015, the President of the Court of Justice refused that request. He did, however, decide that the case would be given priority over others, pursuant to Article 53(3) of the Rules of Procedure. Furthermore, in accordance with Article 95(1) of the Rules of Procedure, the Court maintained the anonymity granted by the referring court.
33.
On 18 May 2015, the respondent in the main proceedings informed the Court of Justice that he recognised and accepted the jurisdiction of the referring court, without, however, apparently informing either the referring court or the French court of this. The Court of Justice communicated that information to the referring court and to the petitioner in the main proceedings by letter of 21 May 2015.
34.
The petitioner in the main proceedings, the United Kingdom Government and the European Commission have submitted written observations. In addition, the petitioner in the main proceedings and the Commission were heard in a hearing in open court on 1 June 2015.
IV – The observations submitted to the Court
A – The observations of the petitioner in the main proceedings
35.
The petitioner in the main proceedings declares that she endorses and repeats the conclusions reached by the referring court. Like the referring court, she deplores, first of all, the anomalous position of a court having jurisdiction in respect of divorce and matrimonial finance but being unable to refer a case to a better placed court under the forum non conveniens exception, unlike the position in cases concerning parental responsibility, ( ) or now provided for, in civil and commercial cases, by Regulation No 1215/2012. ( )
36.
She also condemns the scope for abuse — an abuse which is clear in the main proceedings — that arises from the application of the lis pendens rule contained in Article 19 of Regulation No 2201/2003, where the party who has brought the proceedings is under no duty to take any steps to progress them. She regrets, lastly, the aggravating and discriminating effect of the time zones within the European Union, since parties in the easternmost areas will always have a time advantage, in absolute terms, over those in more westerly areas as regards being the first to issue proceedings.
37.
The petitioner in the main proceedings also submits, in essence, that Article 19 of Regulation No 2201/2003 cannot, if the requirements of Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950, are not to be disregarded, be interpreted as meaning that a court’s jurisdiction is established where it is seised of judicial proceedings which have expired due to the inactivity of the party who issued them. While that regulation does indeed allow a choice of forum in divorce jurisdiction, a party cannot be allowed to choose a forum which is unfavourable to the other party and then delay or avoid altogether a resolution of the proceedings which the first party has himself commenced.
38.
The petitioner in the main proceedings states in that regard that either she is compelled to litigate abroad, in a forum in which neither party is resident and which would be disadvantageous to her in terms of likely result, or she is denied any remedy for so long as the respondent can prolong the proceedings brought in France and prevent any other proceedings from being commenced.
39.
The petitioner in the main proceedings goes on to state that the overall purpose and policy of Regulation No 2201/2003 are such that the priority of jurisdiction afforded to the court first seised presupposes that the party who brought the proceedings is required to progress them with due diligence and expedition to a resolution of the dispute. She refers, in that regard, by analogy, to Article 16(1) of Regulation No 2201/2003, Article 9 of Council Regulation (EC) No 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations, ( ) and Article 14 of Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession. ( )
40.
Lastly, the petitioner in the main proceedings maintains that it accords with common sense and natural justice, and also with French case-law and the case-law of the Court of Justice, if jurisdiction is considered to be ‘established’ for the purposes of Article 19 of Regulation No 2201/2003 only where the applicant proceeds in good faith to progress the litigation to a resolution. The Cour de cassation (Court of Cassation) (France) thus held in a judgment of 26 June 2013 ( ) that the status of the requête as the beginning of the proceedings is valid only if it is followed by the filing of the assignation. In the main proceedings, the fact that the respondent in the main proceedings had not filed an assignation against the petitioner in the main proceedings meant that the bringing of the proceedings in France had ceased to have effect in relation to establishing jurisdiction under Article 19 of Regulation No 2201/2003. Furthermore, the Court of Justice had confirmed that, in certain circumstances, where a court second seised of an application in matters of parental responsibility lacks any evidence for the purpose of assessing lis pendens notwithstanding the efforts made to obtain information by enquiry of the party which has claimed it, that court may, after the expiry of a reasonable period in which answers to the enquiries made are awaited, proceed with consideration of the action. ( )
41.
At the hearing, the petitioner in the main proceedings stated, in response to the written observations of the United Kingdom Government, that the questions referred for a preliminary ruling must be declared admissible. In her submission, it is the case that, in the United Kingdom, lis pendens must be assessed as at the date on which the court is seised rather than as at the date on which it delivers its ruling. She infers from this that it is particularly important that the Court of Justice rule on the questions and hold that the date to be taken into account is that on which the referring court was seised, in this case on 13 June 2014, and that the French court, seised of the divorce petition of the respondent in the main proceedings on 17 June 2014, was therefore second seised.
42.
She also argued that the obligation for the court second seised to ‘decline jurisdiction’ within the meaning of Article 19(3) of Regulation No 2201/2003 did not mean that it should declare that it has no jurisdiction, since the declining of jurisdiction has only suspensive effect and permits the resumption of the second set of proceedings if the proceedings first brought expire, as is the case in the main proceedings.
B – The observations of the United Kingdom Government
43.
The United Kingdom Government submits, principally, that it is not necessary for the Court to rule on the questions referred for a preliminary ruling.
44.
It argues that, in accordance with Article 1113 of the Code of Civil Procedure, the judicial separation proceedings brought before the French court by the respondent in the main proceedings expired early on 17 June 2014, and therefore the referring court, seised of a divorce petition by the petitioner in the main proceedings on 13 June 2014, must be regarded as the ‘court first seised’ rather than the ‘court second seised’, the issuing, by the respondent in the main proceedings, of divorce proceedings in France at 8.20 a.m. on 17 June 2014 changing nothing in that respect.
45.
That position is, according to the United Kingdom Government, consistent with the purpose of the lis pendens rules established ( ) by Article 19 of Regulation No 2201/2003, which is to obviate the risk of irreconcilable judgments in parallel proceedings in different jurisdictions, and with the case-law of the Court of Justice.
46.
The United Kingdom Government nevertheless goes on to consider the two questions referred.
47.
The United Kingdom Government contends first of all that the first question, which concerns the question whether the jurisdiction of the French court is established within the meaning of Article 19 of Regulation No 2201/2003, arises only if the referring court must be considered to be the ‘court second seised’. It observes that the Court of Justice has held that a purposive interpretation should be applied to that provision, ( ) as also to the analogous provisions of the Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters ( ) and Regulation No 44/2001, ( ) having regard to the objectives pursued by Regulation No 2201/2003, which are to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions which might result therefrom.
48.
However, while the jurisdiction of the French court had, at one time, been established, that was no longer the case, since the judicial separation proceedings brought in France had expired. The referring court should therefore hold that there is in fact no longer lis pendens. That solution would ensure that Article 19 of Regulation No 2201/2003 achieves its purpose of preventing irreconcilable judgments and thus of securing legal certainty, while requiring applicants to take steps to progress proceedings in circumstances where these must be conducted within certain time-limits and will expire by effluxion of time.
49.
The United Kingdom Government proposes that the Court answer the second question by ruling, in essence, that Article 19 of Regulation No 2201/2003 must be interpreted as meaning that the term ‘established’ requires the party bringing the first proceedings, such as the judicial separation proceedings brought by the respondent in the main proceedings in this case, to take steps to progress the first proceedings with due diligence to a resolution.
50.
It submits, in that regard, that the purpose of the rules of lis pendens in Regulation No 2201/2003, which is to prevent parallel proceedings in different jurisdictions and the risk of irreconcilable judgments, must be seen as facilitating and not obstructing the progress of disputes to resolution, which accordingly means that the parties must take steps to progress proceedings.
51.
Consequently, the question whether an applicant has acted with due diligence to progress the proceedings which he has brought, or has simply let them expire by effluxion of time, is a factor relevant to the determination whether the jurisdiction of the court he has seised is established within the meaning of Article 19 of Regulation No 2201/2003. Any other outcome could lead to a stalemate by precluding the resolution of the dispute and denying the defendant his right to a fair and public hearing within a reasonable time, as provided for by Article 47 of the Charter of Fundamental Rights of the European Union.
C – The observations of the Commission
52.
The Commission begins by noting that the questions put by the referring court are based on two assumptions, one of which is correct whereas the other is not.
53.
It notes, first, that the referring court is proceeding on the basis that, under Article 19 of Regulation No 2201/2003, judicial separation proceedings brought in France bar divorce proceedings in another Member State, which in the Commission’s view is correct.
54.
It observes, however, that the wording of that provision does not necessarily compel that conclusion. Article 19 could, first of all, be interpreted as meaning that the bringing of judicial separation proceedings bars only other judicial separation proceedings, but not divorce proceedings. It could, on the other hand, also be interpreted as barring all types of parallel proceedings in matrimonial matters.
55.
The Commission is nevertheless of the view that it is the second interpretation that is correct, since Article 19 of Regulation No 2201/2003 does not require that the competing proceedings involve the same cause of action but merely the same parties. Furthermore, the purpose of the lis pendens rule is to prevent irreconcilable judgments being given by courts in different Member States, which would impede their subsequent recognition, in accordance with Article 22(d) of Regulation No 2201/2003. Lastly, that solution is a fortiori required in cases where there is a close relationship between proceedings for judicial separation and divorce.
56.
It states, secondly, that the referring court is proceeding on the basis that the question whether there is lis pendens must be assessed as at the date on which divorce proceedings were brought before it, in this case on 13 June 2014, and not as at the date on which it considered whether it was required to stay proceedings, in this case on 9 October 2014, which in the Commission’s view is not correct.
57.
The objective of the lis pendens rule is to avert the bringing of competing matrimonial proceedings and to remove the risk of irreconcilable judgments being given in different Member States, by applying the strict principle prior temporis. Nevertheless, that rule does not prevent the parties from seising courts in different Member States; it merely requires the court second seised to stay its proceedings and, where appropriate, to decline jurisdiction.
58.
The Commission is of the view that, in a situation such as that in the main proceedings, where proceedings are pending in a court of one Member State when a court of a second Member State is seised, but the proceedings brought in the first Member State have lapsed by the time an application is made to strike out the proceedings in the second Member State, the relevant date for the purpose of assessing lis pendens is the date on which the court seised in the second Member State rules on whether it must stay proceedings and, if appropriate, decline jurisdiction pursuant to Article 19 of Regulation No 2201/2003. That interpretation is confirmed both by the wording of Article 19 of Regulation No 2201/2003 and by the general system and objective of that regulation.
59.
In the present case, at the time when the referring court ruled on whether it was required to stay the divorce proceedings issued by the petitioner in the main proceedings, that is on 9 October 2014, there were no longer any parallel proceedings in France, the judicial separation proceedings having lapsed on 16 June 2014, nor, therefore, was there any risk of irreconcilable judgments. The fact that the respondent in the main proceedings issued divorce proceedings in France early on 17 June 2014 is irrelevant since there were, on that date, proceedings pending in the United Kingdom and, therefore, a situation of lis pendens.
60.
In those circumstances, the Commission concludes that it is not necessary to answer the questions put by the referring court, and proposes an answer only in the alternative, examining point (a) of the first question and the second question together.
61.
It states, first of all, that the meaning of ‘established jurisdiction’ must, logically, relate to the determination by the relevant court of whether it has jurisdiction under Regulation No 2201/2003 and whether, by virtue of its own national procedural law, it has been properly seised.
62.
Taking the view that the case-law relating to Article 27(2) of Regulation No 44/2001 is relevant to the interpretation of Article 19 of Regulation No 2201/2003, it recalls that, in its judgment in Cartier parfums-lunettes and Axa Corporate Solutions assurances, ( ) the Court ruled that ‘the jurisdiction of the court first seised must be regarded as being established … if that court has not declined jurisdiction of its own motion and none of the parties has contested its jurisdiction prior to or up to the time at which a position is adopted which is regarded in national procedural law as being the first defence on the substance submitted before that court’.
63.
In the main proceedings, there can be no doubt that the jurisdiction of the French court which made the non-conciliation order on 15 December 2011 was established, within the meaning of that case-law, at the outset of the proceedings. First, that court authorised the filing of an assignation and, secondly, the petitioner in the main proceedings was involved in the procedure, since she could apply for interim measures and did not object to the international jurisdiction of the French court either at first instance or at the appeal stage.
64.
Next, in the Commission’s view, Article 19 of Regulation No 2201/2003 does not include any obligation on the part of the applicant in proceedings brought before the court first seised to progress those proceedings with due diligence and expedition. The applicant is free to proceed in whichever way he considers most appropriate, subject to compliance with the relevant rules of national legislation, and it is the responsibility of the court seised to ensure that these are applied and to impose sanctions, where appropriate, for any vexatious or abusive manoeuvres.
65.
It would, in any event, be impossible for a court of one Member State to determine whether the lack of progress in proceedings brought before a court of another Member State was indicative of abuse. The Commission observes in that regard that the petitioner in the main proceedings could have filed an assignation herself against the respondent in the main proceedings, not only for judicial separation but also for divorce, as is evident from an opinion of the Cour de cassation of 10 February 2014.
66.
It concludes that Article 19 of Regulation No 2201/2003 must be interpreted as meaning that the jurisdiction of a court first seised does not cease to be established because the applicant in the proceedings brought before that court fails to take steps to progress those proceedings with all requisite diligence and expedition to a resolution of the dispute.
V – Analysis
A – Preliminary observations
67.
It is appropriate to begin by presenting — with all the reservations that such an exercise entails — the specific features of French law relating to judicial separation and divorce proceedings, in order accurately to gauge the particular circumstances of the main proceedings and the singularity of the questions referred for a preliminary ruling.
1. The specific features of judicial separation and divorce proceedings in France
68.
As Mr Bernard de la Gâtinais, First Advocate General at the Cour de cassation explains in his opinion underlying the opinion of the Cour de cassation of 10 February 2014 ( ) cited by the referring court, judicial separation has for a long time been regarded as ‘the Catholics’ divorce’, in that its ‘principal effect is to establish in law the separation of the spouses and to settle the human and material consequences thereof, while allowing the matrimonial relationship to subsist’. Consequently, while, by virtue of its possible effects, divorce in itself entails judicial separation, judicial separation does not incorporate the key element of divorce, which is the irretrievable breakdown of the marriage. That is the simple reason for the principle that a divorce petition can be transformed into a petition for judicial separation but not vice versa, a principle enshrined in Article 1076 of the Code of Civil Procedure.
69.
The latter article thus provides, as noted by the referring court, that a petitioner for judicial separation cannot convert that petition into a divorce petition ( ) and is in some way a prisoner of his own procedure. Thus, where the court seised of a petition for judicial separation has made a non-conciliation order authorising the spouses to institute proceedings for a decree of judicial separation, as in the main case, the petitioner has only two options. He can first of all decide to obtain a judicial separation and thus bring the proceedings to a conclusion by filing an assignation against the respondent for a decree of judicial separation, which he alone is entitled to do in the first three months following the non-conciliation order, in accordance with Article 1113 of the Code of Civil Procedure. He can, however, also abandon judicial separation for one reason or another, notably in favour of divorce, by withdrawing his requête for judicial separation, the admissibility of a divorce petition then being subject to the condition that that withdrawal is accepted and is final. ( )
70.
By contrast, once the three-month period referred to in Article 1113 of the Code of Civil Procedure has ended, the respondent in judicial separation proceedings can not only make up for the petitioner’s omission by filing an assignation for a decree of judicial separation himself, but he can also file for divorce from the petitioner, his cross-petition being admissible in the light of Articles 1076, 1111 and 1113 of the Code of Civil Procedure. ( )
71.
It is against that legal background ( ) that the main events of the case in the main proceedings and the questions referred for a preliminary ruling should be viewed.
2. The particular circumstances of the main case
72.
It is common ground and undisputed that, since the petitioner in the main proceedings and the respondent in the main proceedings have French nationality, the French court with which the respondent lodged a requête for judicial separation had international jurisdiction to consider it, in accordance with Article 3(1)(b) of Regulation No 2201/2003, just as it also has jurisdiction over therequête for divorce lodged by the respondent on 17 June 2014. It is equally undisputed that, since both spouses were habitually resident in the United Kingdom, the courts of that Member State also have international jurisdiction to grant their divorce in accordance with Article 3(1)(a) of Regulation No 2201/2003.
73.
Nor is it disputed that, since the respondent in the main proceedings was the first to file a petition for judicial separation with a French court, in this instance on 30 March 2011, the court of the United Kingdom with which the petitioner in the main proceedings filed a divorce petition on 24 May 2011 was second seised and was therefore required to stay the proceedings, in accordance with Article 19(1) of Regulation No 2201/2003, until such time as the jurisdiction of the French court was established.
74.
It is, lastly, also common ground that the French court first seised declared, in the non-conciliation order made on 15 December 2011, that it had jurisdiction over the petition for judicial separation brought by the respondent in the main proceedings and, at the same time, invited the parties to institute proceedings for a decree of judicial separation. In consequence, and in accordance with Article 19(3) of Regulation No 2201/2003, on 7 November 2012 the High Court dismissed, by consent, the divorce petition issued by the petitioner in the main proceedings, as is apparent from the order for reference.
75.
It follows from this that, at least in that initial phase, the main proceedings complied with the rules of lis pendens laid down in Article 19 of Regulation No 2201/2003.
76.
It must be emphasised, in particular, as the Commission observed and which was not debated, that there is lis pendens within the meaning of that provision ( ) where divorce proceedings are issued in a Member State and judicial separation proceedings are issued in parallel in another Member State, that provision requiring only that the parties be the same, and not that the proceedings involve exactly the same cause of action. ( )
77.
The dispute in the main proceedings and the questions put by the referring court do not, however, relate to that initial phase of the main proceedings, but to a second phase, which begins shortly before the expiry of the 30-month period laid down in Article 1113 of the Code of Civil Procedure, at the end of which the non-conciliation order made by the French court first seised lapses.
78.
As is apparent from the order for reference, shortly before that period expired on 6 June 2014, the petitioner in the main proceedings sought the High Court’s proleptic acceptance of her divorce petition. ( ) That application, described by the referring court as ‘imaginative’, was none the less dismissed as too innovative. The petitioner in the main proceedings subsequently filed a petition for divorce with the referring court on 13 June 2014.
79.
It must be noted in that regard that, unlike the application of 6 June 2014, the purpose of which was different, the divorce petition of 13 June 2014 has not been formally dismissed by the referring court, with no explanation for this having been provided. In particular, the referring court does not indicate whether it considers itself to have been validly seised, having regard to the law of the United Kingdom and to Article 16 of Regulation No 2201/2003.
80.
Be that as it may, it is the divorce petition which the petitioner in the main proceedings filed on 13 June 2014 that gave rise to the proceedings in which the High Court was led to make a reference to the Court of Justice for a preliminary ruling in the main proceedings, the respondent in the main proceedings having invited the High Court to dismiss the petition pursuant, precisely, to Article 19 of Regulation No 2201/2003, arguing that the judicial separation proceedings were still pending on 13 June 2014, and claiming an abuse of process.
81.
It is, moreover, the specific context in which that petition was filed that explains the singular, to say the least, wording of the questions referred to the Court of Justice, to which it is appropriate to turn now.
3. The singularity of the questions referred for a preliminary ruling
82.
The two questions referred by the referring court are closely linked in so far as their very wording is such that they expressly concern the concept of ‘established jurisdiction’ within the meaning of Article 19(1) and (3) of Regulation No 2201/2003.
83.
By its first question, the referring court asks, in essence, whether the provisions of Article 19(1) and (3) of Regulation No 2201/2003 must be interpreted as meaning that the jurisdiction of the court of a Member State first seised of a petition for judicial separation must be regarded as still being ‘established’ in the circumstances described, namely where:
—
the applicant in those judicial separation proceedings, who is authorised to file an assignation against the respondent for a decree of judicial separation within a statutory time-limit of 30 months, fails to do so within that period and thus waits for those proceedings to expire in order to issue new divorce proceedings in the same court;
—
the judicial separation proceedings expire very shortly after divorce proceedings are issued in another Member State; and
—
the applicant in the judicial separation proceedings would always be able, owing to the time zones, to issue divorce proceedings before the respondent could do so.
84.
By its second question, the referring court queries whether Article 19 of Regulation No 2201/2003, and in particular the term ‘established’, must be interpreted as requiring the party who has issued judicial separation proceedings in a court of a Member State to act with due diligence and expedition in order to bring those proceedings to a resolution.
85.
In many respects, the second question simply reformulates the first, as the referring court is ultimately seeking essentially to determine whether the jurisdiction of a court of a Member State first seised of a petition for judicial separation can be regarded as still being established within the meaning of Article 19(1) and (3) of Regulation No 2201/2003 in the absence of any diligence on the part of the petitioner in bringing it to a conclusion.
86.
Be that as it may, the referring court’s query thus concerns only the question whether Regulation No 2201/2003 must be interpreted as meaning that the jurisdiction of the French court, which has been duly established within the meaning of Article 19 of that regulation so far as concerns the judicial separation proceedings issued by the respondent in the main proceedings on 30 March 2011, must be regarded as ‘still’ being established in the circumstances of the main case, and whether the referring court must therefore stay proceedings and, if appropriate, decline jurisdiction in favour of the French court, in the context of the divorce proceedings issued in the referring court by the petitioner in the main proceedings on 13 June 2014.
87.
However, in order to answer that question, it is necessary first to determine which of the two courts — the referring court seised of a divorce petition by the petitioner in the main proceedings on 13 June 2014 or the French court seised of a requête for divorce by the respondent in the main proceedings on 17 June 2014 — must, in the particular circumstances of the main case, characterised as they are by the fact that the judicial separation proceedings brought in France expired between those two dates, be regarded as ‘the court first seised’ within the meaning of Article 19 of Regulation No 2201/2003. That question depends, however, on the interpretation both of Article 16 of Regulation No 2201/2003, not referred to by the referring court, and of Article 19 of that regulation.
88.
Consequently, the two questions referred for a preliminary ruling must be examined together and, moreover, must be expanded and reformulated to relate also to Article 16 of Regulation No 2201/2003.
89.
Therefore, and for the purpose of providing the referring court with the information it needs to dispose of the main proceedings, it is my view that the main question which the Court has to answer can be formulated as follows:
‘Must Articles 16 and 19 of Regulation No 2201/2003 be interpreted as meaning that, in circumstances such as those of the main proceedings:
—
in which judicial separation proceedings issued in a court of a first Member State have expired, and
—
in which two divorce petitions have been filed in parallel, the first in a court of another Member State shortly before the date on which the judicial separation proceedings expired, and the second in the court of the first Member State shortly after the date on which those judicial separation proceedings expired,
the jurisdiction of the court of the first Member State over the divorce petition must be considered to be established?’
B – Interpretation of Articles 16 and 19 of Regulation No 2201/2003
90.
While the Court of Justice has already had occasion to interpret Article 19(2) of Regulation No 2201/2003 concerning lis pendens in matters of parental responsibility, ( ) it has not yet had occasion to interpret the provisions of Article 19(1) and (3), or those of Article 11(1) and (3) of Regulation No 1347/2000 or Article 11(1) and (3) of the Brussels Convention of 28 May 1998.
91.
The Court has, on the other hand, had occasion to interpret analogous provisions in other instruments, in particular Article 21 of the Brussels Convention ( ) and Article 27 of Regulation No 44/2001, ( ) and can therefore reasonably rely on that case-law in answering the questions of the referring court. ( )
92.
In the present case, Article 19(1) and (3) of Regulation No 2201/2003 provides that, in a situation of lis pendens, the court second seised must of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established and, where that is the case, decline jurisdiction in favour of that court.
93.
The court of a Member State seised, for example, of a divorce petition must therefore of its own motion stay its own proceedings if a court of another Member State has previously been seised of a petition for judicial separation, for example, until such time as the latter’s jurisdiction is established. Once that jurisdiction is established, the court second seised of the divorce petition must decline jurisdiction in favour of the court first seised of the petition for judicial separation.
94.
Those provisions thus establish, like Article 21 of the Brussels Convention, a procedural rule of lis pendens which is based clearly and solely on the chronological order in which the courts involved are seised. ( )
95.
In the circumstances of the main proceedings, as I have already stated, the United Kingdom court seised of the divorce petition issued by the petitioner in the main proceedings on 24 May 2011 was required to stay the proceedings, pursuant to Article 19(3) of Regulation No 2201/2003, then decline jurisdiction in accordance with Article 19(3) of Regulation No 2201/2003, which it duly did.
96.
However the questions which the referring court raises do not concern the divorce petition which the petitioner in the main proceedings filed on 24 May 2011, but that filed on 13 June 2014, and the problem of lis pendens with which the referring court considers itself to be faced arises from the succession of proceedings issued in France — the judicial separation proceedings issued on 30 March 2011 and the divorce proceedings issued on 17 June 2014 — and the filing, between those two dates, of a divorce petition in the United Kingdom.
97.
In strictly chronological terms, it must be noted that although the divorce proceedings issued in the United Kingdom on 13 June 2014 were issued before the divorce proceedings brought in France on 17 June 2014, the judicial separation proceedings brought in France on 30 March 2011 were still pending on the date on which the divorce proceedings were issued in the United Kingdom.
98.
In other words, the provisions of Article 19(1) and (3) of Regulation No 2201/2003 do not in themselves solve the problem of lis pendens that arises in a situation such as that in the main proceedings, which is marked by the duality of the procedure for ‘undoing’ a marriage in France, and the commencement in two different Member States of parallel divorce proceedings shortly before and immediately after the expiry of judicial separation proceedings.
99.
It could be held, on the one hand, that at the time when it was seised of the divorce petition on 13 June 2014, the referring court was, and continued to be, the court second seised, and that it was therefore required to stay the proceedings and decline jurisdiction, since the judicial separation proceedings were still pending.
100.
It could, however, also be held that, on the other hand, at the time when the French court was seised of the divorce requête on 17 June 2014, the referring court was the court first seised, since the judicial separation proceedings had expired.
101.
Consequently, and in accordance with settled case-law, it is appropriate to seek the solution to the problem raised in the main proceedings taking into account the overall scheme of Regulation No 2201/2003 and the purpose pursued by the rules it lays down. ( )
102.
I consider, in particular, that the Commission’s proposition that the Court, judicially, fix the date as at which lis pendens must be assessed cannot be accepted, since it effectively denies the very existence of any lis pendens in the main proceedings. The approach advocated by the United Kingdom Government, which consists in determining which of the two courts seised of parallel divorce petitions and also having jurisdiction to hear them must, in the circumstances of the main proceedings, be regarded as being the first seised, seems to me to be the more appropriate.
103.
It must be recalled in that regard that the rules relating to lis pendens are intended, in the interests of the proper administration of justice within the European Union, to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions which might result therefrom. ( )
104.
To that end, Regulation No 2201/2003 established, in Article 19, a clear and effective mechanism for resolving cases of lis pendens that is based on the chronological procedural rule examined above, but also defined, in Article 16, ( ) the concept of ‘seising of a Court’.
105.
It must be noted that, for the purpose of applying the rules of lis pendens, a court is to be deemed to be seised in accordance with that provision either at the time when the document instituting the proceedings was lodged with that court, or at the time when the document instituting the proceedings is received by the authority responsible for service thereof, depending on the option chosen by the Member State of that court, it being made clear that, in both cases, the applicant must not fail to take the steps he is required to take to have the document either served on the respondent or lodged with the court, as the case may be.
106.
Article 16 of Regulation No 2201/2003 thus defines the procedural and temporal characteristics of the concept of seising of a court by prescribing when and under what circumstances the seising of a court takes place, irrespective of the applicable rules in the Member States. ( ) More broadly, the concept of ‘court first seised’ must be considered an independent concept of EU law. ( )
107.
It is thus necessary to determine on the basis of the provisions of Article 16 of Regulation No 2201/2003 how the rule of lis pendens established by Article 19 of Regulation No 2201/2003 must specifically be applied in a situation such as that in the main proceedings in such a way as to enable the risk of parallel proceedings to be minimised and to avoid prolonging the length of time for which proceedings are stayed by the court second seised. ( )
108.
Consequently, the first issue to be addressed is that of establishing whether it can be held that the referring court was indeed ‘seised’ on 13 June 2014 within the meaning of Article 16 of Regulation No 2201/2003.
109.
That does indeed appear to be the case. The petitioner in the main proceedings lodged her divorce petition with the referring court on 13 June 2014 and there is nothing in the order for reference to suggest that she would not have taken the steps she was required to take in accordance with Article 16 of Regulation No 2201/2003. It is, however, ultimately for the referring court to carry out the appropriate checks in that regard.
110.
It will be noted, moreover, that it also appears that the French court was ‘seised’ on 17 June 2014, within the meaning of Article 16 of Regulation No 2201/2003, of the divorce petition lodged by the respondent in the main proceedings.
111.
Strict application of the chronological procedural rule laid down in Article 19 of Regulation No 2201/2003 thus requires the view to be taken that, in the circumstances of the main proceedings, the referring court is the court first seised of a divorce petition, and that it is therefore the French court, second seised, which is required to stay its proceedings until such time as the jurisdiction of the referring court is established and, if appropriate, to decline jurisdiction.
112.
In so far as the jurisdiction of the French court in the judicial separation proceedings brought by the respondent in the main proceedings must be regarded as having come to an end owing to the expiry of those proceedings and, moreover, the referring court must be considered to be the first seised of a divorce petition, the various facts identified by the referring court as being decisive in the questions it referred for a preliminary ruling ( ) appear not to be relevant. The only question that remains is whether the jurisdiction of the referring court is established within the meaning of Article 19 of Regulation No 2201/2003.
113.
Notwithstanding the fact that it is for the referring court to rule in that regard, it must be observed that, under Article 3 of Regulation No 2201/2003, the referring court has jurisdiction over the divorce sought by the parties to the main proceedings. It may also be observed that the referring court did not decline jurisdiction to hear the divorce petition lodged by the petitioner in the main proceedings — quite the contrary — and, moreover, the respondent in the main proceedings did not raise any lack of jurisdiction of the referring court, but merely lodged an application for the divorce petition of the petitioner in the main proceedings to be dismissed or struck out, pursuant to Article 19(3) of Regulation No 2201/2003. ( )
114.
It might also be contended that, in circumstances such as those of the main proceedings, the proposed interpretation of Articles 16 and 19 of Regulation No 2201/2003 disadvantages those who, like the respondent in the main proceedings, are unable to bring divorce proceedings in France after having brought judicial separation proceedings if divorce proceedings are brought in another Member State shortly before expiry of the deadline for the lapsing of the judicial separation proceedings that is laid down in Article 1113 of the Code of Civil Procedure.
115.
That disadvantage is, however, more apparent than real, since it is common ground that the respondent in the main proceedings could, had he wished to do so, have withdrawn his petition for judicial separation in order to lodge a requête for divorce with a French court. If there is a disadvantage, it is only as a result of the situation created by the duality of the procedure for ‘undoing’ a marriage in France and the procedural imbalance which Articles 1076, 1111 and 1113 of the Code of Civil Procedure introduce as between applicant and respondent in the conduct of judicial separation proceedings.
116.
In any event, and as Advocate General Jääskinen pointed out in his Opinion in Weber ( ) in relation to Article 27 of Regulation No 44/2001, the priority of jurisdiction which that provision established on the basis solely of a chronological criterion necessarily favours the party which has been quicker to bring proceedings before a court of a Member State.
117.
It follows from the foregoing that the answer to be given to the questions referred by the referring court is that Articles 16 and 19 of Regulation No 2201/2003 must be interpreted as meaning that, in circumstances such as those of the main proceedings:
—
in which judicial separation proceedings issued in a court of a first Member State have expired, and
—
in which two divorce petitions have been filed in parallel, the first in a court of another Member State shortly before the date on which the judicial separation proceedings expired, and the second in the court of the first Member State shortly after the date on which those judicial separation proceedings expired,
the jurisdiction of the court of the first Member State over the divorce petition must be considered not to be established.
VI – Conclusion
118.
In the light of the foregoing, I propose that the Court of Justice answer the questions referred by the High Court of Justice, Family Division, for a preliminary ruling as follows:
Articles 16 and 19 of Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, repealing Regulation (EC) No 1347/2000, must be interpreted as meaning that, in circumstances such as those of the main proceedings:
—
in which judicial separation proceedings issued in a court of a first Member State have expired, and
—
in which two divorce petitions have been filed in parallel, the first in a court of another Member State shortly before the date on which the judicial separation proceedings expired, and the second in the court of the first Member State shortly after the date on which those judicial separation proceedings expired,
the jurisdiction of the court of the first Member State over the divorce petition must be considered not to be established.
( ) Original language: French.
( ) OJ 2003 L 338, p. 1; ‘Regulation No 2201/2003’.
( ) ‘the petitioner in the main proceedings’.
( ) ‘the respondent in the main proceedings’.
( ) OJ 2001 L 12, p. 1.
( ) OJ 2012 L 351, p. 1.
( ) C‑111/01, EU:C:2003:257, paragraph 27.
( ) See Article 15 of Regulation No 2201/2003.
( ) See recitals 33 and 34 in the preamble thereto, and Articles 32 to 34.
( ) OJ 2009 L 7, p. 1.
( ) OJ 2012 L 201, p. 107.
( ) Cour de cassation, 1st Civil Division, judgment of 26 June 2013, Appeal No 12-24001 (ECLI:FR:CCASS:2013:C100695).
( ) See judgment in Purrucker (C‑296/10, EU:C:2010:665, paragraph 86).
( ) See judgment in C (C‑376/14 PPU, EU:C:2014:2268) and View of Advocate General Szpunar in C (C‑376/14 PPU, EU:C:2014:2275, points 58 to 60).
( ) See judgment in Purrucker (C‑296/10, EU:C:2010:665, paragraphs 64 and 66).
( ) (OJ 1978 L 304, p. 36, ‘the Brussels Convention’). See judgments in Gasser (C‑116/02, EU:C:2003:657, paragraph 41) and Mærsk Olie & Gas (C‑39/02, EU:C:2004:615).
( ) See judgment in Cartier parfums-lunettes and Axa Corporate Solutions assurances (C‑1/13, EU:C:2014:109, paragraph 40).
( ) C‑1/13, EU:C:2014:109, paragraph 45.
( ) Appeal No 13/70007 (ECLI:FR:CCASS:2014:AV15001); ‘the opinion of 10 February 2014’.
( ) See opinion of First Advocate General Bernard de la Gâtinais underlying the opinion of 10 February 2014 and the case-law of the Cour de cassation cited.
( ) See Watine-Drouin, C., Séparation de corps, causes, procédure, effets, JurisClasseur Notarial, Fascicle No 5, No 34 and the case-law cited.
( ) See the opinion of 10 February 2014 and the opinion of First Advocate General Bernard de la Gâtinais.
( ) It must be noted in that regard that, as stated by the petitioner in the main proceedings, the Cour de cassation upheld a judgment of a Cour d’appel which had held that, in accordance with Articles 3(1)(a) and 16 of Regulation No 2201/2003, ‘a court is properly seised of a divorce matter at the date on which the requête is lodged, provided that it has been followed by an assignation for divorce’; see Cour de cassation, 1st Civil Division, judgment of 26 June 2013, Appeal No 12-24001 (ECLI:FR:CCASS:2013:C100695). While it is true that that interpretation of Regulation No 2201/2003 (assuming it is confirmed by the Court of Justice) is likely to solve the problem raised by the dispute in the main proceedings, the fact remains that the questions put to the Court do not concern the question whether the matter has been ‘properly’ brought before the French court but, as we shall see below, the concepts of ‘established jurisdiction’, for the purposes of Article 19 of Regulation No 2201/2003, and of the ‘court first seised’, as provided for by Article 16 of that regulation.
( ) It must nevertheless be noted that the Court of Justice has not yet had occasion to interpret that provision.
( ) It will be recalled that Article 19(1) of Regulation No 2201/2003 essentially reproduces Article 11(2) of the Convention drawn up, on the basis of Article K.3 of the Treaty on European Union, on Jurisdiction and the Recognition and Enforcement of Judgments in Matrimonial Matters, signed in Brussels on 28 May 1998 (OJ 1998 C 221, p. 2; ‘the Brussels Convention of 28 May 1998’), presented as an innovation for dealing with cases of ‘false lis pendens’ in order to ‘deal with the differences in legislation between the various Member States on the admissibility of proceedings for separation, divorce or marriage annulment’. See Explanatory Report on the Convention, drawn up on the basis of Article K.3 of the Treaty on European Union, on Jurisdiction and the Recognition and Enforcement of Judgments in Matrimonial Matters, prepared by Ms Alegría Borrás and approved by the Council on 28 May 1998, paragraph 54 (OJ 1998 C 221, p. 27). See also the Commission’s proposal (COM(1999) 220 final) leading to the adoption of Council Regulation (EC) No 1347/2000 of 29 May 2000 on jurisdiction and the recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility for children of both spouses (OJ 2000 L 160, p. 19), to which the Commission’s proposal (COM(2002) 222 final) leading to the adoption of Regulation No 2201/2003 refers.
( ) See, in that regard, point 21 of this Opinion.
( ) See judgment in Purrucker (C‑296/10, EU:C:2010:665, paragraphs 64 to 86).
( ) See judgments in Zelger (129/83, EU:C:1984:215); Gubisch Maschinenfabrik (144/86, EU:C:1987:528); Overseas Union Insurance and Others (C‑351/89, EU:C:1991:279); Tatry (C‑406/92, EU:C:1994:400); von Horn (C‑163/95, EU:C:1997:472); Drouot assurances (C‑351/96, EU:C:1998:242); GantnerElectronic (C‑111/01, EU:C:2003:257); Gasser (C‑116/02, EU:C:2003:657); and Mærsk Olie & Gas (C‑39/02, EU:C:2004:615).
( ) See, in particular, judgments in Cartier parfums-lunettes and Axa Corporate Solutions assurances (C‑1/13, EU:C:2014:109) and Weber (C‑438/12, EU:C:2014:212).
( ) See, to that effect, but subject to the reservations dictated by the specific nature of parental responsibility, see View of Advocate General Jääskinen in Purrucker (C‑296/10, EU:C:2010:578, point 95 et seq.); see also, in particular, judgment in Purrucker (C‑296/10, EU:C:2010:665, paragraph 64 et seq.).
( ) See judgment in Gasser (C‑116/02, EU:C:2003:657, paragraph 47).
( ) See, in particular, judgments in Gasser (C‑116/02, EU:C:2003:657, paragraph 70) and Cartier parfums-lunettes and Axa Corporate Solutions assurances (C‑1/13, EU:C:2014:109, paragraph 33).
( ) See, in particular, with regard to the Brussels Convention, judgment in Gasser (C‑116/02, EU:C:2003:657, paragraph 41) and, with regard to Regulation No 2201/2003, judgment in Purrucker (C‑296/10, EU:C:2010:665, paragraph 64).
( ) Article 16 of Regulation No 2201/2003 reproduces the provisions of Article 11(4) of Regulation No 1347/2000.
( ) As correctly noted by Advocate General Jääskinen in his View in Purrucker (C‑296/10, EU:C:2010:578, point 98). He emphasises, in that regard, the change of direction by the legislature in relation to the position the Court had adopted in respect of Article 21 of the Brussels Convention in its judgment in Zelger (129/83, EU:C:1984:215, paragraph 16), in which it had held that ‘Article 21 of the Convention must be interpreted as meaning that the court “first seised” is the one before which the requirements for proceedings to become definitively pending are first fulfilled, such requirements to be determined in accordance with the national law of each of the courts concerned’.
( ) See View of Advocate General Jääskinen in Purrucker (C‑296/10, EU:C:2010:578, point 98).
( ) See, by analogy with Article 27 of Regulation No 44/2001, judgment in Cartier parfums-lunettes and Axa Corporate Solutions assurances (C‑1/13, EU:C:2014:109, paragraphs 38 and 41).
( ) Namely, first, the fact that the respondent in the main proceedings took no steps at all to bring the judicial separation proceedings he issued in France to a conclusion and even that he is said to have clearly tried to manoeuvre so as to prevent any divorce proceedings being issued in the United Kingdom, and, secondly, the fact that, owing to the respective time zones of the United Kingdom and France, an applicant to a French court is necessarily in a more favourable position in terms of the chronological rules of lis pendens laid down by Article 19 of Regulation No 2201/2003.
( ) See, by analogy with Article 27 of Regulation No 44/2001, judgment in Cartier parfums-lunettes and Axa Corporate Solutions assurances (C‑1/13, EU:C:2014:109, paragraph 44).
( ) C‑438/12, EU:C:2014:43, point 79. |
OPINION OF ADVOCATE GENERAL
WAHL
delivered on 21 January 2016 ( )
Case C‑469/14
Masterrind GmbH
v
Hauptzollamt Hamburg-Jonas
(Request for a preliminary ruling
from the Finanzgericht Hamburg (Finance Court, Hamburg, Germany))
‛Agriculture — Regulation (EU) No 817/2010 — Export refunds — Regulation (EC) No 1/2005 — Protection of animals during transport — Journey times and resting periods — ‘14+1+14 rule’ — Requirement of a ‘rest period of at least one hour’ — Declaration issued by the official veterinarian that the transport of animals does not meet the requirements under Regulation No 1/2005 — Power of a body of a different Member State responsible for payment of export refunds to review that declaration’
1.
A popular saying, unauthoritatively ascribed to Mahatma Gandhi, has it that the greatness of a nation and its moral progress can be judged by the way its animals are treated. If that is the case, then the matter under consideration warrants particular attention.
2.
The main action turns on the lawfulness of a decision ordering the repayment of export refunds in respect of a transport operation of live cattle from Germany to Morocco (‘the transport at issue’). In the EU, payment of export refunds for the export of live animals to third countries is, as a matter of policy, conditional upon compliance with rules on animal welfare during transport. Disagreement has arisen as to whether the transport at issue complied with those rules.
3.
The matter under consideration raises two distinct issues: first, how to interpret and apply the rule set out in point 1.4(d) of Chapter V of Annex I to Regulation No 1/2005 ( ) (‘the 14+1+14 rule’). Second, what effect a declaration issued by an official veterinarian of one Member State has on the competent authority of another Member State.
4.
With regard to the latter issue, in my view such a declaration merely has persuasive, and not binding, effect. And as for the former issue, although a certain measure of practicality is necessary when having recourse to the 14+1+14 rule, that may not lead to lowering the welfare requirements under Regulation No 1/2005.
I – Legal framework
A – Regulation No 817/2010 ( )
5.
According to the first sentence of Article 1 (‘Scope’) of Regulation No 817/2010, the payment of export refunds is conditional upon ‘compliance, during the transport of the animals to the first place of unloading in the third country of final destination’, with Articles 3 to 9 of Regulation No 1/2005 and the Annexes referred to therein, and with Regulation No 817/2010 itself.
6.
Pursuant to Article 2(3) of Regulation No 817/2010 (‘Checks within the customs territory of the Community’), if the official veterinarian at the exit point is satisfied, inter alia, that the requirements laid down in Regulation No 1/2005 have been complied with within the EU customs territory, ‘he [is to] certify this by one of the entries listed in Annex II and by stamping and signing the document constituting evidence of exit from the [EU] customs territory, either in Section J of the control copy T5 or in the most appropriate place on the national document’.
7.
Article 4(2) of Regulation No 817/2010 (‘Procedure for payment of export refunds’) states, inter alia, that applications for the payment of export refunds are to be supplemented with the document referred to in Article 2(3) of that regulation, ‘duly completed’.
8.
Article 5(1)(c) of Regulation No 817/2010 (‘Non-payment of export refunds’) provides, inter alia, that export refunds will not be paid for animals for which the competent authority considers that, ‘in the light of the documents referred to in Article 4(2) and/or all other elements at its disposal concerning compliance with this regulation’, Articles 3 to 9 of Regulation No 1/2005 and the Annexes referred to therein have not been complied with.
B – Regulation No 1/2005
9.
Article 3 of Regulation No 1/2005 (‘General conditions for the transport of animals’) states, in its first sentence, that ‘no person shall transport animals or cause animals to be transported in a way likely to cause injury or undue suffering to them’. According to the second sentence of that provision, in addition, eight specific general requirements must be met. Those requirements include, inter alia, that (i) all necessary arrangements have been made in advance to minimise the length of the journey and meet animals’ needs during the journey; (ii) the transport is carried out without delay to the place of destination and the welfare conditions of the animals are regularly checked and appropriately maintained; and (iii) water, feed and rest are offered to the animals at suitable intervals and are appropriate in quality and quantity to their species and size.
10.
Article 6(3) of Regulation No 1/2005 (‘Transporters’) provides that ‘transporters [are to] transport animals in accordance with the technical rules set out in Annex I’. Chapter V of Annex I to Regulation No 1/2005 (‘Watering and feeding interval, journey times and resting periods’) sets out the following rules for, inter alia, domestic animals of bovine species:
‘1.1.
The requirements laid down in this Section apply to the movement of … domestic animals of bovine … species, except in the case of air transport.
1.2.
Journey times for animals belonging to the species referred to in point 1.1. shall not exceed eight hours.
1.3.
The maximum journey time in point 1.2. may be extended if the additional requirements of Chapter VI are met.
1.4.
The watering and feeding intervals, journey times and rest periods when using road vehicles which meet the requirements in point 1.3. are defined as follows:
…
(d)
All … animals [other than unweaned calves, lambs, kids and foals which are still on a milk diet, unweaned piglets, pigs and domestic Equidae] of the species referred to in point 1.1. must, after 14 hours of travel, be given a rest period of at least one hour sufficient for them in particular to be given liquid and if necessary fed. After this rest period, the animals may be transported for a further 14 hours.
1.5.
After the journey time laid down, animals must be unloaded, fed and watered and be rested for at least 24 hours.
…
1.8.
In the interests of the animals, the journey times in [points 1.3. and 1.4.] may be extended by two hours, taking account in particular of the proximity to the place of destination.
…’
II – Facts, procedure and the questions referred
11.
By an export declaration of 16 June 2011, Masterrind GmbH (‘Masterrind’) declared six breeding cattle and applied for an advance payment of the corresponding export refunds. That application was granted by the Hauptzollamt Hamburg-Jonas (the head customs office of Hamburg-Jonas; ‘the Hauptzollamt’) by decision of 13 July 2011.
12.
The animals were loaded onto a lorry in Northeim (Germany) at 10.30 on 16 June 2011. That lorry left the loading site at approximately 11.30. At 19.00 on the same day, it arrived in Wasserbillig (Luxembourg) where it stopped for a one-hour feed and water break. After two further hours of transport and in order to comply with the statutory driving times and rest periods of road transport laid down in Regulation No 561/2006, ( ) the lorry made a second feed and water stop for 10 hours in Épinal (France). The lorry continued its journey on the following morning at approximately 8.00 and reached the port of Sète (France) on the same day at 17.00. The transport from Northeim to Sète took 30 hours and 30 minutes. The animals were then loaded onto a ship for the onward journey to Morocco.
13.
By letter of 17 January 2012, the Hauptzollamt informed the applicant that the official veterinarian at the customs office of exit in Sète had endorsed the control document with the entry ‘Non conforme au contrôle officiel visé à l’article 2 du réglement (CE) no 817/2010’ (Not compliant with the official check pursuant to Article 2 of Regulation No 817/2010), in respect of all the animals. The Hauptzollamt further informed the applicant that it could request the competent French veterinary authority to review the lawfulness of the veterinarian’s entry. Following a meeting with the French veterinary authority, it transpired that the abovementioned entry is made where the journey, including the statutory driving times and rests periods, exceeds 31 hours.
14.
In light of the official veterinarian’s negative endorsement in respect of all the animals, the Hauptzollamt took the view that the applicant had not met the conditions set out in Article 2(2) of Regulation No 817/2010 and, consequently, that the refunds granted in advance were to be repaid. Accordingly, by decision of 5 June 2012 amending its decision of 13 July 2011, the Hauptzollamt sought to recover the export refunds which had been paid to the applicant in advance, plus a supplement of 10%.
15.
The applicant challenged the decision of 5 June 2012 and, subsequently, sought an interpretation from the Commission of the journey times and rest periods set out in Regulation No 1/2005. In letters dating 7 March 2013 and 27 July 2013, the then Directorate-General for Health and Consumers (‘DG SANCO’) replied that for bovines, the maximum permitted journey time is 29 hours from loading, including a 1-hour rest break in the vehicle. This period might be extended by two hours in the interests of the animals and taking into account, in particular, the proximity of the place of destination. Accordingly, DG SANCO took the view that the rules provide a maximum journey time of 31 hours for bovines.
16.
By decision of 19 July 2013, the Hauptzollamt rejected the applicant’s challenge. The Hauptzollamt considered itself and the applicant to be bound by the decision of the French official veterinarian, whose negative endorsement had not been amended following the replies given by the Commission. This prompted the applicant to bring an action before the referring court on 21 August 2013 seeking the annulment of the decisions of 5 June 2012 and of 19 July 2013.
17.
The referring court explains that the transport at issue is characterised by the fact that it was divided into three legs of actual physical movement (travel), each not exceeding 14 hours. That court observes that when taken together, the first and second legs do not exceed 14 hours, as is also the case for the second and third legs when considered jointly. It also mentions that when combined, the three legs of travel do not exceed 28 hours. It therefore considers that EU law does not preclude the transport at issue from having been completed in three stages. However, the referring court states that the transport at issue was interrupted by two rest periods totalling 11 hours.
18.
On that basis, the referring court considers the outcome of the main action to depend, first, on whether a rest period of more than one hour is permissible under EU law. Second, in the affirmative, the question arises whether the Hauptzollamt is bound by the entry made by the official veterinarian at the point of exit or whether it may, of its own authority, decide that the transport at issue was carried out in accordance with the provisions of Regulation No 1/2005. Accordingly, entertaining doubts as to the interpretation of Regulations No 1/2005 and No 817/2010, the Finanzgericht Hamburg (Finance Court, Hamburg) decided on 14 October 2014 to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1)
Is the rule set out in point 1.4. of Chapter V of Annex I to Regulation No 1/2005 … according to which, after 14 hours of travel, animals are to be given a rest period of at least 1 hour sufficient for them in particular to be given liquid and if necessary fed, after which they may be transported for a further 14 hours, to be interpreted as meaning that the periods of transport may also be interrupted by a rest period of more than 1 hour or by several rest periods, at least one of which lasts for 1 hour?
(2)
Is the competent payment body of a Member State bound by the entry made by the official veterinarian at the exit point in accordance with Article 2(3) of Regulation No 817/2010 …, with the result that the lawfulness of a refusal to make the entry is reviewable only by the authority accountable for the actions of the border veterinarian, or is the entry made by the official veterinarian a mere procedural act by the authority which may be contested only in tandem with the judicial review proceedings that lie against the payment body’s substantive decisions?’
19.
Written observations have been submitted by the Hauptzollamt, the French Government and the Commission. Pursuant to Article 76(2) of the Rules of Procedure, no hearing has been held.
III – Analysis
A – The first question referred
1. Introductory remarks and observations submitted by the parties participating in the preliminary ruling procedure
20.
Despite being the subject matter of detailed technical specifications, the rules on transport of animals are distinctively opaque. Not surprisingly, they have been at the heart of a copious amount of litigation before the Court, including several requests for a preliminary ruling from the referring court itself. ( ) The matter under consideration, which mainly turns on the interpretation of the expression ‘at least one hour’ appearing in the 14+1+14 rule, is no different in that regard.
21.
It appears that, in the main proceedings, the transport at issue lasted for 30½ hours. The actual travel time, during which the lorry was physically moving, totalled 19½ hours. The order for reference states that the lorry driver took a 10-hour break in order to comply with the requirements set out in Regulation No 561/2006. As this is not explicitly stated in the order for reference, I must specify that the working assumption of this Opinion is that the animals were not unloaded during that rest period.
22.
Hence, by its first question, the referring court essentially wishes to know whether, on a proper construction of the 14+1+14 rule, there is an upper limit to the length of rest periods, and whether they may serve a purpose other than the welfare of the animals transported. In other words: does the fact that, under that rule, rest periods must last for ‘at least one hour’, potentially authorise keeping the animals for a very long time aboard a stationary vehicle?
23.
The referring court has not put a question on the interplay between the rules on animal welfare during transport and those on maximum driving periods and minimum rest periods for road drivers. I shall therefore not address that issue in this Opinion.
24.
The Hauptzollamt adheres to the view of the referring court, according to which it follows from the expression ‘in particular’, appearing in the 14+1+14 rule, that DG SANCO’s interpretation of that rule (referred to in point 15 above) is not necessarily correct. The Finanzgericht Hamburg (Finance Court, Hamburg) favours an interpretation to the effect that the maximum journey time of 28 hours may be interrupted by several rest periods, one of which must last for at least 1 hour and that, when combined, the rest periods may not exceed 14 hours, that being the upper limit to one leg of travel under the 14+1+14 rule.
25.
The French Government submits that the 14+1+14 rule cannot be construed as authorising an excessively long rest period which would compromise the well-being of the animals. In that government’s view, the expression ‘in particular’, apart from referring to feeding the animals and giving them liquids, denotes actions aiming to preserve the well-being of the animals. Moreover, the French Government does not consider it feasible to keep animals on board a vehicle for 10 hours without compromising the aim of Regulation No 1/2005.
26.
The Commission takes the view that, under the 14+1+14 rule, the maximum possible journey time is 29 hours, save for the exceptional situation referred to below at point 32. Moreover, according to the Commission, a period of rest may not be used for purposes extraneous to the welfare of animals. The Commission submits that the words ‘in particular’ do not lend support to a different view, as those words are followed by the terms ‘to be given liquid and if necessary fed’.
2. Assessment
a) Preliminary comments
27.
As we shall see below, neither the wording nor the context of the 14+1+14 rule provides an answer to the question raised above at point 22. In particular, the concepts featuring, on the one hand, in the definitions provided in the main text of Regulation No 1/2005 and, on the other hand, in Annex I thereto, are used incoherently and inconsistently, both internally within each document and especially in relation to each other. This has unfortunately necessitated specifying, throughout this Opinion, the exact set of rules in respect of which those concepts are used.
28.
The incoherence mentioned in the preceding point requires the aim of Regulation No 1/2005 — which is crystal clear — to be given full precedence. Doing so entails interpreting the 14+1+14 rule in a way which sets a plain limit to rest periods spent inside a motionless vehicle.
29.
For the aim of Regulation No 1/2005 is indisputable: to avoid transporting animals in a way likely to cause them injury or undue suffering. ( ) This is in line with Article 13 TFEU, according to which animals are sentient beings. Accordingly, that provision requires the EU and its Member States, in formulating and implementing the EU’s agriculture policies, to pay full regard to the welfare requirements of animals. ( )
30.
Before going any further however, it is necessary, first, to become fully acquainted with the 14+1+14 rule.
b) The 14+1+14 rule
31.
The 14+1+14 rule forms part of a set of rules on ‘watering and feeding interval, journey times and resting periods’ in Annex I to Regulation No 1/2005. It applies to the physical transportation of animals using road vehicles which meet certain minimum animal welfare requirements (relating to the roof and floor of the vehicle, bedding for the animals, feed, partitioning, age rules, water supply, ventilation and navigation systems). If those requirements are met, then the vehicle may transport bovines for 14 hours, after which they must ‘be given a rest period of at least one hour sufficient for them in particular to be given liquid and if necessary fed’, before (possibly) transporting them further for at most another 14 hours. After that, pursuant to point 1.5 of Chapter V of that annex, the bovines must be unloaded, fed and watered and be rested for at least 24 hours.
32.
By way of exception, under point 1.8 of Chapter V of Annex I to Regulation No 1/2005 (‘the +2 rule’), the total ‘journey time’, as that concept is used in the annex, may be extended by two hours, but only if doing so would be in the interests of the animals. The close proximity to the place of destination is a typical example of a situation where enduring a further two hours’ transport might cause less suffering to the animals than being unloaded and reloaded, a notoriously stressful experience. ( )
33.
As is apparent from the foregoing, the 14+1+14 rule does not explicitly state how long rest periods may last at the most, nor what activities may be undertaken during such periods.
34.
Recourse to case-law does not resolve that issue either: the Court has confined itself to holding that the 14+1+14 rule ‘establishes a maximum of 28 hours of travel, interrupted by a minimum rest period of 1 hour after the first 14-hour section ... Accordingly, [that rule] must be understood as authorising a maximum period of travel of 28 hours, interrupted by a minimum rest period of 1 hour’. ( )
35.
As the 14+1+14 rule does not provide a clear answer to the matter under consideration, it is necessary to explore certain other aspects of Regulation No 1/2005.
c) Contextualising Regulation No 1/2005
36.
Article 2 of Regulation No 1/2005 defines a number of key concepts for the purpose of its application. Those definitions include that of a journey (‘the entire transport operation from the place of departure to the place of destination, including any unloading, accommodation and loading occurring at intermediate points in the journey’) and of transport (‘the movement of animals effected by one or more means of transport and the related operations, including loading, unloading, transfer and rest, until the unloading of the animals at the place of destination is completed’). ( )
37.
Generally speaking, it follows from the definitions in Article 2 of Regulation No 1/2005 that a journey is always preceded and followed by a minimum buffer of 48 hours’ rest for the animals outside the vehicle. ( ) Accordingly, a journey does not come to an end unless the animals are accommodated for 48 hours at a site of unloading.
38.
Now, Article 2 of Regulation No 1/2005 attempts to maintain a dichotomy between ‘journey’ and ‘transport’, in the sense that the former covers the entire logistical operation, and the latter only the actual physical movement. However, unlike previously, ( ) the concept of ‘transport’ now oddly includes rest. For if, under that provision, a ‘journey’ is the sum total of all the periods of transport and rest, adding rest to the concept of ‘transport’ begs the question as to what difference actually remains between a journey and transport. This apparent lack of coherence has implications for the interpretation of the terms used in Annex I to the regulation, to which I shall revert below at point 46.
39.
Article 2 of Regulation No 1/2005 also defines a place of rest, namely ‘any stop during the journey which is not a place of destination’, whether the animals have been unloaded or not. However, the concept of rest period itself, which lies at the heart of the matter under consideration, has not been defined. On that point, the predecessor to Regulation No 1/2005 ( ) did contain a definition, namely ‘a continuous period in the course of a journey during which animals are not being moved by a means of transport’. However, that definition neither indicates whether a rest period may be spent inside the vehicle nor what purpose it must serve (if any). Therefore, it does not resolve the dispute under consideration either.
40.
Next, I would draw attention to a provision central to Regulation No 1/2005, cited by many of the parties who have lodged observations: Article 3. Its first sentence embodies what I shall refer to as the ‘general clause’ on the protection of animals during transportation. The general clause is stated in mandatory terms and applies whenever the regulation applies. Moreover, the general clause is phrased in the negative, rather than in the positive. Apart from requiring the prohibited behaviour to be liable to cause harm or undue suffering to animals, the obligation to refrain from doing so does not depend on other factors, such as the passing of a certain amount of time or a minimum geographic distance.
41.
The second sentence of Article 3 of Regulation No 1/2005 specifies certain basic requirements with which anyone intending to transport animals must comply. Those requirements are worded in positive terms and must be met consistently throughout the ‘transport’ (as defined in Article 2). Although the choice of words (‘in addition’) indicates that those requirements apply independently and on top of the general clause, the heading of Article 3 nevertheless indicates that the general conditions for the transport of animals are cumulative.
42.
I shall limit myself to adding that establishing whether Article 3 has been breached — breach which may in principle give rise to the imposition of a penalty under Article 25 of Regulation No 1/2005 — seems to me to require a comprehensive assessment taking into account all relevant circumstances.
43.
Last but not least, I shall revert to the legislative context leading to the adoption of Regulation No 1/2005 at points 51 and 52 below.
d) Position taken
44.
The remarks made above prompt me to take the following view:
45.
First, as a point of order, I should like to state my agreement with the referring court that the 14+1+14 rule permits taking several, and not merely one, rest periods, as long as at least 1 hour of rest is taken after at most 14 hours of physical movement (for instance 7+1+7+1½+12½). Otherwise, the rule would seem entirely unmanageable to me: drivers would be encouraged to wait 14 hours before stopping to attend to their personal needs. Moreover, this would give rise to the question whether any involuntary halt due to, say, road works, traffic congestion or at a train crossing comes within the concept of ‘rest’.
46.
Next, as for the ambiguous meaning of a ‘rest period of at least one hour’, Annex I to Regulation No 1/2005 does not contain any definitions. Therefore, the general definitions set out in Article 2 of the regulation presumably apply.
47.
However, regrettably, those definitions are simply not workable when interpreting Chapter V of Annex I to Regulation No 1/2005: first, the general definition of a ‘journey’ in Article 2 of the regulation comprises the rest periods taken along the way. By contrast, that chapter refers, in its heading, to ‘journey times’ and ‘resting periods’, as if in opposition to each other. Second, the understanding of a ‘journey’, in Article 2 of the regulation, as something which is normally bordered by two 48-hour periods (see point 37 above), seems at odds with the use of the term ‘journey time’ in point 1.5 of that chapter, according to which a 24-hour resting period ‘neutralises’ the periods of travel sustained thus far. Third, as referred to above in point 38, the concept of ‘transport’ now includes ‘rest’. This is in contrast to the 14+1+14 rule, which distinguishes between ‘rest periods’, on the one hand, and ‘travel’ or ‘transport’ on the other. ( )
48.
This evident lack of coherence makes it necessary to interpret the 14+1+14 rule on its own terms, in the light of the basic aim of Regulation No 1/2005 itself; that aim which is stated above at point 29.
49.
It is not open to question that journeys (as used in Article 2 of Regulation No 1/2005), especially long ones, may be a source of discomfort to the animals transported. To be sure, it seems that the regulation is founded on the premiss that any journey involving the confinement and the loading and unloading of animals, as well as their possibly being deprived of food and water, causes them some measure of suffering. In this sense, the aim of the regulation is simply to avoid transportation which causes or is likely to cause injuries and undue suffering to animals. So, the regulation accepts some measure of discomfort to animals during transportation as a necessary evil, but attempts to minimise it. Yet that discomfort may reach a point where it is no longer justified and becomes undue suffering. But when is that the case?
50.
Here, I agree with the Commission that if the aggregate ‘journey times and rest periods’, as specified in point 1.4(d) of Chapter V of Annex I to Regulation No 1/2005, exceed 29 hours — that is to say, adding the three component parts of the 14+1+14 rule — this would in and of itself fall foul of Regulation No 1/2005 as being likely to cause undue suffering to the animals. Of course, this is without prejudice to the application of the +2 rule.
51.
In support of my view, I would point out, first, that the aim of Regulation No 1/2005 is clearly to minimise, as far as possible, long journeys (as used in Article 2 of the regulation) involving the transport of animals. ( ) Allowing open-ended rest periods spent inside the vehicle which, under point 1.5 of Chapter V of Annex I to Regulation No 1/2005, do not have the effect of ‘neutralising’ the actual travel time sustained thus far, would be contrary to that aim. The fact that neither the expert advice to limit the journey time for cattle to 24 hours, ( ) nor the Commission proposal consisting of a 9-hour travel time limit followed by a 12-hour rest period (which could be repeated), ( ) was followed by the Council when adopting the regulation, does not shake me in my view. Indeed, although the Council essentially chose to keep unchanged the rules on journey times and resting periods appearing in Chapter VII of the Annex to Directive 91/628, I cannot imagine that the Council, when ‘[paying] full regard to the welfare requirements of animals’ during the legislative process, pursuant to the Animal Welfare Protocol, had indefinite rest periods inside a vehicle in mind.
52.
It is true that, in Interboves (C‑277/06, EU:C:2008:548), referred to by the parties to this procedure, the Court entertained the idea that the ‘journey times’ under Chapter V of Annex I to Regulation No 1/2005 might exceed 28 hours. However, that does not lead me to take a different view. For in that judgment, the Court interpreted the rules on journey times and resting periods in Directive 91/628. Those rules were primarily adopted in order to eliminate technical barriers to trade in live animals and to allow market organisations to operate smoothly while also ensuring, as a secondary objective, a satisfactory level of protection for the animals concerned. ( ) Under Regulation No 1/2005, this balancing of objectives appears to have been reversed: its primary aim is now the protection of animals, the harmonisation of legislation being ancillary thereto. ( ) In any event, the judgment in Interboves ought to be read with care, as unscrupulous transporters might otherwise take advantage of the inherent differences between the rules on transportation by road and sea. ( )
53.
Accordingly, for the reason set out in the previous point, the fact that Advocate General Mengozzi has stated that ‘a journey time might, for example, be 50 hours, that is to say, two (maximum) periods of transport of 14 hours each, interrupted by a rest period of 22 hours’, ( ) is of no bearing on the matter under consideration. In any event, no mention was made as to whether a rest period of 22 hours could lawfully be spent inside a motionless vehicle.
54.
Second, the +2 rule provides that the ‘journey times’ (not a ‘journey’ under Article 2 of Regulation No 1/2005) — that is to say, the combined periods of physical movement between each ‘neutralising’ 24-hour rest period, and not the individual stages thereof — may be extended by two hours in the interests of the animals, taking account in particular of the proximity to the place of destination. The +2 rule thus seems to suggest that, in the default situation, ‘journey times’ (again: not a ‘journey’ under Article 2 of Regulation No 1/2005) have a fixed upper limit which, for better or worse, I understand to be 28 hours in the case of the 14+1+14 rule.
55.
Hence, in my opinion, a ‘rest period of at least one hour’ may never have the consequence of the ‘journey times and rest periods’ under the 14+1+14 rule exceeding 29 hours (or, where applicable, 31 hours, pursuant to the +2 rule). On the other hand, a ‘journey’, as used in Article 2 of Regulation No 1/2005, may consist of several 29-hour ‘journey times and rest periods’ under Chapter V of Annex I to Regulation No 1/2005, provided that those 29-hour periods each are separated by 24-hour periods where the animals are unloaded, fed and watered, and rested.
56.
However, apart from that, in addition, is it also a requirement that the rest periods pursue a certain aim?
57.
On this point, the Commission argues that the minimum one hour rest period may be extended only for reasons pertaining to the well-being of the animals. The French Government takes a less strict position: rest periods may not exceed a reasonable duration beyond which the basic principle of prevention of injuries or undue suffering of the animals would no longer be observed.
58.
To my mind, it is clear that the entire transport operation, or ‘journey’ if you will — including rest — must comply with all of the requirements of Regulation No 1/2005. Indeed, as the Court has held, it appears that the EU legislature considered, on the basis of scientific and veterinary studies as well as assessments of the application of EU legislation carried out in the animal protection field, that once the provisions of that regulation concerning the health of animals are no longer complied with, animal welfare is liable to be endangered and can no longer be guaranteed. ( ) This means at least two things:
59.
To begin with, rest periods must comply with the general clause. That involves a duty to refrain from (potentially) causing injury or undue suffering to animals, rather than an obligation to act exclusively in their interest. Of course, normally speaking a period during which the vehicle is at a halt will cause less suffering to animals than a period where it is in motion: for instance, the transported animals are at a lesser risk of losing their balance or suffering motion sickness. ( ) However, I cannot exclude the possibility that a rest period which does not bring the total ‘journey times and rest periods’ under the 14+1+14 rule beyond 29 hours might still be liable to cause injury or undue suffering to the animals. To use an example, I do not think the general clause permits animals to be physically moved for 1 hour, followed by a 27-hour rest period spent inside the vehicle, before moving them for a further hour.
60.
Next, a number of obligations set out in Regulation No 1/2005 must be positively and consistently met during periods of rest. I am thinking, first and foremost, of those which follow from the second sentence of Article 3 of Regulation No 1/2005, as well as the requirements listed in Annex I thereto and in particular in Chapter VI, which applies to ‘long journeys’ as defined in Article 2 of the regulation.
61.
For my part, I am unable to read too much into the fact that the 14+1+14 rule mentions that the animals are to be given ‘a rest period sufficient for them in particular to be given liquid and if necessary fed’. Although such actions are clearly in the interests of the animals, that expression appears to add nothing more to the positive requirements which already follow from Regulation No 1/2005. ( ) Moreover, the counter-argument is obvious: the term ‘in particular’ does not explicitly rule out the possibility of a rest period which is not exclusively in the interests of the animals. As the expression of political compromise, the 14+1+14 rule ought to be apprehended with some measure of pragmatism, as illustrated above at point 45.
62.
Establishing whether a rest period fails to observe the requirements set out in Regulation No 1/2005 is a factual assessment which is a matter for the national authorities and, ultimately, the national courts. However, I would call to mind that in the context of export refunds, it is for the exporter to prove that the conditions for granting the refunds are met. ( ) All things being equal, it would seem to me that the longer the duration of a rest period, the more difficult it will be for the exporter to do so.
63.
What is more, Article 22(2) of Regulation No 1/2005 (‘Delay during transport’) requires the competent authority, in the event that a ‘consignment of animals has to be detained during transport for more than two hours … to ensure that appropriate arrangements are made for the care of the animals and, where necessary, their feeding, watering, unloading and accommodation’. I do not see any valid reason why this two-hour rule might not, mutatis mutandis, serve as a yardstick in respect of transporters where a halt is attributable to them. This, moreover, supports the view that the idea that bovines might be kept on board a stationary vehicle for 14 hours without being unloaded, as suggested by the referring court, is simply not feasible.
64.
Turning to the main proceedings, I have taken note of the fact that the duration of the transport at issue exceeds 29 hours, and that Masterrind has not, according to the information which is at the Court’s disposal, invoked the +2 rule. However, as the place of destination of the transport at issue was Morocco, I greatly doubt that it might be possible for Masterrind to rely on the +2 rule. Consequently, I am minded to think that the transport at issue falls foul of the 14+1+14 rule, and that the action ought to be dismissed as ill founded.
65.
In any event I consider that, save in exceptional circumstances, a 10-hour ‘rest period’ spent inside a motionless vehicle cannot be justified and is thus liable to cause the animals undue suffering. It is for the referring court to establish the conditions under which the 10-hour rest took place.
66.
On the basis of the foregoing considerations, I propose that the Court answer the first question referred to the effect that, on a proper construction of the rule set out in point 1.4 of Chapter V of Annex I to Regulation No 1/2005, the ‘journey times and rest periods’ referred to in that point may involve a rest period of more than 1 hour or several rest periods, provided that a period of rest of at least 1 hour separates every combined period of physical movement of at most 14 hours and, moreover, that this would not breach the other requirements set out in that regulation. That is a matter for the national courts to verify. However, until the animals reach the place of destination, as defined in Article 2 of that regulation, point 1.5 of Chapter V of Annex I to that regulation requires them to be unloaded, fed and watered, and rested for at least 24 hours every 29 hours following their first loading at the place of departure, as defined in that same provision. This is without prejudice to the possibility, under point 1.8 of that chapter, of extending the journey time by two hours in the interests of the animals, taking account in particular of the proximity to the place of destination.
B – The second question referred
67.
By its second question, the referring court essentially asks whether an administrative body of a Member State responsible for payment of export refunds is bound by a declaration, issued by an official veterinarian of another Member State, pursuant to which the journey (as used in Article 2 of Regulation No 1/2005) for which export refunds have been applied did not comply with the animal welfare rules.
68.
As observed by the parties to this procedure, the case-law of the Court goes a long way in addressing that question.
69.
In Viamex Agrar Handel, the Court was called upon to interpret a previous incarnation of Regulation No 817/2010. ( ) Unlike the approach taken by its Advocate General, ( ) the Court held that the presentation, by the exporter, of the documents mentioned in Regulation No 615/98 — now Regulation No 817/2010 — does not constitute irrefutable proof of compliance with the applicable export refunds rules, or of compliance with rules on animal welfare during transport. The evidence provided by those documents suffices only in so far as the competent payment body does not have at its disposal elements in the light of which it may find that the rules on animal welfare during transport have not been complied with. The obligation incumbent upon that body is to analyse that evidence, together with any other element available to it, in order to reach a finding as to whether or not those rules have been complied with and decide whether or not to grant the export refunds. ( )
70.
However, the Court has also held that this does not empower the competent payment body arbitrarily to call into question the evidence attached by the exporter to its export refunds application. The competent payment body may reach a finding of non-compliance only on the basis of documents mentioned in Regulation No 615/98 — now Regulation No 817/2010 — and/or of any other objective element with implications for the welfare of the animals. It cannot confine itself to noting mere suppositions or doubts concerning compliance, but must base its findings on objective and specific elements relating to the welfare of the animals and must, in any event, give reasons as to why it considers that the evidence provided by the exporter does not enable it to conclude that the animal welfare rules have been complied with. ( )
71.
That ruling was subsequently confirmed by the Court in Heemskerk and Schaap, sitting in Grand Chamber formation. ( )
72.
In both the abovementioned cases, the exporter was in possession of a declaration of the official veterinarian attesting to the conformity of the seafaring vessel concerned, and thus the transport as such, with the animal welfare rules. The main proceedings concern the reverse situation: the official veterinarian has declared that the journey has not taken place in compliance with the animal welfare rules during transport. The exporter is challenging that view.
73.
Now, unlike what the Hauptzollamt argues, the fact that Article 5(1)(c) of Regulation No 817/2010 refers only to situations where the animal welfare requirements have not been complied with, rather than situations where they have been complied with, does not logically mean that the competent payment body may deny payment to a transport which actually meets those requirements. Indeed, under Article 1 of Regulation No 817/2010, the payment of export refunds for live bovine animals is subject to compliance, during the transport of the animals to the first place of unloading in the third country of final destination, with Articles 3 to 9 of Regulation No 1/2005 and the Annexes referred to therein, and with Regulation No 817/2010 itself. Nothing more, nothing less. For in point of fact, the aim of the export refunds procedure — a procedure applicable to export refunds sought in respect of the export of live bovine animals — is simply to ensure that the product concerned satisfies all the conditions necessary for the refunds. ( )
74.
Hence, the fact that it is for the exporter to show that all conditions are met for the approval of a request for export refunds is irrelevant, as that merely relates to the allocation of the burden of proof. On no account does it alter the fact that the scheme for export refunds aims to foster decisions which are correct on their merits, irrespective of whether they approve or deny such requests, in keeping with the general principle that administrative authorities must act in accordance with the law.
75.
What is more, I must confess to having difficulty in accepting the view that the validity and effects in law of a declaration, issued by an official veterinarian for the purposes of the legal system of which Regulation No 817/2010 forms part, are simply a matter of the law of the Member State of the point of exit, rather than of EU law as such. ( )
76.
Accordingly, the case-law mentioned above at points 69 to 71 applies conversely to the situation under consideration. It follows that a declaration issued by the official veterinarian, attesting to the non-compliance with the animal welfare rules of the journey for which export refunds are sought, does not constitute irrefutable proof thereof.
77.
I am not persuaded by certain arguments which have been raised in support of the opposite view.
78.
First, the argument submitted by the Hauptzollamt, according to which the document referred to in Article 2(3) of Regulation No 817/2010 is ‘duly completed’, and therefore open to review under Article 4(2)(a) of that regulation, only if the official veterinarian at the exit point certifies that the results of the checks pursuant to Article 2 of that regulation are satisfactory, must be rejected. To begin with, the term ‘duly completed’ cannot be interpreted as prescribing a particular result of the checks. Next, Article 2(4) of the regulation states that the document referred to in Article 2(3) thereof is to be endorsed with the total number of animals for which an export declaration has been accepted, minus the number of animals which gave birth or aborted during transport, died or for which the requirements of Regulation No 1/2005 were not complied with.
79.
Second, I do not accept an argument according to which, in the interest of the welfare of the animals, it ought not to be possible to review declarations finding a breach of the rules on animal welfare during transport. The objective of protecting the welfare of animals, laudable as it may be, cannot justify a refusal to pay export refunds where, contrary to a declaration of non-compliance issued by the official veterinarian of another Member State, there has in fact not been a breach of those rules.
80.
Last, an argument based on protection of the financial interests of the EU, raised by the Hauptzollamt, seems evidently ill founded to me. There is no legitimate threat to those interests where the rules on animal welfare have, in actual fact, been complied with. Besides, to put that argument into context, in the hypothetical event of a breach of the principle of legality by the Commission, the Court does not similarly uphold the amount of a fine imposed for breach of the competition rules for fear of a financial loss to the EU. ( )
81.
Be that as it may, as stated by the Hauptzollamt, the French Government and the referring court, the assessment of the physical condition and state of health of animals requires specific expertise and experience, and checks should therefore be carried out by a veterinarian. ( ) The results of such checks amount to factual on-the-spot assessments involving complex and technical evaluations of the health and well-being of the animals. It follows that the discretion afforded to the competent payment body when reviewing such a declaration attesting to the non-compliance with the rules on animal welfare during transport is not unlimited ( ) — rather, it is circumscribed in the same manner, mutatis mutandis, as mentioned above in point 70.
82.
When challenging a declaration of non-compliance, the exporter must demonstrate conclusively, by way of objective evidence, that the assessment made by the official veterinarian is unreliable. However, the mere fact that the exporter takes a view different from that of the official veterinarian as regards the state of the animals for which export refunds are sought, does not mean that the veterinarian’s assessment is manifestly wrong or based on incorrect facts.
83.
So far as concerns the legal consequences of the official veterinarian’s findings, as indicated by the referring court, the expertise which veterinarians possess does not justify the same caution on the part of the competent payment body. Any legal consequences drawn are therefore fully open to review.
84.
On the basis of the foregoing considerations, I propose that the Court answer the second question referred to the effect that, when considering an application for export refunds under Article 4(2) of Regulation No 817/2010, a body responsible for the payment of export refunds is not bound by the entry made, in accordance with Article 2(3) of that regulation, by the official veterinarian. However, where that body decides to depart from the factual assessment made by that veterinarian of the health and welfare of the animals on which that entry is based, it must rely on objective and specific evidence relating to the health and welfare of the animals. If the application is refused in whole or in part, that body must, in any event, provide reasons therefor, it being for the exporter to show, in that case, that the evidence relied on by that body is irrelevant.
IV – Conclusion
85.
In the light of the foregoing considerations, I propose that the Court answer the questions referred in Case C‑469/14 by the Finanzgericht Hamburg (Finance Court, Hamburg) to the effect that:
—
on a proper construction of the rule set out in point 1.4 of Chapter V of Annex I to Council Regulation (EC) No 1/2005 of 22 December 2004 on the protection of animals during transport and related operations and amending Directives 64/432/EEC and 93/119/EC and Regulation (EC) No 1255/97, the ‘journey times and rest periods’ referred to in that point may involve a rest period of more than 1 hour or several rest periods, provided that a period of rest of at least 1 hour separates every combined period of physical movement of at most 14 hours and, moreover, that this would not breach the other requirements set out in that regulation. That is a matter for the national courts to verify. However, until the animals reach the place of destination, as defined in Article 2 of that regulation, point 1.5 of Chapter V of Annex I to that regulation requires them to be unloaded, fed and watered, and rested for at least 24 hours every 29 hours following their first loading at the place of departure, as defined in that same provision. This is without prejudice to the possibility, under point 1.8 of that chapter, of extending the journey time by two hours in the interests of the animals, taking account in particular of the proximity to the place of destination;
—
when considering an application for export refunds under Article 4(2) of Commission Regulation (EU) No 817/2010 of 16 September 2010 laying down detailed rules pursuant to Council Regulation (EC) No 1234/2007 as regards requirements for the granting of export refunds related to the welfare of live bovine animals during transport, a body responsible for the payment of export refunds is not bound by the entry made, in accordance with Article 2(3) of that regulation, by the official veterinarian. However, where that body decides to depart from the factual assessment made by that veterinarian of the health and welfare of the animals on which that entry is based, it must rely on objective and specific evidence relating to the health and welfare of the animals. If the application is refused in whole or in part, that body must, in any event, provide reasons therefor, it being for the exporter to show, in that case, that the evidence relied on by that body is irrelevant.
( ) Original language: English.
( ) Council Regulation (EC) of 22 December 2004 on the protection of animals during transport and related operations and amending Directives 64/432/EEC and 93/119/EC and Regulation (EC) No 1255/97 (OJ 2005 L 3, p. 1).
( ) Commission Regulation (EU) of 16 September 2010 laying down detailed rules pursuant to Council Regulation (EC) No 1234/2007 as regards requirements for the granting of export refunds related to the welfare of live bovine animals during transport (OJ 2010 L 245, p. 16).
( ) Regulation (EC) of the European Parliament and of the Council of 15 March 2006 on the harmonisation of certain social legislation relating to road transport and amending Council Regulations (EEC) No 3821/85 and (EC) No 2135/98 and repealing Council Regulation (EEC) No 3820/85 (OJ 2006 L 102, p. 1).
( ) See, as regards export refunds, inter alia judgments in Viamex Agrar Handel and ZVK, C‑37/06 and C‑58/06, EU:C:2008:18; Viamex Agrar Handel, C‑96/06, EU:C:2008:158; and Viamex Agrar Handel, C‑485/09, EU:C:2011:440.
( ) See recital 11 of Regulation No 1/2005.
( ) Article 13 TFEU mirrors the Protocol on protection and welfare of animals annexed to the Treaty of Amsterdam, OJ 1997 C 340, p. 110 (the ‘Animal Welfare Protocol’), applicable at the time of adoption of Regulation No 1/2005 (see also judgment in Zuchtvieh-Export, C‑424/13, EU:C:2015:259, paragraph 35). Whether an EU measure takes sufficient account of animal welfare is a matter reviewable in the context of the principle of proportionality, see judgment in Jippes and Others, C‑189/01, EU:C:2001:420, paragraphs 79 and 85.
( ) See, inter alia, recital 13 and Article 3(d) of Regulation No 1/2005. See also The welfare of animals during transport (details for horses, pigs, sheep and cattle), Report of the Scientific Committee on Animal Health and Animal Welfare, adopted on 11 March 2002, European Commission, Health and Consumer Protection Directorate-General, Directorate C — Scientific Opinions, p. 24.
( ) Judgment in Interboves, C‑277/06, EU:C:2008:548, paragraphs 15 and 16, in respect of a similar rule in point 48.4(d) of the Annex to Council Directive 91/628/EEC of 19 November 1991 on the protection of animals during transport and amending Directives 90/425/EEC and 91/496/EEC (OJ 1991 L 340, p. 17, as amended).
( ) For the sake of coherence, I have attempted to adhere, throughout this Opinion, to the definitions generally listed in Article 2 of Regulation No 1/2005, including those of ‘journey’ and ‘transport’. However, as will become apparent below, this has been increasingly difficult. As mentioned previously, I have endeavoured to be specific where necessary.
( ) Article 2 of Regulation No 1/2005 defines a place of departure as the place at which the animal is first loaded on to a means of transport provided that it had been accommodated there for at least 48 hours prior to the time of departure. A place of destination is defined as the place at which an animal is unloaded from a means of transport and either accommodated for at least 48 hours prior to the time of departure or slaughtered. Under certain conditions, assembly centres may be deemed to be a place of departure without having to meet the 48-hour requirement. However, that exception does not extend to the definition of a place of destination. Therefore, a journey from the first place of loading to an assembly centre which qualifies as a place of departure will not formally come to an end unless the animals are accommodated for 48 hours (or slaughtered) at the assembly centre.
( ) See Article 2(2)(b) of Directive 91/628, which defined ‘transport’ as ‘any movement of animals, effected by a means of transport, which involves loading and unloading the animals’.
( ) Article 2(2)(h) of Directive 91/628.
( ) It is necessary to point out that the various language versions of point 1.4(d) of Chapter V of Annex I to Regulation No 1/2005 also lack consistency both internally and as between each other. First, not all language versions exclusively use the word ‘transport’, some versions using terms which are not defined (German: ‘Beförderung’, English: ‘travel’). Second, certain language versions use the word ‘journey’ instead of ‘transport’ (Italian: ‘viaggio’; Portuguese: ‘viagem’; Romanian: ‘călătorie’).
( ) According to recital 5 of Regulation No 1/2005, ‘the transport of animals over long journeys, including animals for slaughter, should [, for reasons of animal welfare,] be limited as far as possible’, long journeys being, according to recital 18, ‘likely to have more detrimental effects on the welfare of animals than short ones’. Moreover, the second sentence of Article 3 of the regulation provides that the ‘transport [must be] carried out without delay to the place of destination and the welfare conditions of the animals [must be] regularly checked and appropriately maintained’. Lastly, Article 5(3)(a) (‘Planning obligations for the transport of animals’) obliges organisers to ensure that for each journey, ‘the welfare of the animals is not compromised by insufficient coordination of the different parts of the journey, and that the weather conditions are taken into account’.
( ) The welfare of animals during transport (details for horses, pigs, sheep and cattle), op. cit., p. 80.
( ) Proposal of 16 July 2003 for a Council Regulation on the protection of animals during transport and related operations and amending Directives 64/432/EEC and 93/119/EC (COM(2003) 425 final/3), Annex I, Chapter V, point 1.1(d) (p. 49).
( ) See the third and fourth recitals of Council Directive 95/29/EC of 29 June 1995 amending Directive 91/628/EEC concerning the protection of animals during transport (OJ 1995 L 148, p. 52).
( ) See, to that effect, judgment in Pfotenhilfe-Ungarn, C-301/14, EU:C:2015:793, paragraph 33, and the case-law cited. The judgment in Zuchtvieh-Export, C‑424/13, EU:C:2015:259, according to which transport organisers must show, prior to receiving authorisation for an international transport of animals beginning in the EU, that all the requirements of Regulation No 1/2005 will be complied with, including journey times and resting periods where parts of the journey take place in a third country, bears witness to this reversed hierarchy of policy objectives.
( ) An example: the maximum authorised travel time by road under the 14+1+14 rule without a ‘neutralising’ 24-hour rest is nearly spent (27½ hours) just prior to boarding an intra-EU roll-on/roll-off ferry. The crossing itself exceeds 28 hours (if such crossings exist). Here, the judgment in Interboves (C‑277/06, EU:C:2008:548, paragraphs 33 and 38) seems to suggest that a 12-hour rest period suffices to ‘neutralise’ the minimum 55½ hours of travel by road and ferry which immediately preceded that rest, during which the animals have not been unloaded. In this example, it is furthermore unclear whether, following a ‘neutralising’ 12-hour rest, the animals may be transported for a further 28 hours by road (provided they receive a minimum 1-hour rest). In the case of transportation by roll-on/roll-off ferry to a point outside the EU, no ‘neutralising’ period is prescribed; see the judgment in Schwaninger Martin, C‑207/06, EU:C:2008:414, paragraphs 30 to 35.
( ) Opinion of Advocate General Mengozzi in Interboves, C‑277/06, EU:C:2008:162, point 18.
( ) See, to that effect, Viamex Agrar Handel, C‑96/06, EU:C:2008:158, paragraph 48.
( ) See, as regards the loss of balance of cattle during long distance transport, The welfare of animals during transport (details for horses, pigs, sheep and cattle), op. cit., p. 81.
( ) See Article 3(h) of Regulation No 1/2005, as well as points 1.3 to 1.5 and points 2.1 to 2.3 of Chapter VI of Annex I to that regulation.
( ) Judgment in Heemskerk and Schaap, C‑455/06, EU:C:2008:650, paragraph 24.
( ) Commission Regulation (EC) No 615/98 of 18 March 1998 laying down specific detailed rules of application for the export refund arrangements as regards the welfare of live bovine animals during transport (OJ 1998 L 82, p. 19).
( ) Opinion of Advocate General Mengozzi in Viamex Agrar Handel, C‑96/06, EU:C:2007:680, points 29 and 30 and the operative part.
( ) Judgment in Viamex Agrar Handel, C‑96/06, EU:C:2008:158, paragraphs 34 and 37 and the first indent of the operative part.
( ) Ibid., paragraphs 39 to 41, and the first indent of the operative part.
( ) Judgment in Heemskerk and Schaap, C‑455/06, EU:C:2008:650, paragraphs 24 to 32.
( ) See, to that effect, judgment in Viamex Agrar Handel, C‑96/06, EU:C:2008:158, paragraphs 31 and 32.
( ) In that sense, although I agree that the legal system of the export refund regulations has ‘led to the creation of a Community network’ which ‘necessarily implies cooperation between the Member States’ (see Opinion of Advocate General Mengozzi in Viamex Agrar Handel, C‑96/06, EU:C:2007:680, points 27 and 28), I would in contrast infer from this a need to be able to review declarations such as the one at issue in the main proceedings.
( ) See Article 83 of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1).
( ) See recital 5 of Regulation No 817/2010.
( ) See, to that effect, judgment in Heemskerk and Schaap, C‑455/06, EU:C:2008:650, paragraph 29 and the case-law cited. |
JUDGMENT OF THE GENERAL COURT (Ninth Chamber, Extended Composition)
13 December 2018 ( *1 )
(Competition — Abuse of dominant position — Slovakian market for broadband telecommunications services — Access by third-party undertakings to the ‘local loop’ of the incumbent operator on that market — Decision finding an infringement of Article 102 TFEU and Article 54 of the EEA Agreement — Single and continuous infringement — Definition of ‘abuse’ — Refusal to grant access — Margin squeeze — Calculation of margin squeeze — Equally efficient competitor test — Rights of defence — Imputation of an infringement committed by a subsidiary to its parent company — Decisive influence of the parent company over the subsidiary’s commercial policy — Actual exercise of such influence — Burden of proof — Calculation of the fine — 2006 Guidelines on the method of setting fines)
In Case T-851/14,
Slovak Telekom, a.s., established in Bratislava (Slovakia), represented by D. Geradin, lawyer, and R. O’Donoghue QC,
applicant,
v
European Commission, represented initially by M. Farley, L. Malferrari and G. Koleva, and subsequently by M. Farley, M. Kellerbauer, L. Malferrari and C. Vollrath, acting as Agents,
defendant,
supported by
Slovanet, a.s., established in Bratislava, represented by P. Tisaj, lawyer,
intervener,
ACTION under Article 263 TFEU seeking, primarily, the annulment, insofar as it concerns the applicant, of Commission Decision C(2014) 7465 final of 15 October 2014 relating to proceedings under Article 102 TFEU and Article 54 of the EEA Agreement (Case AT.39523 — Slovak Telekom), as rectified by Commission Decision C(2014) 10119 final of 16 December 2014 and by Commission Decision C(20 15) 2484 final of 17 April 2015, and, in the alternative, the reduction of the fine imposed on the applicant,
THE GENERAL COURT (Ninth Chamber, Extended Composition),
composed M. van der Woude, acting as President, S. Gervasoni, L. Madise, R. da Silva Passos (Rapporteur) and K. Kowalik-Bańczyk, Judges,
Registrar: N. Schall, Administrator,
having regard to the written part of the procedure and further to the hearing on 26 April 2018,
gives the following
Judgment ( )
I. Background to the dispute
The applicant, Slovak Telekom, a.s., is the incumbent telecommunications operator in Slovakia. Deutsche Telekom AG, the incumbent telecommunications operator in Germany and the company at the helm of the Deutsche Telekom group, acquired a 51% stake in the applicant on 4 August 2000, a shareholding which it held throughout the relevant period in this case. The remaining shareholding in the applicant was held by the Ministry of Economy of the Slovak Republic (34%) and the National Property Fund of the Slovak Republic (15%).
On 15 October 2014, the European Commission adopted Decision C(2014) 7465 final relating to proceedings under Article 102 TFEU and Article 54 of the EEA Agreement (Case AT.39523 — Slovak Telekom), rectified by its Decision C(2014) 10119 final of 16 December 2014 and by its Decision C(2015) 2484 final of 17 April 2015, which was addressed to the applicant as well as to Deutsche Telekom (‘the contested decision’). On 24 December 2014, Deutsche Telekom brought an action also seeking annulment of the contested decision (Case T‑827/14).
A.
Technological, factual and regulatory context of the contested decision
The applicant, which is the indirect successor of the public post and telecommunications undertaking that ceased to exist in 1992, is the largest telecommunications operator and broadband provider in Slovakia. The legal monopoly it enjoyed on the Slovakian telecommunications market came to an end in 2000. The applicant offers a full range of data and voice services, and owns and operates fixed copper and fibre optic networks as well as a mobile telecommunications network. The copper and mobile networks cover almost the entire territory of Slovakia.
The contested decision concerns anticompetitive practices on the Slovakian market for broadband internet services. In essence, it relates to the conditions set by the applicant for unbundled access of other operators to the copper local loop in Slovakia between 2005 and 2010.
The local loop is the physical twisted metallic pair circuit (also known as ‘the line’) connecting the network termination point at the subscriber’s premises to the main distribution frame or equivalent facility in the fixed public telephone network.
Unbundled access to the local loop allows new entrants — usually called ‘alternative operators’, as opposed to the incumbent operators of the telecommunications networks — to use the pre-existing telecommunications infrastructure belonging to those incumbent operators in order to offer various services to end users, in competition with the incumbent operators. The different telecommunications services that can be provided to end users through the local loop include high bit-rate data transmission services for fixed internet access and for multimedia applications based on digital subscriber line (DSL) technology.
Local loop unbundling was organised at EU level by, inter alia, Regulation (EC) No 2887/2000 of the European Parliament and of the Council of 18 December 2000 on unbundled access to the local loop (OJ 2000 L 336, p. 4), and Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (OJ 2002 L 108, p. 33). Regulation No 2887/2000 required operators holding ‘significant market power’ to give access to unbundled local loops (ULLs) and to publish a reference unbundling offer. Those provisions were implemented in Slovakia by the Zákon z 3. decembra 2003 č. 610/2003 Z.z. o elektronických komunikáciách, v znení neskorších predpisov (Law No 610/2003 of 3 December 2003 on electronic communications), as amended, which entered into force, with certain exceptions, on 1 January 2004.
In essence, that regulatory framework required the operator identified by the national regulatory authority as the operator with significant market power, which is generally the incumbent operator, to grant alternative operators unbundled access to its local loop and to related services under transparent, fair and non-discriminatory conditions, and to maintain an updated reference offer for such unbundled access. The national regulatory authority was required to ensure that charging for unbundled access to the local loop, set on the basis of cost-orientation, fostered fair and sustainable competition. To that end, the national regulatory authority was entitled inter alia to require changes to be made to the reference offer.
Following a market analysis, on 8 March 2005 the Slovakian national regulatory authority for telecommunications (‘TUSR’) adopted a first-instance decision — Decision No 205/14/2005 — designating the applicant as an operator with significant power on the wholesale market for unbundled access to the local loop within the meaning of Regulation No 2887/2000. Consequently, TUSR imposed a number of obligations on the applicant, including requiring it to submit a reference offer within 60 days. That decision, which the applicant challenged, was confirmed by the Chairman of TUSR on 14 June 2005. Pursuant to that confirmatory decision, the applicant was required to grant all reasonable and justified requests for unbundling of its local loop in order to enable alternative operators to use that loop with a view, on that basis, to offer their own services on the ‘retail mass market’ for broadband services at a fixed location in Slovakia. The decision of 14 June 2005 also ordered the applicant to publish all intended changes to the reference unbundling offer at least 45 days in advance and to submit them to TUSR.
The applicant published its reference unbundling offer on 12 August 2005 (‘the reference offer’). That offer, which was amended on nine occasions between that date and the end of 2010, sets out the contractual and technical conditions for access to the applicant’s local loop. On the wholesale market, the applicant offers access to unbundled local loops in or next to a main distribution frame on which the alternative operator seeking access has rolled out its own backbone network.
According to the contested decision, the applicant’s local loop network, which could be used to supply broadband services after the lines concerned have been unbundled from that operator, covered 75.7% of all Slovakian households between 2005 and 2010. That coverage extended to all local loops in the applicant’s metallic access network that could be used to transmit a broadband signal. However, during that same period, only very few of the applicant’s local loops were unbundled, as from 18 December 2009, and used only by a single alternative operator to provide retail broadband services to undertakings.
B.
Procedure before the Commission
The Commission opened an investigation on its own initiative, inter alia, the conditions for unbundled access to the applicant’s local loop. Following requests for information sent to alternative operators on 13 June 2008 and an unannounced inspection at the applicant’s premises which took place on 13 and 15 January 2009, the Commission decided, on 8 April 2009, to open a procedure against that operator, within the meaning of Article 2 of Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles [101] and [102 TFEU] (OJ 2004 L 123, p. 18).
Further steps were taken in the investigation consisting of additional requests for information sent to alternative operators and TUSR, as well as an announced inspection at the applicant’s premises on 13 and 14 July 2009.
In several discussion documents sent to the Commission between 11 August 2009 and 31 August 2010, the applicant argued that there were no grounds for finding that it had infringed Article 102 TFEU in the present case.
In the course of the investigation, the applicant objected to the provision of information dating from the period prior to 1 May 2004, the date of accession of the Slovak Republic to the European Union. It brought an action for annulment, first, of Commission Decision C(2009) 6840 of 3 September 2009 relating to a proceeding pursuant to Articles 18(3) and 24(1) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles [101 and 102 TFEU] (OJ 2003 L 1, p. 1) and, second, of Commission Decision C(2010) 902 of 8 February 2010 relating to a proceeding pursuant to Articles 18(3) and 24(1) of Regulation No 1/2003. By judgment of 22 March 2012, Slovak Telekom v Commission (T‑458/09 and T‑171/10, EU:T:2012:145), the Court dismissed the actions brought against those decisions.
Following requests for information sent to Deutsche Telekom, the Commission decided on 13 December 2010 to open a procedure against that company pursuant to Article 2 of Regulation No 773/2004.
On 7 May 2012, the Commission sent a statement of objections to the applicant. That statement of objections was sent to Deutsche Telekom the day after. In that statement of objections the Commission concluded, on a preliminary basis, that the applicant might have infringed Article 102 TFEU on account of a practice resulting in the margin squeeze as regards unbundled access to local loops in its network as well as national and regional wholesale broadband access to its competitors, and may have refused alternative operators access to some wholesale products. It also set out the preliminary view that Deutsche Telekom might be liable for the infringement in its capacity as parent company of the applicant during the infringement period.
After accessing the investigation file, the applicant and Deutsche Telekom each replied to the statement of objections on 5 September 2012. A hearing was held on 6 and 7 November 2012.
On 21 June 2013, the applicant sent the Commission a description of possible commitments intended to address its objections from the standpoint of competition law and asked the Commission to adopt a commitments decision within the meaning of Article 9 of Regulation No 1/2003 instead of a prohibition decision. The Commission nonetheless considered those commitments to be insufficient and therefore decided to continue the procedure.
On 6 December 2013 and 10 January 2014 respectively, the Commission sent the applicant and Deutsche Telekom a letter of facts intended to afford them the opportunity to comment on the additional evidence collected after the statement of objections had been issued. The Commission stated that that evidence, to which the applicant and Deutsche Telekom were given access, could be used in a possible final decision.
The applicant and Deutsche Telekom replied to the letter of facts on 21 February and 6 March 2014 respectively.
At meetings held with the applicant on 16 September 2014 and with Deutsche Telekom on 29 September 2014, the Commission provided information on the decision it planned to adopt under Article 7 of Regulation No 1/2003.
C.
Contested decision
In the contested decision, the Commission finds that the undertaking comprising the applicant and Deutsche Telekom committed a single and continuous infringement of Article 102 TFEU and Article 54 of the EEA Agreement concerning broadband services in Slovakia between 12 August 2005 and 31 December 2010 (‘the period under consideration’).
1. Definition of the relevant markets and dominant position of the applicant on those markets
In the contested decision the Commission identifies two relevant product markets, namely:
–
the retail mass market for broadband services at a fixed location;
–
the wholesale market for access to unbundled local loops.
According to the contested decision, the relevant geographical market is the entire territory of the Republic of Slovakia.
The Commission states that, during the period under consideration, the applicant held a monopoly position on the wholesale market for unbundled access to local loops and there were no direct constraints in the form of actual or potential competition or countervailing buying power limiting its market power. The applicant therefore held a dominant position on that market during the period under consideration. The Commission also finds that the applicant held a dominant position during that period on the retail mass market for broadband services at a fixed location.
2. The applicant’s conduct
(a) Refusal to provide unbundled access to the applicant’s local loops
In the first part of its analysis entitled ‘Refusal to supply’, the Commission observes that, although several alternative operators had expressed great interest in being granted access to the applicant’s local loops in order to compete with it on the retail market for broadband services, that operator set unfair terms and conditions in its reference offer rendering such access unacceptable. The applicant thereby delayed, complicated or prevented entry on the retail broadband market.
In that regard, the Commission states that, first, unbundled access to the local loop by an alternative operator is based on the premiss that that operator must first obtain sufficient and adequate information concerning the incumbent operator’s network. That information must enable the alternative operator concerned to assess its business opportunities and to prepare appropriate business plans for its future retail services based on unbundled access to the local loop. In the present case, the reference offer did not satisfy that information requirement with respect to alternative operators.
Accordingly, despite the requirements laid down in the relevant regulatory framework (see paragraphs 7 and 8 above), the reference offer does not provide any basic information regarding the locations of physical access sites and the availability of local loops in specific parts of the network. Alternative operators had access to such information only upon request, in exchange for payment of a fee, within five days of the entry into force of a confidentiality agreement with the applicant and solely after the provision of a bank guarantee. The Commission considers, in essence, that those requirements unreasonably delayed and complicated disclosure of the relevant information to alternative operators and thus discouraged those operators from accessing the applicant’s local loops.
Even in the case of access upon request, the Commission finds that the information provided by the applicant was insufficient. In particular, the applicant did not provide any information on the availability of its local loops, even though such information was crucial to enable alternative operators to prepare their business models in time and to identify the business potential of unbundling. The Commission takes the view that the applicant should have disclosed not only the list of main distribution frames and similar facilities, but also a description of their geographical coverage; information on the ranges of telephone numbers served by those exchanges; information on the actual use of cables (in %) for DSL technologies; information on the ratio of pulse code modulation (PCM) equipment deployment regarding the cables connected to the different main distribution frames; the names or functions of the distribution frames and information on how they are used in the applicant’s technical and methodological regulations; and the maximum lengths of homogeneous local loops. The applicant was moreover well aware of the problems faced by alternative operators as a result of those terms of access to information and the information’s limited scope. The Commission also points out that, although the applicant did not publish a template for the unbundling requests to be submitted by alternative operators until May 2009, its reference unbundling offer made provision at the very outset for the imposition of financial penalties if a request for access were deemed incomplete.
Secondly, according to the contested decision, the applicant unjustifiably reduced the scope of its obligation relating to unbundled access to its local loops.
Thus, in the first place, the applicant improperly excluded from that obligation ‘passive’ lines, namely lines which existed physically but were not in use. By doing so, the applicant reserved for itself a significant number of potential customers who were not yet purchasing its broadband services but to whom its network was available, even though the market was growing and the relevant regulatory framework did not restrict the unbundling obligation to active lines only. The restriction applied by the applicant was not, in the Commission’s view, justified by any objective technical reasons.
In the second place, the applicant unjustifiably excluded from its unbundling obligation the services which it classed as ‘conflicting services’, namely services that it was likely to offer and which may have been in conflict with access to the local loop by an alternative operator. In addition to the fact that the actual concept of conflicting services is vague, the list of such services — drawn up unilaterally by the applicant — is open and, in consequence, creates uncertainty for alternative operators. That limitation deprived alternative operators of a large number of potential customers, customers which were reserved for the applicant and therefore withdrawn from the retail market.
In the third place, the Commission classifies as unjustified the rule imposed by the applicant in the reference offer, whereby only 25% of local loops contained in a multi-pair cable could be used for the provision of broadband services, in order to avoid cross-talk and interferences. That rule is not justified because it is of a general and abstract nature and does thus not take account of the characteristics of the cables and the specific combination of transmission techniques. The Commission points out, in that regard, that the practice followed in other Member States demonstrates that there are alternatives to such upstream abstract limitations on access, for instance the principle of 100% cable fill-in together with the a posteriori resolution of any specific problems stemming from spectrum interferences. Finally, the applicant applied to itself a maximum fill-in rule of 63%, which is less strict than the rule it applied to alternative operators.
Finally, thirdly, the applicant established a number of unfair terms and conditions in the reference offer concerning unbundled access to its local loops.
In that regard, in the first place, according to the contested decision, the applicant included unfair terms and conditions in the reference offer relating to collocation, defined in that offer as ‘the provision of the physical space and the technical equipment necessary for the appropriate placement of the telecommunication equipment of the Authorised Provider with the purpose of provision of services to the end users of the Authorised Provider via access to the local loop’. The barrier thus erected for alternative operators was the result of, in particular, the following factors: (i) the conditions required a preliminary inquiry into the possibilities of collocation which was not objectively necessary; (ii) alternative operators were only able to challenge the determination of the form of collocation decided by the applicant by paying an additional fee; (iii) the consequence of the expiry of the reservation period after delivery to the alternative operator of the notice regarding the outcome of the preliminary or detailed inquiry, without any collocation agreement being concluded, was that the preliminary or detailed inquiry had to be repeated in full; (iv) the applicant was not bound by any deadlines in the event of additional detailed inquiries triggered by negotiations and was entitled to withdraw — without stating reasons and without any legal consequences — a proposed collocation agreement during the term for acceptance of the proposal by the alternative operators within the established deadlines; (v) the applicant was not bound by any precise time limit for implementing collocation; (vi) the applicant unilaterally imposed unfair and non-transparent fees for collocation.
In the second place, the Commission finds that, under the reference offer, alternative operators were required to submit forecasts of the requests for qualification of the local loop 12 months in advance for each collocation space, on a month-by-month basis, before being able to submit a request for qualification for access to the relevant local loop. The Commission considers that such a requirement obliges alternative operators to submit forecasts at a time when they are not in a position to estimate their needs in terms of unbundled access. It also criticises the fact that failure to comply with the forecasting terms triggered the payment of penalties and complains about the mandatory nature of the forecasting obligation and the lack of any deadline for the applicant to respond to a request for qualification in the event that such a request did not comply with the forecasted volume.
In the third place, the Commission considers that the mandatory qualification procedure, which was designed to enable alternative operators to determine whether a specific local loop was suitable for xDSL technology or any other broadband technology they might intend to use before placing a firm unbundling order, was such that those operators were deterred from requesting unbundled access to the applicant’s local loops. Thus, while conceding that it is necessary to verify the suitability of local loops for unbundling or the basic preconditions for unbundling a specific line, the Commission states that the splitting of that qualification process from the very request for access to the local loop unnecessarily delayed unbundling and generated additional costs for alternative operators. Furthermore, a number of aspects examined in the context of the qualification process are superfluous. The Commission considers to be unjustified the validity period limited to 10 days applying to the positive qualification of a local loop, after which a request for access could no longer be made.
In the fourth place, according to the contested decision, the reference offer included disadvantageous terms as regards repairs, service and maintenance, due to (i) the lack of an appropriate definition of ‘planned works’ and ‘unplanned works’; (ii) the unclear distinction between ‘unplanned works’ and straightforward ‘defaults’, liable to give rise to unjustified conduct on the part of the applicant; (iii) the very short deadlines for informing alternative operators of such works and for transmitting that information to their customers; and, finally, (iv) the shifting of responsibility to the alternative operator for service interruptions caused by repairs where that operator has been deemed to be uncooperative.
In the fifth place, the Commission regards as unfair several terms and conditions applying to the bank guarantee that must be provided by all alternative operators wishing to conclude a collocation agreement with the applicant and ultimately secure access to its local loops. Therefore, first of all, the applicant enjoys an overly wide discretion in deciding whether to accept or refuse a bank guarantee and is not subject to any deadline in that regard. Next, the amount of the guarantee, set at EUR 66 387.84, is disproportionate in the light of the risks and costs borne by the applicant. That is all the more so since the reference offer allowed the applicant to multiply that amount by up to 12 where it called on the guarantee. Furthermore, the applicant was able to call on the bank guarantee to cover not only the failure to pay for actual services it provided, but also to cover any claims for damages that it could submit. Moreover, the applicant was entitled to trigger the bank guarantee without having to show that it had first asked the debtor to pay and without the debtor having the option of raising a counterclaim. Lastly, the Commission notes that alternative operators do not benefit from any similar security even though they may incur losses as a result of the applicant’s conduct in respect of unbundled access to local loops.
The Commission concludes that those aspects of the applicant’s conduct, taken together, amounted to a refusal by that operator to provide unbundled access to its local loops.
(b) Margin squeeze of alternative operators in the provision of unbundled access to the applicant’s local loops
In the second part of its analysis of the applicant’s conduct, the Commission makes a finding of margin squeeze as a result of the behaviour of that operator in connection with unbundled access to its local loops, which constitutes an independent form of abuse of a dominant position. Accordingly, the spread between the prices charged by the applicant for the grant of such access to alternative operators and the prices charged to its own customers was either negative or insufficient for an operator as efficient as the applicant to cover the specific costs which it had to incur to supply its own products or service on the downstream market, namely the retail market.
Where the service portfolio under consideration includes only broadband products, the Commission notes that an equally efficient competitor would have been able, by means of unbundled access to the applicant’s local loops, to replicate the entirety of the retail DSL offering of the applicant as it evolved over time. The ‘period-by-period’ margin analysis (namely the calculation of the available margins for each year of the period between 2005 and 2010) demonstrates that a competitor as efficient as the applicant faced negative margins and would not therefore have been able to replicate profitably the retail broadband portfolio offered by the applicant.
Where the portfolio examined includes voice telephony services in addition to broadband services by means of full access to the local loop, the Commission also concludes that a competitor as efficient as the applicant would not have been able, due to the prices charged by the applicant on the upstream market for unbundled access, to operate profitably on the relevant retail market during the period between 2005 and 2010. An equally efficient competitor would not therefore have been able to replicate profitably, over that same period, the applicant’s portfolio. The addition to that portfolio of multi-play services, available as from 2007, would not alter that finding.
Since neither the applicant nor Deutsche Telekom put forward during the administrative procedure any objective justification for their exclusionary conduct, the Commission concludes that the applicant’s conduct during the period under consideration constitutes an abusive margin squeeze.
3. Analysis of the anticompetitive effects of the applicant’s conduct
The Commission considers that those two types of conduct on the part of the applicant, namely the refusal to provide unbundled access to the local loop and the margin squeeze of the alternative operators were likely to prevent alternative operators from relying on unbundled access in order to enter the Slovakian retail mass market for broadband services at a fixed location. According to the contested decision, its conduct made competition less effective on that market because there was no genuine profitable alternative for competing operators to wholesale access to xDSL broadband based on the unbundling of local loops. The impact of the applicant’s conduct on competition was all the more significant because the retail market for broadband services showed strong potential for growth during the period under consideration.
The Commission also states, in essence, that according to the ‘investment ladder’ concept, that barrier to access to the unbundling of the local loop deprived alternative operators of a source of income which would have allowed them to make further investments in the network, particularly by developing their own access network to connect their customers directly.
The Commission concludes that the anticompetitive conduct of the applicant on the mass market for broadband services at a fixed location in Slovakia was likely to have negative effects on competition and, in the light of its geographical reach across the entire territory of the Slovak Republic, was able to affect trade between Member States.
4. Addressees of the contested decision and fines
According to the contested decision, not only was Deutsche Telekom in a position to exercise decisive influence over the applicant’s commercial policy during the entire period under consideration, but it actually exercised such influence. Since the applicant and Deutsche Telekom form part of the same undertaking, both were held liable for the single and continuous infringement of Article 102 TFEU forming the subject matter of the contested decision.
As regards the penalty for that infringement, the Commission states that it set the amount of the fines by reference to the principles laid down in its Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (OJ 2006 C 210, p. 2) (‘the 2006 Guidelines’).
First of all, the Commission calculates the basic amount of the fine by retaining 10% of the applicant’s turnover on the market for unbundled access to the local loop and for fixed retail broadband in the last full financial year of its participation in the infringement, in the case at hand 2010, and by multiplying the resulting figure by 5.33 to take account of the duration of the infringement (5 years and 4 months). The basic amount of the fine is thus EUR 38838000. Under the first paragraph of Article 2(a) of the contested decision, this is the first fine imposed for the infringement in question and for which the applicant and Deutsche Telekom are held jointly and severally liable.
Next, the Commission applies a twofold adjustment to the basic amount. In the first place, it finds that when the infringement in question occurred, Deutsche Telekom had already been held liable for an infringement of Article 102 TFEU, on account of a margin squeeze in the telecommunications sector, in Decision 2003/707/EC of 21 May 2003 relating to a proceeding under Article 82 [EC] (Cases COMP/37.451, 37.578, 37.579 — Deutsche Telekom AG) (OJ 2003 L 263, p. 9), and that, when the decision was adopted, Deutsche Telekom held 51% of the applicant’s shares and was in a position to exercise decisive influence over it. Consequently, the Commission finds that, for Deutsche Telekom, the basic amount of the fine should be increased by 50% on account of repeated infringement. In the second place, the Commission states that the worldwide turnover of Deutsche Telekom for 2013 was EUR 60123 million and that, in order to give the fine sufficient deterrent effect, a coefficient multiplier of 1.2 should be applied to the basic amount. The product of that twofold adjustment, namely EUR 31070000, gives rise, under the first paragraph of Article 2(b) of the contested decision, to a separate fine imposed on Deutsche Telekom alone.
5. Operative part of the contested decision
Articles 1 and 2 of the contested decision read as follows:
‘Article 1
(1) The undertaking consisting of Deutsche Telekom AG and Slovak Telekom a.s. has committed a single and continuous infringement of Article 102 of the Treaty and Article 54 of the EEA Agreement.
(2) The infringement lasted from 12 August 2005 until 31 December 2010 and consisted of the following practices:
(a)
withholding from alternative operators network information necessary for the unbundling of local loops;
(b)
reducing the scope of its obligations regarding unbundled local loops;
(c)
setting unfair terms and conditions in its Reference Unbundling Offer regarding collocation, qualification, forecasting, repairs and bank guarantees;
(d)
applying unfair tariffs which do not allow an equally efficient competitor relying on wholesale access to the unbundled local loops of Slovak Telekom a.s. to replicate the retail broadband services offered by Slovak Telekom a.s. without incurring a loss.
Article 2
For the infringement referred to in Article 1, the following fines are imposed:
(a)
a fine of EUR 38838000 on Deutsche Telekom AG and Slovak Telekom a.s., jointly and severally;
(b)
a fine of EUR 31070000 on Deutsche Telekom AG.
...’
II. Procedure and forms of order sought
[…]
The applicant claims that the Court should:
–
annul Articles 1 and 2 of the contested decision in so far as that decision affects it;
–
in the alternative, reduce the fine imposed on it under Article 2 of the contested decision;
–
order the Commission to pay the costs;
–
if the Court dismisses the action as inadmissible or unfounded, order each party to bear its own costs.
The Commission and the intervener contend that the Court should:
–
dismiss the action in its entirety, and
–
order the applicant to pay the costs.
III. Law
A.
Admissibility
[…]
B.
Substance
The applicant puts forward five pleas in law in support of both its principal claims seeking annulment of the contested decision and its alternative claims seeking a reduction of the fine imposed on it, alleging (i) manifest errors of law and assessment in the application of Article 102 TFEU as regards the applicant’s abusive conduct; (ii) infringement of the applicant’s rights of defence as regards the practice resulting in the margin squeeze; (iii) errors in the finding of that practice; (iv) error committed by the Commission in finding that the applicant and Deutsche Telekom were part of a single undertaking and were both liable for the infringement in question; and (v) errors in determining the amount of the fine.
1. First plea in law: manifest errors of law and assessment in the application of Article 102 TFEU as regards the applicant’s abusive conduct
In support of its first plea, the applicant essentially objects to the legal test applied by the Commission in the contested decision in order to find that its practice constituted abuse of a dominant position within the meaning of Article 102 TFEU.
The first plea in law is essentially made up of five complaints, alleging (i) that the Commission failed to apply the condition relating to the indispensable nature of access to the applicant’s copper DSL network to be able to operate on the retail market for broadband services in Slovakia, within the meaning of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569); (ii) misapplication of the judgment of 9 September 2009, Clearstream v Commission (T‑30l/04, EU:T:2009:317); (iii) that the contested decision is inconsistent in terms of competition policy in so far as it concerns proof of the outright refusal of access and the refusal of access; (iv) errors of fact and of law as well as a defective statement of reasons in the justification for derogating from the conditions established in the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569); and (v) failure to demonstrate that access to the applicant’s local loop is indispensable to competitors located on the downstream market.
The Commission and the intervener contest those complaints and contend that the present plea in law should be rejected.
(a) The first and fifth complaints
In the context of its first and fifth complaints, the applicant claims that the Commission, in essence, classified a range of its conduct during the period under consideration, referred to by the seventh part of the contested decision (recitals 355 to 821), as a ‘refusal to supply’ access to its local loop without having verified the indispensability of such access, for the purposes of paragraph 41 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569).
By its first complaint, the applicant calls in question the Commission’s findings in recitals 361 to 371 of the contested decision, according to which the circumstances of the present case are different from those in the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). The applicant asserts that it is apparent from that judgment that a refusal to supply infringes Article 102 TFEU in particular where that refusal concerns a product the supply of which is indispensable for carrying on the relevant business (the ‘indispensability condition’). In this case, the Commission wrongly failed to examine whether access to the applicant’s network was indispensable to be able to operate on the retail market for broadband services in Slovakia. Accordingly, the applicant disputes the Commission’s finding that the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), is authority for the proposition that, in the case of a constructive refusal of access, the Commission is not required to demonstrate that the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), particularly the indispensability condition, apply (recital 359 et seq. of the contested decision).
It follows from paragraphs 55 to 58 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), read together, that the practice resulting in the margin squeeze constitutes a standalone abuse under Article 102 TFEU which does not require prior proof of an obligation to deal meeting the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). Since the Commission found that paragraph 55 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), covers not only the practice resulting in the margin squeeze but also a constructive refusal of access, as in this case, it was wrong to seek to expand significantly the narrow reasoning of that judgment.
In particular, according to the applicant, although it is apparent from the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), that the indispensability condition is not a requirement for all ‘terms of trade’ abuses under Article 102 TFEU, this does not, however, mean that the condition does not apply in the case of a refusal of access. Nowhere in the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), or in any other judgment, did the Court state that the indispensability condition established in the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), is limited to cases of outright refusal of access. On the contrary, that approach would undermine the effectiveness of Article 102 TFEU. Even if the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), involves an outright refusal to supply, the Court established in that judgment the general principles of a duty to assist competitors.
As regards the judgments cited by the Commission in the defence, the applicant considers that those judgments constitute a new approach compared to the contested decision. In any event, firstly, the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), assimilated the judgment of 6 March 1974, Istituto Chemioterapico Italiano and Commercial Solvents v Commission (6/73 and 7/73, EU:C:1974:18), which is authority for the proposition that indispensability is a legal prerequisite. Therefore, those two judgments are compatible.
Secondly, the case-law cited by the Commission, namely the judgments of 14 February 1978, United Brands and United Brands Continentaal v Commission (27/76, EU:C:1978:22), and of 16 September 2008, Sot. Lélos kai Sia and Others (C‑468/06 to C‑478/06, EU:C:2008:504), does not apply to the present case, since, first of all, the complaints raised in the context of those cases did not concern a refusal to deal but rather the fact that such a refusal was used as a way to bring about a different restriction of competition. Next, those cases did not involve the sale of an input to competitors on a downstream market, but the supply of finished goods for distribution or resale. Finally, in those cases, the dominant undertaking had decided to terminate the supply of goods that it previously supplied to the customers in question, while in this case — as in the case giving rise to the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), — the access seekers had never previously been supplied by the dominant undertaking.
Thirdly, the applicant considers, as regards the case-law cited by the Commission relating to the refusal to license intellectual property rights, namely the judgments of 5 October 1988, Volvo (238/87, EU:C:1988:477, paragraph 8), of 6 April 1995, RTE and ITP v Commission (C‑241/91 P and C‑242/91 P, EU:C:1995:98, paragraph 50), and of 29 April 2004, IMS Health (C‑418/01, EU:C:2004:257, paragraph 35), that that case-law is compatible with the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), since that judgment refers to the judgment of 6 April 1995, RTE and ITP v Commission (C‑241/91 P and C‑242/91 P, EU:C:1995:98), which is itself cited in the later judgments. The fact that more stringent conditions, in particular that the input must be necessary to manufacture a ‘new product’, may be required in intellectual property cases does not mean that the Commission can do away with the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), in cases which are not related to that field.
Fourthly, the applicant claims that, regarding the application of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), there is no reason to think that the Court wished to limit the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), to the strict circumstances of that case. There is a difference between stating, as was done in the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), that the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), do not apply to all ‘terms of trade’ cases and stating, as the Commission does, that the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), should not apply in any of those cases.
Fifthly, the decisions cited by the Commission do not support its proposition, since its analysis in Decision 2001/892/EC of 25 July 2001 relating to a proceeding under Article 82 [EC] (COMP/C‑1/36.915 — Deutsche Post AG — Interception of cross-border mail) (OJ 2001 L 331, p. 40) is based on the fact that Deutsche Post’s distribution network was indispensable to senders located in the United Kingdom. The Polaroid v SSI Europe case, cited as an example of an abusive constructive refusal of access, is not relevant to the case at hand.
By its fifth complaint, the applicant asserts that the contested decision does not demonstrate that access to its local loop is indispensable to downstream competitors. In that regard, it follows from the judgment of 29 April 2004, IMS Health (C‑418/01, EU:C:2004:257, paragraph 28), that it is not sufficient to demonstrate that alternative approaches are less advantageous for other operators, but it is necessary to demonstrate the indispensability of the network concerned within the meaning of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). The obligation to grant access to a facility arises if the refusal to supply objectively has a sufficiently serious effect on competition.
Furthermore, no relevance is to be attached to the questions examined by the Commission in section 7.3 of the contested decision and, in particular, in recitals 382 and 384 thereof, concerning whether the applicant’s copper network was important and whether efficient wholesale access to xDSL based on the local loop was important for alternative operators in Slovakia. Accordingly, the Commission committed an error as regards the application of the criterion of indispensability. It is necessary for the Commission to consider whether access to the local loop is indispensable to enable the applicant’s competitors to compete on the downstream retail market so that, without such access, competition would be impossible or excessively difficult. Since the vast majority of broadband access is based on technologies other than the applicant’s copper network, such access is not indispensable in the sense of impossible or excessively difficult.
The Commission and the intervener dispute those arguments.
In that regard, according to established case-law, a dominant undertaking has a special responsibility not to allow its behaviour to impair genuine, undistorted competition on the internal market (see judgment of 6 September 2017, Intel v Commission, C‑413/14 P, EU:C:2017:632, paragraph 135 and the case-law cited), and the fact that such a position has its origins in a former legal monopoly must, in that regard, be taken into account (judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 23).
That is why Article 102 TFEU prohibits, in particular, a dominant undertaking from, among other things, adopting pricing practices that have an exclusionary effect on competitors considered to be as efficient as it is itself and strengthening its dominant position by using methods other than those that are part of competition on the merits. From that point of view, not all competition on price can be regarded as legitimate (see judgment of 6 September 2017, Intel v Commission, C‑413/14 P, EU:C:2017:632, paragraph 136 and the case-law cited).
It has been held, in that regard, that abuse of a dominant position prohibited by Article 102 TFEU is an objective concept relating to the conduct of a dominant undertaking which, on a market where the degree of competition is already weakened precisely because of the presence of the undertaking concerned, through recourse to methods different from those governing normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing on the market or the growth of that competition (see judgments of 19 April 2012, Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 17 and the case-law cited, and of 9 September 2009, Clearstream v Commission, T‑301/04, EU:T:2009:317, paragraph 140 and the case-law cited).
Article 102 TFEU covers not only those practices that directly cause harm to consumers but also practices that cause consumers harm by interfering with the free play of competition (see, to that effect, judgments of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 20 and the case-law cited, and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 171).
The effect on competition referred to in paragraph 109 above does not necessarily relate to the actual effect of the abusive conduct complained of. For the purposes of establishing an infringement of Article 102 TFEU, it is necessary to show that the abusive conduct of the undertaking in a dominant position tends to restrict competition or, in other words, that the conduct is capable of having that effect (judgment of 19 April 2012, Tomra Systems and Others v Commission, C‑549/10 P, EU:C:2012:221, paragraph 68; see, also, judgments of 9 September 2009, Clearstream v Commission, T‑301/04, EU:T:2009:317, paragraph 144 and the case-law cited, and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 268 and the case-law cited).
Moreover, as regards the abusive nature of a practice resulting in a margin squeeze, it should be noted that the second paragraph of Article 102 TFEU expressly prohibits a dominant undertaking from directly or indirectly imposing unfair prices (judgments of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 25, and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 173). Since the list of abusive practices contained in Article 102 TFEU is nevertheless not exhaustive, the list of abusive practices contained in that provision does not exhaust the methods of abusing a dominant position prohibited by EU law (judgments of 21 February 1973, Europemballage and Continental Can v Commission, 6/72, EU:C:1973:22, paragraph 26; of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 26; and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 173).
In the present case, it should be pointed out that the argument presented by the applicant in the first plea in law refers only to the legal test applied by the Commission, in the seventh part of the contested decision (recitals 355 to 821), in order to classify a range of conduct of the applicant during the period under consideration as ‘refusal to supply’. By contrast, the applicant does not dispute the existence itself of the conduct noted by the Commission in that part of the contested decision. As is apparent from recitals 2 and 1507 of the contested decision, that conduct, which contributed to the identification by the Commission of a single and continuous infringement of Article 102 TFEU (recital 1511 of the contested decision), consisted, firstly, in concealing from alternative operators information relating to the applicant’s network, which is necessary for the unbundling of that operator’s local loop, secondly, in a reduction by the applicant of its obligations relating to unbundling under the applicable regulatory framework and, thirdly, in the establishment by that operator of a number of unfair terms and conditions in its reference offer relating to unbundling.
Moreover, as the applicant confirmed during the hearing, the first plea in law does not call into question the analysis of the conduct which consisted in a margin squeeze carried out by the Commission in the eighth part of the contested decision (recitals 822 to 1045 of the contested decision). In its action, the applicant does not dispute that that type of conduct constitutes an independent form of abuse distinct from that of refusal to provide access and the existence thereof is therefore not subject to the criteria laid down in the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569) (see, to that effect, judgment of 10 July 2014, Telefónica and Telefónica de España v Commission, C‑295/12 P, EU:C:2014:2062, paragraph 75 and the case-law cited). Therefore, in essence, by its first and fifth complaints, the applicant alleges that the Commission classified the conduct referred to in paragraph 113 above as ‘refusal to supply’ access to its local loop without having verified the ‘indispensable’ nature of such access, for the purposes of the third condition set out in paragraph 41 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569).
In that judgment, the Court indeed considered that, in order for the refusal by a dominant undertaking to grant access to a service to constitute an abuse within the meaning of Article 102 TFEU, that refusal must be likely to eliminate all competition on the market on the part of the person requesting the service, such refusal must not be capable of being objectively justified, and the service must in itself be indispensable to carrying on that person’s business (judgment of 26 November 1998, Bronner, C‑7/97, EU:C:1998:569, paragraph 41; see, also, judgment of 9 September 2009, Clearstream v Commission, T‑301/04, EU:T:2009:317, paragraph 147 and the case-law cited).
Moreover, it is clear from paragraphs 43 and 44 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), that, in order to determine whether a product or service is indispensable for enabling an undertaking to carry on business in a particular market, it must be determined whether there are products or services which constitute alternative solutions, even if they are less advantageous, and whether there are technical, legal or economic obstacles capable of making it impossible or at least unreasonably difficult for any undertaking seeking to operate in the market to create, possibly in cooperation with other operators, alternative products or services. According to paragraph 46 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), in order to accept the existence of economic obstacles, it must be established, at the very least, that the creation of those products or services is not economically viable for production on a scale comparable to that of the undertaking which controls the existing product or service (judgment of 29 April 2004, IMS Health, C‑418/01, EU:C:2004:257, paragraph 28).
However, in the present case, since the legislation relating to the telecommunications sector defines the legal framework applicable to it and, in so doing, contributes to the determination of the competitive conditions under which a telecommunication undertaking carries on its business in the relevant markets, that legislation constitutes a relevant factor in the application of Article 102 TFEU to the conduct of that undertaking, in particular for assessing the abusive nature of such conduct (judgment of 14 October 2010, Deutsche Telekom v Commission, C‑280/08 P, EU:C:2010:603, paragraph 224).
As the Commission correctly points out, the conditions referred to in paragraph 115 above were laid down and applied in the context of cases dealing with the question whether Article 102 TFEU could be such as to require the undertaking in a dominant position to supply to other undertakings access to a product or service, in the absence of any regulatory obligation to that end.
Such a context differs from that of the present case, in which TUSR, by a decision of 8 March 2005 confirmed by the director of that authority on 14 June 2005, required the applicant to grant all reasonable and justified requests for unbundling of its local loop, in order to enable alternative operators, on that basis, to offer their own services on the retail mass market for broadband services at a fixed location in Slovakia (paragraph 9 above). That requirement resulted from the public authorities’ intention to encourage the applicant and its competitors to invest and innovate, whilst ensuring that competition in the market is maintained (recitals 218, 373, 388, 1053 and 1129 of the contested decision).
As is stated in recitals 37 to 46 of the contested decision, TUSR’s decision, taken in accordance with Law No 610/2003, implemented in Slovakia the requirement of unbundled access to the local loop of operators with significant market power on the market for the provision of fixed public telephone networks, provided for in Article 3 of Regulation No 2887/2000. The EU legislature justified that requirement, in recital 6 of that regulation, by the fact that ‘it would not be economically viable for new entrants to duplicate the incumbent’s metallic local access infrastructure in its entirety within a reasonable time[, since a]lternative infrastructures … do not generally offer the same functionality or ubiquity’.
Therefore, given that the relevant regulatory framework clearly acknowledged the need for access to the applicant’s local loop, in order to allow the emergence and development of effective competition in the Slovak market for high-speed internet services, the demonstration, by the Commission, that such access was indeed indispensable for the purposes of the last condition set out in paragraph 41 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), was not required.
It follows from the above that the Commission cannot be criticised for failing to establish the indispensable nature of access to the network at issue.
It should be added that such a complaint can also not be made against the Commission if it had to be considered that the implied refusal of access at issue was covered by the considerations in the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83). In that judgment, the Court held that it cannot be inferred from paragraphs 48 and 49 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), that the conditions to be met in order to establish that a refusal to supply is abusive, which was the object of the first question referred for a preliminary ruling examined in that case, must necessarily also apply when assessing the abusive nature of conduct which consists in supplying services or selling goods on conditions which are disadvantageous or on which there might be no purchaser (judgment of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 55). In that regard, the Court held that such conduct may, in itself, constitute an independent form of abuse distinct from that of refusal to supply (judgment of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 56).
The Court, moreover, stated that a different interpretation of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), would amount to a requirement that any conduct of a dominant undertaking in relation to its terms of trade could be regarded as abusive, the conditions to be met to establish that there was a refusal to supply would in every case have to be satisfied, and that would unduly reduce the effectiveness of Article 102 TFEU (judgment of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 58).
The applicant correctly notes, concerning that point, that the practice at issue in the main proceedings examined by the Court in the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), merely consisted, as is apparent from paragraph 8 of that judgment, in a possible margin squeeze by the historical Swedish fixed telephone network operator in order to discourage requests by alternative operators for access to its local loop. It cannot be deduced therefrom that the interpretation given by the Court in that judgment of the scope of the conditions set out in paragraph 41 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), is limited to that sole form of abusive conduct and does not cover practices which are not strictly related to pricing such as those examined in the present case by the Commission in the seventh part of the contested decision (see paragraphs 27 to 41 above).
It should, first of all, be noted that, in paragraphs 55 to 58 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), the Court did not refer to the particular form of abuse constituted by the margin squeeze of competitor operators in a downstream market, but rather to the supply of ‘services or selling goods on conditions which are disadvantageous or on which there might be no purchaser’ and to ‘terms of trade’ fixed by the dominant undertaking. Such wording suggests that the exclusionary practices to which reference was therefore made concerned not solely a margin squeeze, but also other business practices capable of producing unlawful exclusionary effects for current or potential competitors, like those classified by the Commission as an implicit refusal to supply access to the applicant’s local loop (see, to that effect, recital 366 of the contested decision).
That reading of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), is supported by the reference made by the Court, in that part of its analysis, to paragraphs 48 and 49 of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). Those paragraphs dealt with the second question for a preliminary ruling referred to the Court in that case and did not concern the refusal by the dominant undertaking at issue in the dispute in the main proceedings to give access to its home-delivery scheme to the publisher of a rival newspaper, examined in the context of the first question, but the possible classification as abuse of a dominant position of a practice which consisted for that undertaking in making such access subject to the condition that the publisher at issue entrust to it the carrying out of other services, such as sales in kiosks or printing.
In the light of the foregoing, it is necessary to conclude that the classification of the applicant’s conduct examined in the seventh part of the contested decision as abusive practices for the purposes of Article 102 TFEU did not presuppose that the Commission establish that the access to the applicant’s local loop was indispensable to the exercise of the activity of competitor operators in the retail market for fixed broadband services in Slovakia, for the purposes of the case-law cited in paragraph 116 above.
Therefore, the first and fifth complaints of the plea in law must be rejected as unfounded.
(b) The third complaint
By its third complaint, the applicant claims that the non-application of the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), in the case of a constructive refusal to supply access leads to inconsistency in terms of competition policy. In those circumstances, it is easier to prove a constructive refusal to supply access than an outright refusal, with the result that the more serious type of abuse would be treated less severely than the less serious abuse. In the present case, at least one of the applicant’s competitors had access to its network, with the result that the refusal of access would not be outright (recital 408 of the contested decision). Outright refusal is more serious than constructive refusal of access, although the Commission’s approach would result in the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), applying to the outright refusal and not to the constructive refusal of access.
However, the Commission offers no explanation as to why, in general terms, a constructive refusal of access must be treated more severely than an outright refusal of access or why, in particular, the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), no longer need to be satisfied in the former case.
The Commission and the intervener dispute those arguments.
In that regard, it suffices to note that that argument is based on an erroneous premiss, namely that the seriousness of an infringement of Article 102 TFEU consisting in a refusal by a dominant undertaking to supply a product or service to other undertakings depends solely on its form. The gravity of such an infringement is likely to depend on numerous factors independent of the explicit or implicit nature of that refusal, such as the geographic scope of the infringement, whether it is intentional, or further to its effects on the market. The 2006 Guidelines confirm that analysis when they state, in paragraph 20 thereof, that the assessment of the gravity of an infringement of Article 101 or Article 102 TFEU is made on a case-by-case basis for all types of infringement, taking account of all the relevant circumstances of the case.
Finally, it must be noted that, in paragraph 69 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), the Court observed that the indispensable nature of the wholesale product could be relevant in order to assess the effects of a margin squeeze. However, in the present case, it must be pointed out that the applicant invoked the Commission’s obligation to show the indispensable nature of the unbundled access to the applicant’s local loop only in support of its claim that the Commission failed to apply the legally appropriate criteria during its assessment of the practices examined in the seventh part of the contested decision (see, by analogy, judgment of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 182), and not so as to call into question the Commission’s assessment of the anticompetitive effects of those practices, carried out in the ninth part of that decision (recitals 1046 to 1109 of the contested decision).
Therefore the third complaint must be rejected as unfounded.
(c) The second complaint
By its second complaint, the applicant submits that the failure to apply the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), in the contested decision is at odds with the judgment of 9 September 2009, Clearstream v Commission (T‑301/04, EU:T:2009:317), particularly paragraph 146 thereof, which, despite relating to a constructive refusal of sale, as mentioned in recital 360 of the contested decision, applies those conditions. The Commission is wrong because, in the Clearstream case, the de facto monopoly of the company at issue had statutory protection, even though the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), were satisfied. Unlike the case giving rise to the judgment of 9 September 2009, Clearstream v Commission (T‑301/04, EU:T:2009:317), the Commission is, in this case, unable to demonstrate the indispensability of the applicant’s DSL network. That is why it goes to such lengths to distinguish it from the Bronner and Clearstream cases.
The Commission and the intervener dispute those arguments.
In that regard, it must be noted, as the Commission correctly maintained, that there is no contradiction between the approach taken by the Commission in the case giving rise to the judgment of 9 September 2009, Clearstream v Commission (T‑301/04, EU:T:2009:317), and in the present case, since, in that first case, there was no obligation for the dominant undertaking to supply the service at issue and the dominant undertaking had not developed its market position in the context of a legal monopoly.
As is apparent from the case-law referred to in paragraph 117 above, since the legislation relating to the telecommunications sector defines the legal framework applicable to it and, in so doing, contributes to the determination of the competitive conditions under which a telecommunications undertaking carries on its business in the relevant markets, that legislation is a relevant factor in the application of Article 102 TFEU to the conduct of that undertaking, in particular in assessing the abusive nature of such conduct.
Consequently, the second complaint must be rejected as unfounded.
(d) The fourth complaint
By its fourth complaint the applicant claims that the contested decision is vitiated by errors of fact and of law as well as an insufficient statement of reasons in recital 370. In that recital, the Commission defended the derogation from the conditions of the judgments of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), stating that those conditions did not apply to a refusal to supply access because, first, the applicant was subject to a regulatory obligation to grant access to the local loop under earlier rules and, secondly, because the applicant’s network was developed under a former State monopoly.
In the first place, as regards the errors of fact and law relating to those two justifications, firstly, the applicant claims that the Commission committed errors by asserting that it was necessary to derogate from the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), due to the existence of the obligation to grant access to the local loop deriving from earlier rules.
In that regard, the applicant argues that such an obligation does not necessarily have implications as regards the conditions for the application of Article 102 TFEU, since they pursue different objectives. The Commission erred in law by failing to draw the distinction, flowing from paragraph 113 of the judgment of 10 April 2008, Deutsche Telekom v Commission (T‑271/03, EU:T:2008:101), between the role of an ex ante regulatory obligation, which seeks to reduce the market power of dominant undertakings, and the role of ex post competition law, under which the main focus of the authorities is the specific conduct of undertakings and whether their use of any market power was abusive.
More particularly, an obligation to sell may be imposed by ex ante legislation where the Commission’s power to impose such an obligation under Article 102 TFEU is exercisable only in exceptional circumstances. Although it is apparent from the case-law that the legislation relating to the telecommunications sector may be taken into account for the purpose of applying Article 102 TFEU to the conduct of a dominant undertaking (judgment of 14 October 2010, Deutsche Telekom v Commission, C‑280/08 P, EU:C:2010:603, paragraphs 224 and 227), the Commission did not, in the contested decision, merely take into account the obligations imposed under such legislation; instead, it relied entirely on the assessment carried out by TUSR and did not conduct any examination of its own.
According to the applicant, the considerations in the judgment of 10 April 2008, Deutsche Telekom v Commission (T‑271/03, EU:T:2008:101), from which it follows that secondary EU legislation ‘may’ be relevant under Article 102 TFEU, apply only in the context of that case, since the Court was required to examine whether the Commission had committed an error by noting the existence of a regulatory obligation under such legislation. It does not follow from that judgment or from the existence of a regulatory obligation that the Commission is able to sidestep the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569).
On the contrary, the applicant submits, and pointed out during the hearing, that Article 102 TFEU and the legislation at issue pursue different objectives, so that a national regulatory authority may decide to increase competition on the market while an obligation to deal can be imposed under Article 102 TFEU only to remedy an abusive refusal of access.
Moreover, the reference to Article 21(3) of Law No 610/2003, to which the Commission referred to argue that TUSR weighed up the interests involved, was not cited in that ’authority’s earlier decisions. In any event, the general duty to conduct a balancing exercise under domestic law does not mean that the Commission is entitled to disregard the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). It is for the Commission to demonstrate that, where there is an earlier regulatory obligation, the conditions of the judgment of 26 November 1998, Bronner (C‑7/97,EU:C:1998:569), do not apply. The applicant acknowledges that, while it is true that there was no relevant regulatory obligation in the case which gave rise to that judgment, that does not lead to the conclusion which the Commission seeks to draw.
Secondly, as regards the justification according to which the applicant’s network was developed in the context of a monopoly, the applicant claims that the case-law relied upon by the Commission, in the contested decision, does not allow that second justification to be rejected. First of all, paragraph 109 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), cited by the Commission, is not relevant. Next, it follows from paragraph 23 of the judgment of 27 March 2012, Post Danmark (C‑209/10, EU:C:2012:172), to which the Commission refers, that the existence of a former State monopoly may be relevant when considering the conduct of an undertaking. Therefore, that judgment is not authority for the proposition that the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), do not apply.
The contention that the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), do not apply where the network at issue has its historical origins in a State monopoly is wrong because Article 102 TFEU does not envisage any special treatment for former State monopolies. On the contrary, the Commission has stated in the past that the historical nature of a monopoly was not relevant to the present-day assessment of abuse under Article 102 TFEU.
The Commission and the intervener dispute those arguments.
In that regard, it suffices, in order to reject those arguments, to note that the observations in paragraphs 117 to 121 above are not based on the premiss that the obligation imposed on the applicant to grant unbundled access to its local loop results from Article 102 TFEU, but merely notes, in accordance with the case-law cited in paragraph 117 above, that the existence of such a regulatory obligation is a relevant aspect of the economic and legal context in which it is necessary to assess whether the applicant’s practices examined in the seventh part of the contested decision could be classified as abusive practices for the purposes of that provision.
Moreover, the reference made by the applicant to paragraph 113 of the judgment of 10 April 2008, Deutsche Telekom v Commission (T‑271/03, EU:T:2008:101), to support the argument set out in paragraph 143 above, is not relevant. The Court admittedly held, in paragraph 113 of that judgment, that the national regulatory authorities operate under national law which may have objectives which differ from those of EU competition policy. That reasoning sought to support the Court’s rejection of the applicant’s argument invoked in that case, according to which, in essence, the ex-ante control of its charges by the German regulatory authority for telecommunications and post precluded that Article 102 TFEU could be applied to a possible margin squeeze resulting from its charges for unbundled access to its local loop. That paragraph was therefore unconnected with the question whether the existence of a regulatory obligation of access to the local loop of the dominant operator is relevant in order to assess the compliance of its access policy with Article 102 TFEU.
Moreover, it follows from settled case-law that the existence of a dominant position resulting from a legal monopoly must be taken into consideration in the context of the application of Article 102 TFEU (see, to that effect, judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 23 and the case-law cited).
Therefore, in so far as it alleges errors of law and fact relating to the justifications put forward by the Commission in order to defend the derogation from the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), and relating to the applicant’s obligation, deriving from the earlier rules, to grant access to the local loop and to the existence of a pre-existing State monopoly, the fourth complaint must be rejected as unfounded.
In the second place, the applicant alleges that the Commission failed to state adequate reasons relating to the justification that that institution put forward with a view to derogating from the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), and consisting in the need to make first-time access mandatory. The Commission did not conduct any examination as to the existence of an earlier regulatory obligation, did not analyse the content of that obligation and did not explain why first-time access should be mandatory or why the lack of such access would eliminate all effective competition. The Commission did not provide any evidence to support its assessment that national legislation had weighed up the incentives of the applicant for keeping its facilities for its own use against those of undertakings potentially wishing access to the local loop. The contested decision fails to demonstrate why the regulatory obligations concerned provide a sufficient basis for disregarding the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). The Commission was required to give particularly clear, compelling and detailed reasons as to why first-time access should be mandatory and, in consequence, why the failure to grant access would eliminate all effective competition.
In the reply, firstly, the applicant adds that recitals 36 to 49 of the contested decision contain only a general description of the regulatory framework and a brief description of the earlier access obligation. That statement of reasons does not address the question whether that obligation justifies disregarding the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569).
Secondly, TUSR did not refer to the Slovakian regulatory provisions relating to the balancing exercise when it imposed the earlier obligations. In any event, the balancing exercise under the earlier rules is different from that under Article 102 TFEU. Moreover, an argument based on the balancing exercise allegedly carried out by TUSR cannot, according to the applicant, justify the complete lack of reasons as regards the other conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569).
Thirdly, when the Commission contends that the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), do not apply anyway in the present case, it is confusing the question of the merits of the decision with the obligation to state reasons.
Fourthly, the applicant claims that, as regards the reference to Section 9.3 of the contested decision relating to anticompetitive effects, that section does not state the reasons for the decision. The applicant claims, first of all, that the elimination of all effective competition is just one of the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), while the failure to state reasons exists as regards the other conditions of that judgment. Next, the examination of anticompetitive effects in the contested decision does not replace the need to provide specific reasons concerning the indispensability condition. Lastly, that section rebuts the Commission’s argument in so far as it contains evidence demonstrating a lack of anticompetitive effects.
Moreover, as regards the justification based on the fact that the applicant’s network was developed in the context of a monopoly, the applicant claims that the statement of reasons contained in recital 373 of the contested decision is not sufficient to explain why the Commission found the existence of a former State monopoly to be relevant to the consideration of abuse under Article 102 TFEU.
According to the applicant, since the Commission is subject to the principle of good administration, it is responsible for examining the specific circumstances of the former State monopoly that it seeks to rely on as the basis for disregarding the conditions of the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), circumstances which are highly relevant. The applicant also submits that it is not possible to describe as factual details of no particular relevance the information provided in recital 891 of the contested decision relating to the applicant’s investments in broadband assets between 2003 and 2010. The applicant claims that, on the contrary, the Commission should have considered the nature and impact of those investments when compared with its historical position. The applicant concludes that if the statement of reasons contained in the contested decision was adequate, that would mean, in practice, that no limitation is imposed on the Commission where a State monopoly has existed in the past.
The Commission and the intervener dispute those arguments.
In that regard, the statement of reasons required by Article 296 TFEU must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to defend their rights and the Court to exercise its power of review. In the case of a decision adopted pursuant to Article 102 TFEU, that principle requires that the contested decision mention facts forming the basis of the legal grounds of the measure and the considerations which led to the adoption of the decision (judgment of 9 September 2010, Tomra Systems and Others v Commission, T‑155/06, EU:T:2010:370, paragraph 227).
Firstly, the applicant considers that the contested decision does not contain an examination concerning the existence of an earlier regulatory obligation, or an analysis of its contents, or evidence supporting the Commission’s assessment that the national legislation had weighed up the incentives of the applicant for keeping its facilities for its own use against those of undertakings potentially wishing access to the local loop. It also does not put forward why the regulatory obligations allow the conditions of supply access arising from the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), to be disregarded. However, it must be noted that, first, the Commission set out, in the contested decision, the regulatory framework relating to unbundled access to the local loop in Slovakia in recitals 36 to 46 of the contested decision. Secondly, it set out the legal framework concerning abusive refusals to grant access in recitals 355 to 371 of the contested decision, explaining, more particularly, that it considered the present case to differ from the circumstances of the case giving rise to the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), and that that judgment does not apply in the present case. Therefore, the argument put forward by the applicant must be rejected.
Secondly, as regards the applicant’s claim that the Commission was required to give particularly clear, compelling and detailed reasons as to why the failure to grant access would eliminate all effective competition, it should be noted that, in the present case, the applicant invoked the indispensable nature of the unbundled access to its local loop only in support of its claim that the Commission failed to apply the legally appropriate criteria during its assessment of the practices examined in the seventh part of the contested decision (see, by analogy, judgment of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 182), and not so as to call into question the Commission’s assessment of the anticompetitive effects of those practices, carried out in the ninth part of that decision (recitals 1046 to 1109 of the contested decision). In any event, the reasoning contained in that part of the contested decision is clear and unequivocal concerning the negative effects on competition of the applicant’s exclusionary conduct.
Thirdly, as regards the applicant’s claim that the statement of reasons included in recital 373 of the contested decision does not suffice in order to explain the reasons why the Commission considers that the existence of a former State monopoly is relevant for the purposes of examining an abuse in the light of Article 102 TFEU, it should be noted that the Commission, first of all, stated in that recital, referring to the specific provisions of Articles 8 and 12 of Directive 2002/21 and Article 21(3) of Law No 610/2003, that the applicant’s obligation to supply imposed by TUSR’s decision took account of the applicant’s incentives, as well as those of its competitors, to invest and innovate, while ensuring that competition in the market is maintained. The Commission added, in that recital 373, that it was possible that the imposition of an obligation to supply or grant access has no impact on incentives to invest or innovate, where the market position of the dominant undertaking had been developed under the protection of special or exclusive rights or had been financed by State resources, as happened in the present case. The Commission, next, referred to paragraph 23 of the judgment of27 March 2012, Post Danmark (C‑209/10, EU:C:2012:172), from which it follows that where the existence of a dominant position has its origins in a former legal monopoly, that fact has to be taken into account, explaining that that was the situation of the applicant in the present case. The Commission, finally, took care to explain, in recital 373 of the contested decision, that it followed from recital 3 of Regulation No 2887/2000 that one of the reasons why the local access network remained one of the ‘least competitive segments of the liberalised telecommunications market’ was that new entrants did not have widespread alternative network infrastructures, given that operators, such as the applicant, for a long time, had rolled out their local access networks over significant periods of time protected by exclusive rights and had been able, for decades, to fund investment costs from monopoly rents from the provision of voice telephony services and public funds.
Furthermore, the Commission noted, in recital 370 of the contested decision, that it followed from paragraph 109 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), that the structure of a market is also highly influenced by the former monopolistic structure.
In the light of all those reasons, it must be considered that the Commission gave sufficient reasons for its decision, where it concluded that the fact that the network at issue was developed under a monopoly constituted a relevant factor which it had to take into account in the context of the examination it conducted under Article 102 TFEU.
Therefore, it is necessary to reject the fourth complaint also in so far as it alleges a breach of the obligation to state reasons.
It follows from all of the foregoing that the first plea in law must be rejected as unfounded.
2. Second plea in law: infringement of the applicant’s rights of defence as regards the assessment of the practice resulting in the margin squeeze
The second plea in law concerns the applicant’s rights of defence and is divided into two parts. The first part alleges that the Commission committed procedural errors regarding the calculation of the applicant’s long run average incremental costs (‘LRAIC’), that is to say the costs which that operator would not have had to bear if it had not offered the corresponding services. The second part alleges that it was not possible for the applicant to adopt a position during the administrative procedure about the multi-period approach to the calculation of the costs borne by the applicant in order to assess the existence of a practice resulting in the margin squeeze.
(a) The first part, alleging procedural errors committed by the Commission concerning the calculation of the long run Average incremental costs (LRAIC)
The applicant complains that the Commission, first, changed the methods, the principles and the data for the purpose of conducting the analysis of the LRAIC and, secondly, failed, before the adoption of the contested decision, to communicate its objections to the information that the applicant had submitted to it in order to conduct that analysis. In the statement of objections, the Commission used solely the data from the applicant’s internal cost reporting system, namely ‘UCN’ data (účelové členenie nákladov) (classification of specific costs) and the summaries of profitability provided by the applicant, since the applicant did not have specific data relating to the LRAIC. According to the applicant, that ‘UCN’ data was based on top-down, fully allocated historical costs. That data relies on straight-line depreciation that does not allow for the recovery of costs over time. In the statement of objections (paragraph 1038), the Commission itself acknowledged the limitations of that data for the purposes of the assessment of the practice resulting in the margin squeeze and stated that those data were unsatisfactory. Accordingly, following the statement of objections, the applicant submitted new data, on the basis of the consultancy report prepared in February 2013 and sent to the Commission in the annex to the response to the statement of objections. That new data inter alia adjusted the historical costs. Therefore, the Commission accepted the re-evaluation and asset costs and depreciation put forward by the applicant (recital 894 of the contested decision).
The applicant notes that, by accepting a significant part of that data, the Commission considers the consultancy report to be credible. Likewise, the Commission did not raise objections, with respect to the principles, methodology and data provided by the applicant, before the adoption of the contested decision. However, in the contested decision, it rejected part of those principles, that methodology and that data (recital 899 of the contested decision). The applicant considers that the Commission should have sent notification, before the adoption of the contested decision, of the detailed objections relating to the principles, methodology and data which it had set out in that decision. The lack of such notification constitutes an infringement of the rights of the defence. According to the applicant, the Commission was required to set out in full the methodology, principles and cost-related data on which it intended to rely as part of its burden of proving the infringement and was also required to communicate its view to the applicant. In addition, the applicant unsuccessfully raised those procedural problems with the Hearing Officer.
Furthermore, the Commission itself acknowledges that, at the time of the statement of objections, it was not in possession of any data on the LRAIC, while the contested decision relies on those costs, meaning that the Commission changed its approach between those two documents. According to the applicant, since the Commission changed its approach after sending the statement of objections, the onus was on it to send a fresh statement of objections or a new statement of facts to the applicant.
Moreover, according to the applicant, the tables relating to the margin squeeze calculation provided by the Commission during the state of play meeting of 16 September 2014 did not support the relevant passages of the contested decision or observe its rights of defence. In that context, the applicant describes those tables as superficial, being only four pages long and lacking any explanation in support of the data contained therein. Similarly, the applicant claims that the Commission did not send it the tables until the meeting on the state of play of the file held on 16 September 2014, one month before publication of the contested decision, showing that the Commission’s position at that point in time was already fixed. The applicant noted, at the hearing, that, during that meeting, the Commission had indicated that it was in the process of drafting a negative decision regarding it. In any event, the disclosure of those tables demonstrates that the Commission felt compelled to send, after the statement of objections, a document setting out its margin squeeze calculation.
The Commission contests those arguments.
As is apparent from recital 862 of the contested decision, the Commission requested the applicant to supply the information necessary in order to calculate the costs relating to additional inputs which are necessary to transform its wholesale services into retail services. Before the statement of objections, the applicant sent the Commission calculations of the costs for 2003 to 2010 in ‘UCN’ spreadsheets and several spreadsheets containing additional calculations. In the context of the first part of its second plea in law, the applicant alleges, in essence, an infringement of its rights of defence in so far as the objections raised by the Commission concerning the methodology, the principles and the data which the applicant submitted were highlighted for the first time in recitals 860 to 921 of the contested decision.
In that regard, it should be recalled that observance of the rights of the defence in the conduct of administrative procedures relating to competition policy constitutes a general principle of EU law whose observance the European Courts ensure (see judgment of 18 June 2013, ICF v Commission, T‑406/08, EU:T:2013:322, paragraph 115 and the case-law cited).
That principle requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged and on the documents used by the Commission to support its claim that there has been an infringement of the rules on competition. To that end, Article 27(1) of Regulation No 1/2003 provides that the parties are to be sent a statement of objections. That statement must set out clearly all the essential elements on which the Commission is relying at that stage of the procedure (judgment of 5 December 2013, SNIA v Commission, C‑448/11 P, not published, EU:C:2013:801, paragraphs 41 and 42).
That requirement is satisfied where the final decision does not allege that the persons concerned have committed infringements other than those referred to in the statement of objections and only takes into consideration facts on which the persons concerned have had the opportunity of stating their views in the course of the procedure (see, to that effect, judgments of 24 May 2012, MasterCard and Others v Commission, T‑111/08, EU:T:2012:260, paragraph 266, and of 18 June 2013, ICF v Commission, T‑406/08, EU:T:2013:322, paragraph 117).
However, the essential facts on which the Commission is relying in the statement of objections may be set out summarily and the decision is not necessarily required to be a replica of the statement of objections, because that statement is a preparatory document containing assessments of fact and of law which are purely provisional in nature (see, to that effect, judgments of 17 November 1987, British American Tobacco and Reynolds Industries v Commission, 142/84 and 156/84, EU:C:1987:490, paragraph 70; of 5 December 2013, SNIA v Commission, C‑448/11 P, not published, EU:C:2013:801, paragraph 42 and the case-law cited; and of 24 May 2012, MasterCard and Others v Commission, T‑111/08, EU:T:2012:260, paragraph 267). Thus, it is permissible for the Commission to supplement the statement of objections in the light of the parties’ replies, whose arguments show that they have actually been able to exercise their rights of defence. The Commission may also, in the light of the administrative procedure, revise or supplement its arguments of fact or law in support of its objections (judgment of 9 September 2011, Alliance One International v Commission, T‑25/06, EU:T:2011:442, paragraph 181). Consequently, until a final decision has been adopted, the Commission may, in view, in particular, of the written or oral observations of the parties, abandon some or even all of the objections initially made against them and thus alter its position in their favour or decide to add new complaints, provided that it affords the undertakings concerned the opportunity of making known their views in that respect (see judgment of 30 September 2003, Atlantic Container Line and Others v Commission, T‑191/98 and T‑212/98 to T‑214/98, EU:T:2003:245, paragraph 115 and the case-law cited).
It results from the provisional nature of the legal classification of the facts made in the statement of objections that the Commission’s final decision cannot be annulled on the sole ground that the definitive conclusions drawn from those facts do not correspond precisely with that provisional classification (judgment of 5 December 2013, SNIA v Commission, C‑448/11 P, not published, EU:C:2013:801, paragraph 43). The taking into account of an argument put forward by a party during the administrative procedure, without it having been given the opportunity to express an opinion in that respect before the adoption of the final decision, cannot as such constitute an infringement of its rights of defence, where taking account of that argument does not alter the nature of the complaints against it (see, to that effect, order of 10 July 2001, Irish Sugar v Commission, C‑497/99 P, EU:C:2001:393, paragraph 24; judgments of 28 February 2002, Compagnie générale maritime and Others v Commission, T‑86/95, EU:T:2002:50, paragraph 447, and of 9 September 2011, Alliance One International v Commission, T‑25/06, EU:T:2011:442, paragraph 182).
The Commission is required to hear the addressees of a statement of objections and, where necessary, to take account of their observations made in response to the objections by amending its analysis specifically in order to respect their rights of defence. The Commission must therefore be permitted to clarify that classification in its final decision, taking into account the factors emerging from the administrative procedure, in order either to abandon such objections as have been shown to be unfounded or to amend and supplement its arguments, both in fact and in law, in support of the objections which it raises, provided however that it relies only on facts on which those concerned have had an opportunity to make known their views and provided that, in the course of the administrative procedure, it has made available the evidence necessary for their defence (see judgments of 3 September 2009, Prym and Prym Consumer v Commission, C‑534/07 P, EU:C:2009:505, paragraph 40 and the case-law cited, and of 5 December 2013, SNIA v Commission, C‑448/11 P, not published, EU:C:2013:801, paragraph 44 and the case-law cited).
Finally, it should be recalled that, according to established case-law, the rights of the defence are infringed where it is possible that, as a result of an error committed by the Commission, the outcome of the administrative procedure conducted by the latter might have been different. An applicant undertaking establishes that there has been such an infringement where it adequately demonstrates, not that the Commission’s decision would have been different in content, but rather that it would have been better able to ensure its defence had there been no error, for example because it would have been able to use for its defence documents to which it was denied access during the administrative procedure (see judgments of 2 October 2003, Thyssen Stahl v Commission, C‑194/99 P, EU:C:2003:527, paragraph 31 and the case-law cited, and of 24 May 2012, MasterCard and Others v Commission, T‑111/08, EU:T:2012:260, paragraph 269 and the case-law cited; judgment of 9 September 2015, Philips v Commission, T‑92/13, not published, EU:T:2015:605, paragraph 93).
In the present case, the Commission received, during the investigation, the data on costs in the ‘UCN’ spreadsheets, which constitute an accounting instrument of the applicant, representing, by commercial service and by service family, the total revenues, the total operating costs, the capital employed, the total cost of capital, the operating profit and the economic profit (recitals 863 and 864 of the contested decision). It follows from the contested decision that the costs included in the ‘UCN’ spreadsheets are based on fully allocated historical costs and differ from the LRAIC (recital 875 of the contested decision). The Commission also obtained presentations showing how the costs were grouped and tables and descriptions relating to the costs of each of the services (recitals 865 to 867 of the contested decision). The Commission requested the applicant to provide profitability data for broadband services, recalculated by using the LRAIC methodology (recitals 868 and 869 of the contested decision). Since the applicant confirmed that it did not calculate the profitability figures according to the LRAIC methodology for broadband services, the Commission used, at the statement of objections stage, the data at its disposal, namely the ‘UCN’ data and the explanations relating to costs, by adapting the individual costs (recitals 870 to 875 of the contested decision). According the Commission, at that stage, in the absence of data on the LRAIC, the figures contained in the ‘UCN’ spreadsheets were the best available source for the margin squeeze calculations (recital 875 of the contested decision). On that basis, in the statement of objections, the Commission established that an equally efficient competitor with access to the applicant’s local loop would have faced significant negative margins if it had tried to replicate the applicant’s retail broadband portfolio over the years 2005 to 2010 (paragraphs 1203 and 1222 of the statement of objections).
In the first place, as regards the complaint put forward by the applicant that it was not heard in relation to the principles, the methodology and the data relating to the calculation of the LRAIC, it should be noted that the applicant had the opportunity to respond to the arguments set out in the statement of objections and that it made full use of that possibility. Therefore, in its response to the statement of objections, on the basis of the consultancy report, the applicant submitted a methodology based on current cost accounting, by means of the estimation of the downstream costs for the period between 2005 and 2010 based on data from 2011 (recital 881 of the contested decision). In particular, the applicant claimed, in that response, that it was necessary, during the calculation of the LRAIC, first, to re-evaluate the assets and, secondly, to take into account the inefficiencies of its network for broadband provision. As regards, in particular, the taking into account of those inefficiencies, the applicant proposed to make optimisation adjustments, namely, firstly, the replacement of existing assets with their modern equivalents, which are more efficient and less costly (modern asset equivalent), secondly, to maintain as far as possible technical coherence and, thirdly, asset reduction on the basis of currently used capacity as opposed to the installed capacity (together, ‘the optimisation adjustments’).
In the contested decision, the Commission agreed to include in particular the applicant’s asset re-evaluation in its margin squeeze analysis and to remove, as concerns the specific fixed costs, the joint and common costs. By contrast, it rejects the optimisation adjustments (recitals 894, 903, 904 and 910 of the contested decision). Therefore, in the contested decision, the Commission identified margins which were different from those calculated in the statement of objections.
However, it should be noted that the changes made in the contested decision in relation to the statement of objections, concerning the calculation of the margin squeeze, resulted from taking into consideration data and calculations provided by the applicant itself in response to the statement of objections. That taking into consideration appears therefore, in particular, in recitals 910, 945, 963 and 984 of the contested decision. It is moreover apparent from recitals 946 (footnote No 1405) and 1000 of the contested decision that the Commission took account, during the adoption of that decision, of the update of the margin squeeze calculations provided by the applicant in its response to the letter of facts (paragraph 21 above).
In the second place, as regards the complaint put forward by the applicant that the Commission changed the principles, methodology and data relating to the calculation of the LRAIC, without having heard the applicant on that issue, first of all, it is apparent from the examination of the statement of objections and the contested decision that the Commission did not put forward any new objections in the contested decision with respect to its assessment of the margin squeeze. In those two documents, the Commission considered that an equally efficient competitor using access to the local loop on the applicant’s wholesale market would face significant negative margins if it offered the applicant’s portfolio of broadband services via the local loop (paragraph 1203 of the statement of objections and recital 1023 of the contested decision). In both documents, the Commission considered that that would remain the case even if additional services in a downstream portfolio, namely voice services, internet television services (IPTV) and multi-play services, were taken into consideration (paragraph 1222 of the statement of objections and recital 1023 of the contested decision). Next, it should be noted that the infringement period applied by the Commission is shorter in the contested decision than that applied by the Commission in the statement of objections. In both documents, the date of the beginning of the infringement was 12 August 2005. By contrast, the date of the end of the infringement was 8 May 2012 in the statement of objections (paragraph 1546 of the statement of objections) and is set at 31 December 2010 in the contested decision (recital 1516 of the contested decision). Finally, as regards the methodology for calculating the margins, the Commission relied, in both documents, on the LRAIC. Therefore, both in paragraphs 996 to 1002 of the statement of objections and in recitals 860 and 861 of the contested decision, the Commission set out the guidelines for the calculation of costs on the basis of the LRAIC.
More particularly, as regards the methodology for calculating the margins, it should be noted that the Commission applied the same method at the stage of the statement of objections and of the contested decision. Firstly, tables 48 and 78 to 80 of the statement of objections and tables 21 to 24 of the contested decision show the wholesale charges for access to the local loop. It must be noted that the Commission nevertheless was careful to explain in recitals 935 to 938 of the contested decision the reasons why it considered that there was a difference between the figures provided by the applicant and the figures presented in the calculations which it carried out. Secondly, it should be noted that table 81 of the statement of objections corresponds to table 25 of the contested decision, both tables showing the network costs. Table 25 is based on data provided in the applicant’s response to the statement of objections. Thirdly, it should be noted that table 82 of the statement of objections corresponds to table 26 of the contested decision, which shows the ISP (internet service provider costs) recurrent costs. The calculations of those costs are based on data provided by the applicant. Moreover, the Commission responds, in recitals 964 and 697 of the contested decision, to the applicant’s arguments in that regard presented in its response to the state of objections. Fourthly, it must be pointed out that table 83 of the statement of objections and table 27 of the contested decision relate to the local loop set-up fees and are identical. Fifthly, both table 86 of the statement of objections and tables 29 and 30 of the contested decision concern the depreciation of subscribers’ acquisition costs, table 29 taking into account a period of depreciation over three years and table 30 a period of depreciation over four years, in accordance with the applicant’s suggestion in its response to the statement of objections. Sixthly, it must be noted that table 87 of the statement of objections is identical to table 31 of the contested decision relating to revenues from the applicant’s bundled DSL Access and DSL internet services. Seventh, it should be pointed out that the results of the calculations of the margin squeeze are set out in table 88 of the statement of objections and in tables 32 and 33 of the contested decision, table 32 being based on the depreciation over three years and table 33 on the depreciation over four years.
It follows that the method and the principles that the Commission applied to examine the applicant’s margins were, in essence, identical in the statement of objections and in the contested decision. Consequently, the complaint put forward by the applicant, according to which the Commission changed those methods and those principles before adopting the contested decision, without having heard the applicant on that issue, must be rejected.
As regards the data on which the calculations of the margins are based, as was explained in recitals 875 to 877 of the contested decision, admittedly, at the stage of the statement of objections, those calculations were based on the ‘UCN’ tables which reflected the fully allocated costs. However, as follows from recitals 885 to 894 of the contested decision, the Commission accepted the adjustments made by the applicant concerning current cost accounting. The Commission thus took into account the adjustments proposed in that regard by the applicant and modified the costs of network assets, so that they constitute a more precise estimate of an equally efficient competitor’s costs. The taking those adjustments into account was specifically designed to satisfy the requirements noted in paragraph 183 above and the right of the parties to be heard during the administrative procedure therefore did not require that they be granted a new possibility to make known their point of view about the calculations of margins prior to the adoption of the contested decision.
In the light of the above, it is necessary to reject the first part relating to procedural errors concerning the calculation of the LRAIC.
(b) The second part, alleging the inability to take a position, during the administrative procedure, about the multi-period approach to the calculation of the costs borne by the applicant in order to assess the existence of a practice resulting in the margin squeeze
The applicant notes that, in the statement of objections, the Commission applied a method consisting in analysing the costs, by not taking into account the positive margin found in 2005, although, in the contested decision, the approach taken involved a multi-period analysis. By failing to give the applicant the opportunity to submit observations on that approach, the Commission infringed its rights of defence. The applicant considers that, in contrast to the Commission’s assertions, it cannot be inferred from the response to the statement of objections that it itself proposed the multi-period approach. By contrast, the applicant proposed the discounted cash flow analysis, which was moreover applied by the Commission in its Decision C(2007) 3196 final, of 4 July 2007, relating to a proceeding under Article 82 [EC] (Case COMP/38.784 — Wanadoo España v Telefónica). The discounted cash flow analysis is justified by the duration of a customer’s subscription or a contract.
The applicant claims that, in addition, in the context of the discounted cash-flow analysis, the Commission should not have commenced the evaluation in 2005 and terminated it in 2010 simply because that period corresponded to that examined in the context of the ‘period-by-period’ approach.
Specifically, the multi-period approach used in the contested decision leads to a finding of a positive margin in 2005 and to the extension of the period of the alleged abuse compared with the period set out in the statement of objections. In that regard, the Commission, according to the applicant, ignored that positive margin when it stated, in recital 998 of the contested decision, that entry for four months in 2005 could not be considered entry ‘on a lasting basis’. The change of approach between the statement of objections and the contested decision transforms a positive margin in one year into a negative margin by selecting subsequent years of profitability and concluding that the net arithmetical difference was negative overall. Thus, the multi-period approach makes it impossible for a dominant undertaking to foresee the outcome of applying such an approach. Furthermore, the multi-period approach also leads to arbitrariness, since one or more periods could have both positive and negative margins at the same time depending on which years are used in that approach.
The Commission disputes the applicant’s arguments and contends that the present part should be rejected.
In that regard, the applicant complains, in essence, that the Commission used the multi-period approach in order to extend the period of infringement set out in the statement of objections, since such an approach was not envisaged in the statement of objections, and that it infringed its rights of defence, by failing to give it the possibility of presenting its observations relating to that approach.
It should be noted that, in paragraph 1012 of the statement of objections, the Commission initially stated its intention to use the period-by-period approach in relation to the examination of the applicant’s margins. The margin squeeze calculations included in paragraphs 1175 to 1222 of the statement of objections were made on a year-by-year basis during the period under consideration. In the contested decision, in order to assess the possible margin squeeze, the Commission adopted the ‘period-by-period’ approach consisting in determining the profits or losses realised over periods equivalent to one year (recital 851 of the contested decision). It should be noted that the summary of the results of the analysis is included in recitals 1007 to 1012 of the contested decision, from which it is apparent that the Commission bases its conclusions on the ‘period-by-period’ approach.
In paragraph 1281 of its response to the statement of objections, the applicant nevertheless opposed the sole use of the ‘period-by-period’ method, which had been used by the Commission in the statement of objections. The applicant claims in essence that, in the telecommunications sector, operators assessed their ability to obtain a reasonable return over a period exceeding one year. It thus proposed, inter alia, that the examination of a margin squeeze be supplemented by an analysis over several periods, in which the total margin would be evaluated over several years.
The Commission therefore decided to use, in addition, as is apparent from recital 859 of the contested decision, a multi-period approach so as to take account of that objection and in order to establish whether that approach altered its conclusion that the rates charged by the applicant for alternative operators to gain unbundled access to its local loop resulted in a margin squeeze between 2005 and 2010.
In the context of that additional examination, the result of which is included in recitals 1013 and 1014 of the contested decision, the Commission identified a total negative margin relating to each portfolio of services, first, for the period between 2005 and 2010 (table 39 in recital 1013 of the contested decision) and, secondly, for the period between 2005 and 2008 (table 40 in recital 1014 of the contested decision). The Commission inferred therefrom, in recital 1015 of the contested decision, that the multi-period analysis did not alter its finding of the existence of a margin squeeze resulting from a ‘period-by-period’ analysis.
It results from the above that, first, in order to establish the applicant’s margins in the contested decision, the multi-period analysis followed the objection, made by the applicant, in its response to the statement of objections, relating to the ‘period-by-period’ method of calculation. Secondly, the multi-period analysis of the margins for unbundled access to the applicant’s local loop, in the contested decision, aimed to complement the ‘period-by-period’ analysis. Moreover, the additional multi-period analysis led the Commission to consolidate its finding concerning the existence of a margin squeeze on the Slovak market for broadband internet services between 12 August 2005 and 31 December 2010.
Therefore, as the Commission, in essence, maintains, the multi-period analysis did not result in the applicant being held accountable for facts in respect of which the latter did not have the opportunity to express its views during the administrative procedure, by altering the nature of the objections made against it, but merely led to an additional analysis of the margins resulting from the applicant’s pricing practices for unbundled access to its local loop, in the light of an objection raised by the applicant in its response to the statement of objections.
As regards the argument that the Commission used the multi-period analysis in order to establish the infringement period and to substitute a negative margin for 2005 for a previously positive margin, it should be noted that, following the ‘period-by-period’ analysis, the Commission had already reached the conclusion that a competitor as efficient as the applicant could not have, between 12 August 2005 and 31 December 2010, replicated profitably the applicant’s retail portfolio comprising broadband services (recital 1012 of the contested decision). It is apparent in particular from recital 998 of the contested decision that, according to the Commission, the existence of a positive margin between August and December 2005 does not prevent that period from being included in the infringement period in the form of a margin squeeze, since operators consider their ability to obtain a return over a longer period. In other words, the Commission established the duration of the practice resulting in the margin squeeze on the basis of the ‘period-by-period’ approach and the multi-period approach was used solely by way of addition. In any event, it must be noted that that argument, in reality, seeks to contest the merits of that approach and cannot, therefore, be considered to be validly raised in support of an alleged infringement of the applicant’s rights of defence. In reality, that complaint relates to a disagreement with the methodology used by the Commission to find a margin squeeze for the period from 12 August to 31 December 2005.
Concerning the applicant’s argument that the method of calculating the margin squeeze applied by the Commission in the context of that additional examination does not correspond to the method suggested by the applicant in its response to the statement of objections and allegedly based on the Commission’s decision-making practice, it is apparent from paragraphs 1498 to 1500 of that response that the applicant proposes to examine the ‘cumulated profits’ over a period between 2005 and 2008. The Commission however noted that the multi-period analysis suggested by the applicant was distinct from the backward-looking analysis of the discounted expected cash flow, which was based on different input data and a different methodology (recital 858 of the contested decision). It nevertheless took note of the applicant’s suggestion concerning a multi-period analysis by undertaking, by way of addition, a multi-period examination, by analysing, in recital 1013 of the contested decision (table 39), the cumulated profits over a period between 2005 and 2010, and, in recital 1014 of that decision (table 40), the cumulated profits over a period between 2005 and 2008.
It is apparent from the case-law cited in paragraph 183 above that respect for the applicant’s right to be heard merely required the Commission to take account, for the purposes of adopting the contested decision, of the criticism concerning the calculation of margins presented by the applicant in response to the statement of objections. By contrast, that right in no way implied that the Commission must necessarily reach the conclusion desired by the applicant when it made that criticism, namely the finding that there was no margin squeeze between 12 August 2005 and 31 December 2010.
Finally, as regards the document including the calculation of the margins sent by the Commission during the state of play meeting of 16 September 2014, the applicant claims, in essence, first, that that document was presented to it late, since the Commission had announced that the contested decision was being drafted and, secondly, since the Commission felt obliged to disclose its final calculations of margins before sending the contested decision to it.
However, for the reasons set out in in paragraphs 183 and 199 to 204 above, the Commission was not obliged to disclose its final calculations of margins before sending the contested decision to the applicant. Moreover, the fact that it organised a ‘state-of-play meeting’ does not invalidate that assessment. As the Commission maintained in its pleadings and during the hearing, such meetings are organised between the Commission and the parties under investigation in the interests of sound administration and transparency and to inform them of the state of play of the procedure. Nevertheless, those ‘state-of-play meetings’ are distinct from the formal meetings required in accordance with Regulations Nos 1/2003 and 773/2004 and are complementary to them. Therefore, the fact that it organised a state of play meeting on 16 September 2014 does not allow it to be concluded that the Commission was obliged to permit the applicant to present, on that occasion, its observations relating to the examination of margins, and that all the more so since the applicant was informed about all of the material elements of the calculation of margins made by the Commission and was given the opportunity to present its observations prior to the adoption of the contested decision.
It follows that the second part of the second plea in law and that plea in law must be rejected.
3. The third plea in law, alleging errors committed in the finding of the margin squeeze
By its third plea in law, the applicant essentially claims that the Commission’s finding of the practice resulting in the margin squeeze was incorrect. This plea is divided into two parts. The first part alleges that no account was taken of the optimisation adjustments proposed by the applicant in the calculation of its LRAIC. The second part alleges error on the part of the Commission in its margin squeeze calculation due to the consolidation of revenue and costs for the entire infringement period, as well as infringement of the principle of legal certainty.
(a) First part alleging that no account was taken of the optimisation adjustments in the calculation of the applicant’s LRAIC
In support of the first part of its third plea in law, the applicant contests the Commission’s decision for not having accepted, in recitals 895 and 903 of the contested decision, the optimisation adjustments in order to calculate the margin squeeze. The inclusion of those optimisation adjustments would have reduced the upstream costs used in calculating the margin squeeze. Therefore, the reasons for that rejection set out by the Commission in recitals 894 and 900 to 902 of the contested decision are misconceived. Consequently, the Commission overestimated the applicant’s actual downstream costs which, as a result, had material consequences for the findings relating to the margin squeeze, given that there was no margin squeeze in 2005 and 2007.
According to the applicant, its proposals were not additional adjustments, but in issue was its calculation of the LRAIC. The Commission’s approach was inconsistent. On the one hand, it accepted the current cost accounting and, on the other hand, rejected the optimisation adjustments, which are compatible with the calculations of the LRAIC. As regards the adjustments of the network costs, the applicant considers that those adjustments, which are necessary in order to estimate the LRAIC, took into account a certain level of spare capacity included in the requirements for retail broadband services.
That approach is borne out by the case-law. Relying on the judgments of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), and of 10 April 2008, Deutsche Telekom v Commission (T‑271/03, EU:T:2008:101), the applicant notes that, in some circumstances, it may be wise to take account of competitors’ costs rather than those of the dominant undertaking. That is so in the present case, since the applicant did not have easy access to data to establish the LRAIC.
The Commission disputes the applicant’s arguments.
The applicant complains, in essence, that the Commission committed an error during the calculation of the LRAIC, by refusing, in recitals 895 to 903 of the contested decision, to adjust the latter to the level of costs which would have been incurred by an efficient operator building an optimal network adapted to meet current and future demand on the basis of information available at the time of the assessment carried out by the Commission.
Therefore, as was stated in paragraph 186 above, in its response to the statement of objections, the applicant, relying on the consultancy report, proposed a methodology based on current cost accounting, by means of the estimation of the downstream costs for the period between 2005 and 2010 based on data from 2011 (recital 881 of the contested decision). In particular, the applicant submitted, in that response, that it was necessary, during the calculation of the LRAIC, first, to re-evaluate the assets and, secondly, to take account of the inefficiencies of its network for broadband provision. As regards, in particular, taking those inefficiencies into account, the applicant proposed the optimisation adjustments described in paragraph 186 above.
In its own calculations of the LRAIC, the applicant thus adjusted the capital cost of the assets and their depreciation values in the years 2005 to 2010, as well as the operating costs of those assets, by relying on the weighted average adjustment factor calculated by the author of the consultancy report for 2011 (recital 897 of the contested decision). The applicant claims that the suggested optimisation adjustments reflected the spare capacity identified in the elements of that network, namely assets removed from that network because they were not in productive use, but which had not yet been sold by that operator (recital 898 of the contested decision).
The Commission nevertheless refused to make those optimisation adjustments in the contested decision.
In the first place, as regards the replacement of existing assets with their more modern equivalents, the Commission stated, in recital 900 of the contested decision, that such a replacement could not be accepted since it amounts to adjusting the costs without properly adjusting the depreciations. The Commission referred to that paragraph in recitals 889 to 893 of the contested decision, in which it expressed doubts about the adjustment, as it was proposed by the applicant, of the costs of assets for the period between 2005 and 2010. Moreover, the Commission considered, in recital 901 of the contested decision, that such a replacement of existing assets was not compatible with the equally efficient competitor criterion. The case-law confirmed that the abusive nature of the pricing practices of a dominant operator is in principle determined in relation to its own position. In the present case, the adjustments of the LRAIC suggested by the applicant is based on a collection of hypothetical assets and not on the same assets as those held by that operator.
In the second place, as regards the taking into account of the excess capacity of the networks on the basis of ‘actually’ used capacity, the Commission concluded, in recital 902 of the contested decision, that, since investments are based on a forecast of demand, it was inevitable that, in the context of an ex post examination, a certain capacity remains sometimes unused.
None of the complaints put forward by the applicant against that part of the contested decision can be upheld.
Firstly, the applicant is wrong to claim that there is a contradiction between, on the one hand, the rejection of the optimisation adjustments of the LRAIC and, on the other hand, the acceptance, in recital 894 of the contested decision, of the asset re-evaluation which it proposed. The applicant also cannot claim that the Commission should have accepted the optimisation adjustments proposed by it on the ground that, as for the asset re-evaluation, the Commission did not have reliable historic costs concerning the optimisation adjustments.
The re-evaluation of the assets was based on the assets held by the applicant in 2011. With respect to that re-evaluation and as is apparent from recitals 885 to 894 of the contested decision, the Commission noted that it did not have at its disposal data better reflecting the applicant’s incremental broadband asset costs for the period between 2005 and 2010. As a result, in the analysis of the margin squeeze in the contested decision, the Commission included the applicant’s current assets proposed by the latter. However, the Commission pointed out that that re-evaluation was capable of leading to an underestimation of downstream asset costs.
By comparison, as is apparent from recital 895 of the contested decision, the optimisation adjustments proposed by the applicant consisted in adjusting the assets to the approximate level of an efficient operator that would build an optimal network adapted to satisfy future demand based on ‘today’s’ information and demand predictions. Those adjustments were based on a forecast and on an optimal network model, and not on an estimate reflecting the incremental costs of the applicant’s existing assets.
It follows that the optimisation adjustments, in general, and the replacement of existing assets by their more modern equivalents, in particular, had a different objective from the re-evaluation of assets proposed by the applicant. Furthermore, the taking into consideration, by the Commission, of the re-evaluation of current assets proposed by the applicant, due to the absence of other more reliable data on the LRAIC of that operator, did not suggest that the Commission necessarily accepted the optimisation adjustments of the LRAIC. The Commission was thus justified in treating differently, on the one hand, the replacement of existing assets by their more modern equivalents and, on the other hand, the re-evaluation of assets proposed by the applicant.
Secondly, the applicant cannot be followed when it disputes the conclusion, in recital 901 of the contested decision, that the optimisation adjustments would lead to a calculation of the LRAIC on the basis of the assets of a hypothetical competitor and not its own assets.
In that regard, it should be noted that, according to settled case-law, the assessment of the lawfulness of the pricing policy applied by a dominant undertaking, in the light of Article 102 TFEU, requires that reference be made, in principle, to pricing criteria based on the costs incurred by the dominant undertaking and on its strategy (see judgments of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 41 and the case-law cited, and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 190; see also, to that effect, judgment of 10 April 2008, Deutsche Telekom v Commission, T‑271/03, EU:T:2008:101, paragraph 188 and the case-law cited).
In particular, as regards a pricing practice resulting in a margin squeeze, the use of such analytical criteria can establish whether, in accordance with the equally efficient competitor test referred to in paragraph 108 above, that undertaking would have been sufficiently efficient to offer its retail services to end-users otherwise than at a loss if it had first been obliged to pay its own wholesale prices for the intermediary services (judgments of 14 October 2010, Deutsche Telekom v Commission, C‑280/08 P, EU:C:2010:603, paragraph 201; of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 42; and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 191).
The validity of such an approach is reinforced by the fact that it also conforms to the general principle of legal certainty, since taking into account the costs and prices of the dominant undertaking enables that undertaking, in the light of its special responsibility under Article 102 TFEU, to assess the lawfulness of its own conduct. While a dominant undertaking knows its own costs and prices, it does not as a general rule know those of its competitors (judgments of 14 October 2010, Deutsche Telekom v Commission, C‑280/08 P, EU:C:2010:603, paragraph 202; of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 44; and of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 192).
The Court admittedly stated, in paragraphs 45 and 46 of the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), that it could not be ruled out that the costs and prices of competitors may be relevant to the examination of the practice resulting in the margin squeeze. It is apparent however from that judgment that it is only where it is not possible, in the light of the particular circumstances, to refer to the prices and costs of the dominant undertaking that the prices and costs of competitors on the same market should be examined, which the applicant has not claimed in the present case (see, by analogy, judgment of 29 March 2012, Telefónica and Telefónica de España v Commission, T‑336/07, EU:T:2012:172, paragraph 193).
In the present case, first, the replacement of existing assets by their more modern equivalents sought to adjust the costs of assets by retaining the value of ‘current’ assets, without however properly adjusting the depreciations (recital 900 of the contested decision). That replacement led to a calculation of the margin squeeze on the basis of hypothetical assets, namely assets which do not correspond with those held by the applicant. The costs relating to the applicant’s assets were thus underestimated (recitals 893 and 900 of the contested decision). Secondly, taking into consideration the excess capacity of the networks on the basis of the ‘currently’ used capacity would result in excluding the applicant’s assets which are not in productive use (see paragraph 218 above).
Therefore, in the light of the principles noted in paragraphs 228 to 231 above, the Commission was able to conclude without committing an error that the optimisation adjustments of the LRAIC proposed by the applicant would have resulted, during the calculation of the margin squeeze, in the costs incurred by that operator itself between 12 August 2005 and 31 December 2010 being disregarded.
Finally, the applicant cannot be followed when it claims that, in the contested decision, the Commission infringed the principle that the examination of a margin squeeze must be based on an effective competitor, when it concluded in essence that it was inevitable that there sometimes remains unused capacity (recital 902 of the contested decision). It follows from the principles referred to in paragraphs 230 and 231 above that the examination of a pricing practice resulting in a margin squeeze consists, in essence, in assessing whether a competitor as efficient as the dominant operator is capable of offering the services concerned to final customers otherwise than at a loss. Such an examination is therefore not carried out by reference to a perfectly efficient operator in the light of market conditions at the time of such a practice. If the Commission had accepted the optimisation adjustments linked to excess capacity, the calculations of the applicant’s LRAIC would have reflected the costs associated with an optimal network corresponding to demand and not affected by the inefficiencies of that operator’s network, namely the costs of a competitor more efficient than the applicant. Therefore, in the present case, although it is not disputed that part of the applicant’s relevant assets remained unused between 12 August 2005 and 31 December 2010, the Commission was able without committing an error to include that part of the assets, in other words the excess capacity, in the calculation of the LRAIC.
The Commission was thus correct to reject the optimisation adjustments and, therefore, to analyse the abusive nature of the applicant’s pricing practices, in particular, on the basis of the applicant’s costs.
Thirdly, contrary to what is claimed by the applicant, the rejection of the optimisation adjustments is not incompatible with the findings in the judgments of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), and of 10 April 2008, Deutsche Telekom v Commission (T‑271/03, EU:T:2008:101), according to which it may be wise to take account of competitors’ costs rather than the costs of the dominant undertaking.
First, regarding the case giving rise to the judgment of 10 April 2008, Deutsche Telekom (T‑271/03, EU:T:2008:101, paragraph 210), the termination fees at issue constituted wholesale charges billed by the dominant undertaking to its competitor and making up part of the total cost borne by that competitor. Those fees had therefore to be included in the calculation of the costs of an equally efficient competitor. However, those fees were different from a forecast as well as from an optimal network model, which did not reflect the incremental costs of the applicant’s existing assets (see paragraph 225 above).
Secondly, as regards the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83), as referred to in paragraphs 230 and 231 above, it follows from that judgment that it is only when it is not possible, in the light of the circumstances, to refer to the prices and costs of the dominant undertaking that it is appropriate to examine those of the competitors on the same market. However, that is not the situation in the present case, since the costs of the applicant’s assets could be established on the basis of a later revaluation, and they constituted an indicator in order to evaluate the costs of an equally efficient competitor.
It follows from the above that the first part of the third plea in law must be rejected as unfounded.
(b) The second part, alleging an error in the margin squeeze calculation due to the consolidation of revenue and costs for the entire period under consideration, as well as infringement of the principle of legal certainty
The applicant contests the Commission’s resorting to the multi-period approach (multi-annual approach set out in recital 1013 of the contested decision). The Commission adopted that approach, which does not exist in the statement of objections, in order to convert the positive margins into negative margins. It obtained positive margins, during the administrative procedure, by adopting the ‘period-by-period’ approach. However, by adopting the multi-period (multi-annual) approach, the Commission extended the period of the infringement. In particular, the ‘period-by-period’ (year-by-year) approach led to a finding of negative margins for each year during the period between 2005 and 2010. The negative margin of 2005, found in the statement of objections, was, however, transformed into a positive margin in the contested decision. Consequently, by applying the ‘period-by-period’ (year-by-year) approach, in actual fact, there was no practice resulting in the margin squeeze in 2005. Relying on a numerical example, the applicant concludes that, in accordance with the multi-period (multi-annual) approach used by the Commission, a margin squeeze could be found for the entire period, whereas that is not the case when each year is consolidated.
Therefore, the multi-period (multi-annual) approach is arbitrary and incompatible with the principle of legal certainty, since the infringement period depends entirely on the period over which the margins are aggregated and compared.
The applicant considers that, if those errors were corrected, there would be no basis for a finding of the practice resulting in the margin squeeze and the Commission would not have discharged its burden of proving the infringement. Annex A.21 to the application demonstrates the existence of a material error in the Commission’s costs and revenue analysis.
The Commission’s argument that a finding of a practice resulting in the margin squeeze may be made, notwithstanding the existence of a positive margin, is at odds with the case-law, as the legal test, in order to establish that a pricing practice resulting in a margin squeeze is abusive for the purposes of Article 102 TFEU, is whether the undertaking itself or an undertaking as efficient as it would have been in a position to offer its services to subscribers otherwise than at a loss. A positive margin does not necessarily lead to an abuse. The necessary precondition for a finding of a practice resulting in an abusive margin squeeze is the existence of a negative margin at an equally efficient competitor, which was not demonstrated in the present case for 2005.
Moreover, the Commission’s contention that the multi-period (multi-annual) approach was proposed by the applicant is incorrect, since, in reality, it suggested the updating method referred to in paragraph 194 above.
In the first place, the Commission notes that it is apparent from recitals 997 and 998 of the contested decision that the ‘period-by-period’ (year-by-year) approach allowed it to be demonstrated that an equally efficient competitor using, on the wholesale market, access to the applicant’s local loop faced negative margins and could not replicate profitably the applicant’s retail broadband portfolio. That conclusion is not undermined by the fact that the margin was positive for the last four months of 2005. It is only after reaching that conclusion that the Commission strengthened its analysis with the ‘multi-period’ approach. As regards the arguments relating to the validity of that multi-period (multi-annual) approach, the Commission refers back to the arguments it submitted in the context of the second part of the second plea in law.
In the second place, the Commission maintains that it follows from the judgment of 17 February 2011, TeliaSonera Sverige (C‑52/09, EU:C:2011:83, paragraphs 74 and 75), that an abusive squeeze may exist even where margins remain positive, where the dominant undertaking’s practices are likely to make it at least more difficult for the operators concerned to trade on the market by reason, for example, of artificially reduced profitability, where such practices are not economically justified. Consequently, the fact that the margin was positive for the last four months of 2005 does not automatically mean that the applicant’s conduct did not amount to abuse during that period. On the contrary, the Commission argues that such conduct constitutes abuse if the applicant’s pricing policy was likely to have an exclusionary effect for competitors that are at least as efficient as the applicant by making access to the market concerned more difficult or even impossible for them. In addition, when determining the lawfulness of the pricing policy applied by a dominant undertaking, reference should be made to that undertaking’s strategy which, in the case at hand, indicates that the applicant knew that it was setting higher prices than its average revenue for wholesale access at local loop level and that it could carry out a margin squeeze.
In the third place, as regards the criticisms of the multi-period (multi-annual) approach, the Commission repeats its arguments that the infringement period was already determined using the ‘period-by-period’ approach. On the basis of that approach, the Commission concluded that that infringement period commenced on 12 August 2005. The period adopted for the multi-period approach was determined by the infringement period which had already been established in the context of the ‘period-by-period’ approach. Moreover, the Commission submits that while it was aware of the shortcomings of the ‘multi-period’ (multi-annual) approach, that approach was proposed by the applicant in paragraphs 1388 and 1389 of its response to the statement of objections.
Finally, the applicant’s contention that the multi-period (multi-annual) approach could be based on the duration of a customer’s subscription or a contract is not supported by the case-law since, in the Telefónica case, as in the present case, the multi-period (multi-annual) analysis covered approximately five years, corresponding both to the length of the infringement and the lifetime of the relevant assets.
The intervener points out that the Commission’s approach, in calculating the margin squeeze, was prudent and to the applicant’s advantage since, with a view to avoiding purely hypothetical assumptions of those costs, collocation fees, which constituted, for alternative operators, an unknown amount and, for the applicant, a significant part of the costs connected with the local loop, were not included in the LRAIC.
By the second part of its third plea in law, the applicant accuses the Commission, in essence, of having applied the multi-period (multi-annual) approach solely in order to extend the infringement period to the last four months of 2005 during which, according the period-by-period (year-by-year) approach, there was a positive margin. The Commission thus wrongly concluded that there was a margin squeeze during 2005 and infringed the principle of legal certainty.
In that regard, it should be pointed out that the Commission concluded, relying on the ‘period-by-period’ (year-by-year) approach, that the applicant had engaged in margin squeeze practices from 12 August 2005. It is apparent from recital 997 of the contested decision that, on the basis of an analysis relating to every year during the period under consideration, an equally efficient competitor using wholesale access to the applicant’s local loop was faced with negative margins and could not replicate profitably the retail broadband portfolio of the applicant. In recital 998 of the contested decision, the Commission pointed out that the fact that there is a positive margin for four months in 2005 does not disprove that conclusion, given that an entry over four months could not be considered as entry on a lasting basis. According to the Commission, operators consider their ability to earn a reasonable return over a longer period, which extends over several years (recital 998 of the contested decision). On that basis, the Commission concluded, in recital 1012 of that decision, that, in the period between 12 August 2005 and 31 December 2010, a competitor as efficient as the applicant could not have replicated profitably that operator’s retail portfolio.
However, as was noted in paragraph 228 above, in order to assess the lawfulness of the pricing policy applied by a dominant undertaking, it is necessary, in principle, to refer to pricing criteria based on the costs incurred by the dominant undertaking itself and on its strategy.
In particular, as regards a pricing practice resulting in a margin squeeze, the use of such analytical criteria can establish whether that undertaking would have been sufficiently efficient to offer its retail services to end-users otherwise than at a loss if it had first been obliged to pay its own wholesale prices for the intermediary services (see paragraph 229 above and the case-law cited).
First, the validity of such an approach is all the more justified by the fact that it also conforms to the general principle of legal certainty, since taking into account the costs and prices of the dominant undertaking enables that undertaking, in the light of its special responsibility under Article 102 TFEU, to assess the lawfulness of its own conduct. While a dominant undertaking knows what its own costs and charges are, it does not, as a general rule, know what its competitors’ costs and charges are. Secondly, an exclusionary abuse also affects potential competitors of the dominant undertaking, which might be deterred from entering the market by the prospect of a lack of profitability (see paragraph 230 above and the case-law cited).
It follows therefrom that, in order to establish the constituent elements of the practice of a margin squeeze, the Commission, in recital 828 of the contested decision, correctly had recourse to the equally efficient competitor criterion, by demonstrating that the dominant undertaking’s downstream operations could not trade profitably on the basis of the wholesale price applied in respect of its downstream competitors and on the retail price applied by the downstream arm of that undertaking.
As is apparent from tables 32 to 35 of the contested decision, the analysis carried out by the Commission resulted, in all the scenarios envisaged and as the latter itself acknowledged in recital 998 of that decision, in a positive margin for the period between 12 August and 31 December 2005.
In such circumstances, the Court has already held that, to the extent that a dominant undertaking sets its prices at a level covering the great bulk of the costs attributable to the supply of the goods or services in question, it is, as a general rule, possible for a competitor as efficient as that undertaking to compete with those prices without suffering losses that are unsustainable in the long term (judgment of 27 March 2012, Post Danmark, C‑209/10, EU:C:2012:172, paragraph 38).
It results therefrom that, during the period between 12 August and 31 December 2005, a competitor as efficient as the applicant had, in principle, the possibility to compete with the latter on the retail market for broadband services in so far as unbundled access to the local loop was granted to it, and without suffering losses that were unsustainable in the long term.
The Court has indeed held that, if a margin is positive, it is not ruled out that the Commission can, in the context of the examination of the exclusionary effect of a pricing practice, demonstrate that the application of that practice was, by reason, for example, of reduced profitability, likely to have the consequence that it would be at least more difficult for the operators concerned to trade on the market concerned (see, to that effect, judgment of 17 February 2011, TeliaSonera Sverige, C‑52/09, EU:C:2011:83, paragraph 74). That case-law can be read in conjunction with Article 2 of Regulation No 1/2003, according to which, in any proceedings for the application of Article 102 TFEU, the burden of proving an infringement of that article rests on the party or the authority alleging the infringement, namely, in the present case, the Commission.
However, in the present case, it must be noted that the Commission did not demonstrate in the contested decision that the applicant’s pricing practice, during the period between 12 August and 31 December 2005, resulted in such exclusionary effects. However, such a demonstration was required particularly given the presence of positive margins.
The mere claim, in recital 998 of the contested decision, that the operators consider their ability to earn a reasonable return over a longer period, which lasted several years, cannot constitute such proof. Such a fact, assuming it is established, is based on a prospective examination of profitability, which is necessarily hypothetical. Furthermore, in the present case, those positive margins appeared at the very beginning of the period under consideration, at a time when no negative margin could yet have been found. In those circumstances, it must be concluded that the reason set out in recital 998 of the contested decision does not satisfy the requirement arising from the principle of legal certainty noted in paragraph 230 above, according to which a dominant undertaking must be in a position to assess the conformity of its conduct with Article 102 TFEU.
For that same reason, the finding of the negative margins, by means of the application of the multi-period approach, cannot undermine that assessment, since, in the present case, that approach resulted in such a finding only by means of a weighting of the positive margins for 2005 with the negative margins found respectively for the years 2006 to 2010 (recital 1013 of the contested decision) and 2006 to 2008 (recital 1014 of the contested decision).
Moreover, in recital 1026 of the contested decision, on the basis of the documents established by applicant’s regulatory department in April 2005 and relating to a strategy of submission of the reference offer concerning unbundled access to the local loop and ULL prices, the Commission considered that the latter knew, from 1 August 2005, that the prices for wholesale access at local loop level were squeezing the margins of alternative operators.
Nevertheless, it should be noted that, in the light of positive margins between 12 August and 31 December 2005, the Commission was subject to a specific obligation with regard to the proof of exclusionary effects of the practice of a margin squeeze alleged against the applicant during that period (see the case-law referred to in paragraph 259 above).
Therefore, the Commission’s allegation and the documents invoked in support thereof are not sufficient to demonstrate the exclusionary effect of the practice of a margin squeeze alleged against the applicant and, for example, a reduction of profitability, likely to make it at least more difficult for the operators concerned to exercise their activities on the market at issue.
Moreover, sections 9 and 10 of the contested decision, which deal with the anticompetitive effects of the applicant’s conduct, do not contain any examination of the effects of the practice of a margin squeeze alleged during the period between 12 August and 31 December 2005.
Therefore, in the light of settled case-law according to which any doubt in the mind of the Court must operate to the advantage of the undertaking to which the decision finding an infringement was addressed (judgments of 8 July 2004, JFE Engineering and Others v Commission, T‑67/00, T‑68/00, T‑71/00 and T‑78/00, EU:T:2004:221, paragraph 177, and of 12 July 2011, Hitachi and Others v Commission, T‑112/07, EU:T:2011:342, paragraph 58), it must be concluded that the Commission has not provided proof that the practice leading to a margin squeeze by the applicant had begun before 1 January 2006. Since the contested decision is, consequently, vitiated by an error of assessment on that point, it is not necessary to examine whether that approach also infringed Article 23 of Regulation No 1/2003, as the applicant claims.
In the light of the above, the second part of the third plea in law invoked by the applicant must be partially upheld and Article 1(2)(d) of the contested decision must be annulled in so far as it declares that, over the course of the period between 12 August and 31 December 2005, the applicant imposed unfair tariffs which do not allow an equally efficient competitor relying on wholesale access to its unbundled local loops to replicate the retail broadband services offered by the applicant without incurring a loss.
[…]
5. The fifth plea in law, raised in the alternative, alleging errors in the determination of the amount of the fine
By its fifth plea in law, raised in the alternative, the applicant claims that the Commission committed errors in the calculation of the amount of the fine imposed on it. That plea is divided into two parts. The first part alleges a manifest error of assessment where the Commission took account of the applicant’s turnover for the 2010 financial year for the purpose of calculating the amount of the fine. The second part alleges a manifest error of assessment relating to the date on which the infringement period commenced.
(a) First part alleging a manifest error of assessment as a result of the applicant’s turnover for the 2010 financial year being taken into account for the purpose of calculating the amount of the fine
The applicant considers that the Commission committed a manifest error of assessment in finding, in accordance with point 13 of the 2006 Guidelines, that the basic amount of the fine had to be calculated on the basis of the turnover for the last full year of the infringement, namely, in particular, the applicant’s turnover on the unbundled local loop market and fixed broadband market in 2010.
In so doing, the Commission diverged from its own decision-making practice, namely Decision C(2011) 4378 final, of 22 June 2011, relating to a proceeding under Article 102 TFEU (Case COMP/39.525 — Polish telecommunications) (‘the Polish Telecommunications decision’). In recital 896 of that decision, the Commission found that it was appropriate to take the average annual sales due, first, to the significant growth in sales during the period in question in the relevant market, particularly wholesale sales and, secondly, to the fact that the market was still developing and hence growing beyond normal market growth rates at the time of the infringement. That consideration should be applied to the present case since the Commission admitted in the contested decision that the applicant’s turnover had grown by 133% between 2005 and 2010. Therefore, relying on that decision, the applicant argues that the basic amount of the fine should have been calculated on the basis of the average of the five years of infringement found by the Commission.
By relying on the last financial year, the Commission applied stricter standards to the applicant than in the Polish Telecommunications decision. The applicant also states that although the Commission enjoys a margin of discretion in setting the amount of fines, it cannot act in an arbitrary and inconsistent manner.
The Commission, supported by the intervener, contests those arguments.
It is necessary, first of all, to note that Article 23(3) of Regulation No 1/2003 provides that, in fixing the amount of the fine, regard must be had both to the gravity and to the duration of the infringement.
Moreover, it should be noted that, according to point 13 of the 2006 Guidelines, ‘in determining the basic amount of the fine to be imposed, the Commission will take the value of the undertaking’s sales of goods or services to which the infringement directly or indirectly relates in the relevant geographic area within the EEA’ and that for that purpose, it ‘will normally take the sales made by the undertaking during the last full business year of its participation in the infringement …’.
It is apparent, moreover, from the case-law that the proportion of the turnover accounted for by the goods or services in respect of which the infringement was committed gives a proper indication of the scale of the infringement on the relevant market, since the turnover in those goods or services constitutes an objective criterion giving a proper measure of the harm which that practice does to normal competition (see, to that effect, judgment of 28 June 2016, Portugal Telecom v Commission, T‑208/13, EU:T:2016:368, paragraph 236 and the case-law cited).
Point 13 of the 2006 Guidelines thus aims, as regards an infringement of Article 102 TFEU, to adopt as the starting point for the calculation of the amount of the fine imposed on the undertaking at issue an amount which reflects the economic significance of the infringement (see, to that effect, judgments of 11 July 2013, Team Relocations and Others v Commission, C‑444/11 P, not published, EU:C:2013:464, paragraph 76; of 12 November 2014, Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 57; and of 23 April 2015, LG Display and LG Display Taiwan v Commission, C‑227/14 P, EU:C:2015:258, paragraph 53).
However, it should also be noted that the self-limitation of the Commission’s discretion arising from the adoption of the 2006 Guidelines is not incompatible with that institution maintaining a substantial margin of discretion. Those guidelines display flexibility in a number of ways, enabling the Commission to exercise its discretion in accordance with the provisions of Regulation No 1/2003, as interpreted by the EU Courts (see, to that effect, judgment of 11 July 2013, Team Relocations and Others v Commission, C‑444/11 P, not published, EU:C:2013:464, paragraph 96 and the case-law cited), and with other rules and principles of Union law. In particular, point 13 of the 2006 Guidelines itself states that the Commission must ‘normally’ use the sales made by the undertaking during the last full business year of its participation in the infringement for the calculation of the amount of the basic fine (see, to that effect, judgment of 9 September 2015, Samsung SDI and Others v Commission, T‑84/13, not published, EU:T:2015:611).
In the present case, it is apparent from recitals 1490 to 1495 of the contested decision that, in order to determine the basic amount of the fine imposed jointly and severally on the applicant and on Deutsche Telekom, the Commission took account of the sales made by the applicant during the last full business year of its participation in the infringement, namely the turnover achieved by that operator on the market for access to unbundled local loops for fixed retail broadband in 2010. The Commission thus applied point 13 of the 2006 Guidelines.
The applicant cannot be followed when it claims that the Commission committed a manifest error of assessment by not deviating from that rule in the present case, despite the sharp increase in its turnover during the period under consideration.
First, although the applicant claims that, between 2005 and 2010, its turnover increased by 133%, from EUR 31184949 to EUR 72868176, it nevertheless does not put forward any evidence capable of establishing that that latter turnover, achieved over the last full calendar year of the infringement, did not constitute, at the time when the Commission adopted the contested decision, an indication of its true size, of its economic power on the market and of the scope of the infringement at issue.
Secondly, the applicant cannot be followed when it complains that the Commission ignored its Polish Telecommunications decision and, as a result, disregarded its previous practice and imposed a criterion different from that provided for in point 13 of the 2006 Guidelines.
It is apparent from settled case-law that the Commission’s practice in previous decisions does not itself serve as a legal framework for the fines imposed in competition matters and that decisions in other cases can give only an indication for the purpose of determining whether there might be discrimination since the facts of those cases, such as markets, products, the undertakings and periods concerned, are not likely to be the same (see judgments of 24 September 2009, Erste Group Bank and Others v Commission, C‑125/07 P, C‑133/07 P and C‑137/07 P, EU:C:2009:576, paragraph 233 and the case-law cited; of 16 June 2011, Heineken Nederland and Heineken v Commission, T‑240/07, EU:T:2011:284, paragraph 347; and of 27 February 2014, InnoLux v Commission, T‑91/11, EU:T:2014:92, paragraph 144).
Therefore, previous decisions by the Commission imposing fines can be relevant from the point of view of observance of the principle of equal treatment only where it is demonstrated that the facts of the cases in those other decisions, such as markets, products, the countries, the undertakings and periods concerned, are comparable to those of the present case (see judgments of 13 September 2010, Trioplast Industrier v Commission, T‑40/06, EU:T:2010:388, paragraph 145 and the case-law cited; of 29 June 2012, E.ON Ruhrgas and E.ON v Commission, T‑360/09, EU:T:2012:332, paragraph 262 and the case-law cited; and of 9 September 2015, Philips v Commission, T‑92/13, not published, EU:T:2015:605, paragraph 204 and the case-law cited).
In the present case, the applicant has not put forward any evidence capable of establishing that the facts of the case which gave rise to the Polish Telecommunications decision were comparable to those of the present case. The Commission stated in its pleadings that, in that case, it had taken into account the average of the turnover of 2005 to 2009 on the ground that the relevant turnover of the period concerned had grown exponentially, namely an increase of 2800% for the period from 2006 to 2007, an increase of 370% for the period from 2007 to 2008 and an increase of 160% for the period from 2008 to 2009. It follows from that turnover, the correctness of which is not called into question by the applicant, that, first, the rate of growth of the turnover was much higher in the case giving rise to the Polish Telecommunications decision than that of the applicant’s turnover in the present case and, secondly, that that turnover evolved in a less stable way than the turnover observed in the present case.
It follows from the above that, by taking into account in the present case the turnover achieved by the applicant during the year ending 31 December 2010, namely the last full business year of participation in the infringement, and by thus complying with its own rule set out in point 13 of the 2006 Guidelines, the Commission did not exceed the limits of its discretion concerning the determination of the amount of fines.
The first part of the fifth plea in law must therefore be rejected as unfounded.
(b) Second part, alleging a manifest error of assessment relating to the date on which the infringement period commenced
By its second part, the applicant claims that the contested decision is vitiated by a manifest error of assessment in so far as it finds the existence of an infringement commencing on 12 August 2005, the date on which the reference offer was published. As a framework contract, that offer was meant to evolve, particularly in the course of negotiations with third parties or following advice provided by national regulatory authorities.
More particularly, the applicant notes, first, that that offer was the first the applicant had ever drawn up, which made clarifications and amendments through negotiations all the more necessary.
Secondly, the Commission’s position according to which that infringement starts with the publication of the reference unbundling offer is not consistent with its decision-making practice. By way of example, in its Decision C(2004) 1958 final, of 2 June 2004 (Case COMP/38.096 — Clearstream) (‘the Cleastream decision’), the Commission concluded that Clearstream had abused its dominant position by constructively refusing to supply Euroclear with primary clearing and settlement services for registered shares. The Commission, nevertheless, acknowledged that it was necessary to give the parties some time to enable them to negotiate the terms and conditions of the contracts (recital 341 of the Clearstream decision). Likewise, in its Polish Telecommunications decision, the Commission did not take the date of publication of the reference offer as the starting date of the infringement, but the day of the beginning of its first negotiations with the other operators.
The applicant states that a refusal to supply infringement can only exist after access negotiations have failed due to the unreasonableness of the conditions set by the network holder. Furthermore, according to the applicant, the onus was on the Commission to prove at what point in time the negotiations failed due to the applicant’s unreasonable demands. Moreover, account needs to be taken of the fact that access negotiations are by definition long and cumbersome given the complexity of the matter.
In the alternative, the applicant considers that the alleged refusal to grant access starts either at the end of a reasonable period that granting access would normally require involving preparations from both sides (recital 341 of the Clearstream decision) or on the start date of the initial access negotiations with alternative operators (recital 909 of the Polish Telecommunications decision).
The Commission, supported by the intervener, disputes those arguments.
In that regard, it is not disputed that, by his decision of 14 June 2005, the Chairman of TUSR required the applicant to provide unbundled access to its local loop under fair and reasonable conditions, and that it is with a view to fulfilling that obligation that the applicant published, on 12 August 2005, a reference unbundling offer (see paragraphs 9 and 10 above).
Moreover, the applicant does not dispute the description of the contents of its reference offer made in section 7.6 of the contested decision (‘ST’s unfair terms and conditions’), according to which the Commission concluded, in recital 820 of that decision, that the terms and conditions of that offer had been set so as to render unbundled access to the local loop unacceptable for the alternative operators.
It is apparent from that part of the contested decision that the abusive practices which are there classified as ‘refusal to supply’ by the Commission resulted, essentially, from the reference offer itself.
Therefore, as regards, firstly, the lack of disclosure to alternative operators of information relating to the applicant’s network, which is necessary for the unbundling of the local loop, it follows first of all from recital 439 of the contested decision that the Commission considered that the reference offer did not contain the basic information regarding the locations of physical access sites and the availability of local loops in specific parts of the access network. Furthermore, in recitals 443 to 528 of the contested decision, the Commission admittedly examined the information relating to the network provided by the applicant at the request of an alternative operator with a view to unbundling. However, it follows also from that part of the contested decision that the arrangements for access to such information which were considered by the Commission to be unfair and, therefore, dissuasive for alternative operators resulted from the reference offer itself. The Commission in particular criticised the fact, in the first place, that the reference offer had not determined the exact scope of the information relating to the network that the applicant would place at the disposal of alternative operators, by specifying the categories of information concerned (recital 507 of the contested decision), in the second place, that that offer provided access to information from the non-public information systems only after the conclusion of the framework agreement on access to the local loop (recital 510 of the contested decision) and, in the third place, that that offer made such access to information relating to the applicant’s network subject to the payment by the alternative operator of large fees (recitals 519 and 527 of the contested decision).
As regards, secondly, the reduction of the scope of its regulatory obligation concerning unbundled access to the local loop, first of all, it follows from recitals 535 and 536 of the contested decision that the restriction of that obligation to active lines only (see paragraph 32 above), alleged of the applicant by the Commission, resulted from paragraph 5.2 of the introductory part of its reference offer. Next, it follows in particular from recitals 570, 572, 577, 578 and 584 of the contested decision that it is in the light of stipulations contained in Annex 3 to that reference offer that the Commission inferred that the applicant had unjustifiably excluded conflicting services from its obligation relating to unbundled access to the local loop (see paragraph 33 above). Finally, it follows from recital 606 of the contested decision that the 25% cable use limitation rule imposed by the applicant for unbundled access to the local loop and regarded by the Commission as unjustified (see paragraph 34 above), resulted from Annex 8 to the reference offer.
As regards, thirdly, the setting by the applicant of unfair conditions relating to unbundling regarding collocation, qualification, forecasting, repairs, service and maintenance and bank guarantee, they all resulted, as is shown in section 7.6.4 of the contested decision, from the reference offer published by that operator on 12 August 2005. Also, the terms which are considered by the Commission to be unfair were included respectively in Annexes 4, 5, 14 and 15 to that offer as regards collocation (recitals 653, 655 and 683 of the contested decision), in Annexes 12 and 14 as regards the alternative operators’ forecasting obligation (recitals 719 and 726 to 728 of the contested decision), in Annex 5 as regards the qualification procedure of the local loops (recitals 740, 743, 767, 768 and 774 of the contested decision), in Annex 11 as regards the terms and conditions relating to repairs, service and maintenance (recitals 780, 781, 787, 790 and 796 of the contested decision), and in Annexes 5 and 17 as regards the bank guarantee required from the alternative operator which is a candidate for unbundled access (recitals 800, 802 to 807, 815 and 816 of the contested decision).
It follows that, even assuming that some of those terms of access were liable to be relaxed in the context of bilateral negotiations between the applicant and operators seeking access, which the applicant merely affirms without corroborating evidence, the Commission correctly concluded that the reference offer published on 12 August 2005 was capable of dissuading as from that date applications for access made by alternative operators, due to the unfair terms and conditions which it contained.
In those circumstances, the Commission did not commit an error in finding that, as a result of the terms of access in its reference offer published on 12 August 2005, the applicant had compromised the entry of alternative operators onto the mass (or general public) retail market for broadband services at a fixed location in Slovakia, in spite of the obligation imposed on it in that regard under TUSR’s decision, and that that conduct was therefore capable of having such negative effects on competition from that date (see, inter alia, recitals 1048, 1050, 1109, 1184 and 1520 of the contested decision).
That conclusion is not undermined by the applicant’s claim that the Commission infringed its own decision-making practice, namely the approach adopted in the Clearstream decision and in the Polish Telecommunications decision. It suffices to note that those decisions were made in a context which is different from that of the present case and that they are therefore not capable of establishing that in the contested decision the Commission diverged from its previous decision-making practice.
Therefore, in the first place, as regards the Clearstream decision, it suffices to note that that decision, unlike the contested decision in the present case, was taken in a context characterised by the absence of any regulatory obligation for the undertaking which owns the infrastructure at issue to grant other undertakings access to that infrastructure, and by the absence of an obligation imposed on that undertaking to publish a reference offer setting out the terms and conditions of such access.
Moreover, the period of four months, which the General Court considered to correspond to the reasonable time limit for the provision of the primary clearing and settlement services by Clearstream, had been established by comparing the examples in which Clearstream granted access to its Cascade RS system. Therefore, it should be noted that, in that case, there were several examples in which Clearstream had granted access, which allowed the Commission, and later the Court, to reach the conclusion that the period of four months was reasonable to grant such access (judgment of 9 September 2009, Clearstream v Commission, T‑301/04, EU:T:2009:317, paragraph 151). However, in the present case, since the applicant gave access to its local loops only to one other operator on 18 December 2009, there was no example which could serve as a reference, so that the Commission could not fix such a ‘reasonable period’. It follows that the circumstances of the present case are not comparable with those of the case giving rise to the judgment of 9 September 2009, Clearstream v Commission (T‑301/04, EU:T:2009:317).
In the second place, as regards the Polish Telecommunications decision, the Commission found that the incumbent operator at issue had abused its dominant position on the Polish wholesale market for broadband access and unbundled access to the local loop, by refusing to give access to its network and to supply wholesale products from those markets in order to protect its position on the retail market. Moreover, the context of the Polish Telecommunications case was characterised by a regulatory obligation to grant access similar to that imposed on the applicant in the present case, and by the obligation imposed on the Polish Telecommunications operator at issue to publish a reference offer for unbundled access to its local loop. Nevertheless, it is apparent from a detailed analysis of the Polish Telecommunications decision that the approach taken in that decision is not inconsistent with that taken in the contested decision. In the Polish Telecommunications decision, the Commission noted that the dominant operator’s anticompetitive strategy essentially materialised only in the course of negotiations with alternative operators which were candidates for the grant of unbundled access to the local loop and wholesale access to the dominant operator’s broadband services. Therefore, the unreasonable access conditions resulted from proposals for access contracts made by the dominant operator at issue in the context of negotiations with alternative operators. Furthermore, the delay in the process of negotiating access agreements could not, by hypothesis, have been identified upon the publication of the dominant operator’s first reference offer. In addition, the limitation of access to its network carried out by the dominant operator took place at a later stage than the conclusion of the wholesale access agreements with the alternative operators. Moreover, the limitation of effective access to subscriber lines took place after the alternative operator concerned obtained access to a collocation space or the authorisation to install a correspondence cable. Finally, the problems of access to reliable and accurate general information which is necessary for alternative operators to take decisions relating to access were manifest at every step of the procedure for access to the dominant operator’s network. The conduct of the dominant operator in the Polish Telecommunications case was therefore different from the practices which were classified as ‘refusal to supply’ by the Commission in the contested decision, practices which, as is apparent from the analysis in paragraphs 455 to 459 above, resulted essentially from the reference offer for unbundled access to the local loop of the applicant itself. In contrast to the Polish Telecommunications decision in which the starting point of the infringement of Article 102 TFEU was fixed at the date on which the first access negotiations between the dominant operator at issue and an alternative operator had begun, several months after the publication of the first reference offer (recital 909 and the footnote to page 1259 of the contested decision), those differences justify the Commission identifying, in the present case, 12 August 2005, that is to say the date of publication of the reference offer, as the date of commencement of the implied refusal of access to the local loop.
For the same reason, it is necessary to reject the applicant’s argument that the refusal to supply infringement can be established only after the access negotiations have failed due to the unreasonableness of the conditions set by the network holder. In addition, it is not certain that the negotiations could have led to the unfair terms and conditions in the reference offer being removed.
Concerning the applicant’s allegation that the Commission must bear the burden of proof in relation to the point in time the negotiations failed due to the applicant’s unreasonable demands, first, for the same reasons as those indicated in paragraphs 461 to 464 above, that date cannot be relevant in order to determine the start of the infringement. Secondly, as the intervener contended, the exact date of the failure of the negotiations cannot be objectively determined, so that the Commission is not required to provide such proof.
As regards the arguments presented in the alternative, in so far as the applicant considers that the alleged refusal to grant access should start at the end of a reasonable period that granting access would normally require involving preparations from both sides (recital 341 of the Clearstream decision), it should be noted that such a reasonable period does not exist in the present case for the reasons set out in paragraphs 460 to 462 above. Therefore, that argument must be rejected. In so far as the applicant intends the infringement to start on the date of the initial access negotiations with alternative operators (recital 909 of the Polish Telecommunications decision), as was considered, in essence, in paragraphs 463 and 464 above, the negotiations were not relevant for the purposes of determining the start of the infringement in this case. Consequently, that argument must also be rejected.
The second part, alleging an error committed by the Commission when it found that the implied refusal of access to the local loop began on 12 August 2005, must therefore be rejected as unfounded.
It should be added that the applicant does not dispute the classification of a single and continuous infringement adopted by the Commission with respect to all of the practices mentioned in Article 1(2) of the contested decision, namely (a) withholding from alternative operators network information necessary for the unbundling of local loops; (b) reducing the scope of its obligations regarding unbundled local loops; (c) setting unfair terms and conditions in its reference unbundling offer regarding collocation, qualification, forecasting, repairs and bank guarantees; (d) applying unfair tariffs which do not allow an equally efficient competitor relying on wholesale access to the unbundled local loops of the applicant to replicate the retail broadband services offered by the applicant without incurring a loss.
In those circumstances, and in so far as the second part of the present plea in law, alleging an error committed by the Commission when it found that the implied refusal of access to the local loop began on 12 August 2005, was rejected (see paragraph 467 above), the Commission was justified in finding that the single and continuous infringement which is the object of the contested decision had started on 12 August 2005.
Therefore, it is necessary to reject the fifth plea in law in its entirety.
It follows from all the foregoing that Article 1(2)(d) of the contested decision must be annulled in so far as it declares that, during the period between 12 August and 31 December 2005, the applicant applied unfair tariffs which do not allow an equally efficient competitor relying on wholesale access to its unbundled local loops to replicate the retail broadband services offered by it without incurring a loss (see paragraph 268 above). As a result, Article 2 of that decision must also be annulled in so far as it concerns the applicant. The remainder of the claim for annulment of the contested decision must be dismissed.
IV. The conclusions, put forward in the alternative, seeking variation of the amount of the fine
The applicant also requests the Court, in the alternative, to reduce the amount of the fines which were imposed on it by the contested decision.
It should be noted, in that regard, that, according to settled case-law, the review of legality provided for in Article 263 TFEU entails the EU judicature conducting a review, in respect of both the law and the facts, of the contested decision in the light of the arguments relied on by an applicant, which means that it has the power to assess the evidence, annul the decision and to alter the amount of the fines (see, to that effect, judgments of 3 September 2009, Prym and Prym Consumer v Commission, C‑534/07 P, EU:C:2009:505, paragraph 86 and the case-law cited; of 26 January 2017, Duravit and Others v Commission, C‑609/13 P, EU:C:2017:46, paragraph 30 and the case-law cited; and of 27 March 2014, Saint-Gobain Glass France and Others v Commission, T‑56/09 and T‑73/09, EU:T:2014:160, paragraph 461 and the case-law cited).
The review of legality is supplemented by the unlimited jurisdiction which Article 31 of Regulation No 1/2003, in conjunction with Article 261 TFEU, confers on the EU judicature. That jurisdiction empowers the Courts, beyond carrying out a mere review of legality with regard to the penalty, to substitute their own appraisal for the Commission’s and, consequently, to cancel, reduce or increase the fine or penalty payment imposed (judgments of 8 December 2011, Chalkor v Commission, C‑386/10 P, EU:C:2011:815, paragraph 63, and of 8 December 2011, KME Germany and Others v Commission, C‑389/10 P, EU:C:2011:816, paragraph 130; see, also, judgment of 26 January 2017, Duravit and Others v Commission, C‑609/13 P, EU:C:2017:46, paragraph 31 and the case-law cited).
It should be noted that the exercise of unlimited jurisdiction does not amount to a review of the Court’s own motion, and that proceedings before the Courts of the European Union are inter partes. Therefore, with the exception of pleas involving matters of public policy which the Courts are required to raise of their own motion, it is for the applicant, in principle, to raise pleas in law against the decision under appeal and to adduce evidence in support of those pleas (see, to that effect, judgment of 10 July 2014, Telefónica and Telefónica de España v Commission, C‑295/12 P, EU:C:2014:2062, paragraph 213 and the case-law cited).
It is in the light of those principles that it is necessary to determine whether the amount of the fines imposed by the Commission in the contested decision must be modified.
As is apparent from paragraphs 267, 268 and 471 above, the Commission has not provided evidence that that practice leading to a margin squeeze committed by the applicant could have started before 1 January 2006 and, consequently, Article 1(2)(d) of the contested decision must be annulled to the extent that it concerns the applicant and that it includes a margin squeeze which was committed between 12 August and 31 December 2005 in the single and continuous infringement.
As regards the impact of that error on the basic amount of the fine for which the applicant is jointly and severally liable, the Court considers, in the exercise of its unlimited jurisdiction, that it is necessary to reduce the proportion of the applicant’s relevant sales applied by the Commission and to establish that proportion at 9.8% instead of 10%. Since the applicant achieved over the course of the last full year of the infringement a relevant turnover of EUR 72868176, the amount which must be used to calculate the basic amount of the fine for which the applicant is jointly and severally liable is EUR 7 141 081.20. The basic amount of that fine corresponds to the multiplication of that amount by a coefficient of 5.33, reflecting the duration of the infringement, and must therefore be set at EUR 38061963. The applicant’s application for the amount of the fine to be reduced is dismissed as to the remainder.
As regards the Commission’s application, brought in the alternative during the hearing, for the amount of the fine imposed jointly and severally on the applicant and on Deutsche Telekom to be increased, the Court considers, without it even being necessary to rule on the admissibility of such an application, that, in the light of the circumstances of the case, it is not necessary to modify the amount fixed in paragraph 478 above.
V. Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Furthermore, under Article 134(3) of the Rules of Procedure, the parties are to bear their own costs where each party succeeds on some and fails on other heads. However, if it appears justified in the circumstances of the case, the Court may order that one party, in addition to bearing its own costs, pay a proportion of the costs of the other party. In the present case, the Commission and the intervener have failed on some heads. Nevertheless, the applicant has not applied for the intervener to be ordered to pay the costs, but only for the Commission to be so ordered.
In those circumstances, the applicant must be ordered to bear four fifths of its own costs, as well as four fifths of the costs of the Commission and the intervener, in accordance with the form of order sought by them. The Commission is to bear one fifth of its own costs and of those of the applicant. The intervener is to bear one fifth of its own costs.
On those grounds,
THE GENERAL COURT (Ninth Chamber, Extended Composition)
hereby:
1.
Annuls Article 1(2)(d) of Commission Decision C(2014) 7465 final of 15 October 2014 relating to proceedings under Article 102 TFEU and Article 54 of the EEA Agreement (Case AT.39523 — Slovak Telekom) in so far as it declares that, over the course of the period between 12 August and 31 December 2005, Slovak Telekom, a.s., imposed unfair tariffs which do not allow an equally efficient operator relying on wholesale access to its unbundled local loops to replicate the retail broadband services offered by it without incurring a loss;
2.
Annuls Article 2 of Decision C(2014) 7465 final in so far as it fixes the amount of the fine imposed jointly and severally on Slovak Telekom at EUR 38838000;
3.
Fixes the amount of the fine imposed jointly and severally on Slovak Telekom at EUR 38061963;
4.
Dismisses the action as to the remainder;
5.
Orders Slovak Telekom to bear four fifths of its own costs, four fifths of the costs of the European Commission and four-fifths of the costs of Slovanet, a.s.;
6.
Orders the Commission to bear one fifth of its own costs and one fifth of the costs incurred by Slovak Telekom;
7.
Orders Slovanet to bear one fifth of its own costs.
Van der Woude
Gervasoni
Madise
da Silva Passos
Kowalik-Bańczyk
Delivered in open court in Luxembourg on 13 December 2018.
E. Coulon
Registrar
S. Gervasoni
President
( *1 ) Language of the case: English.
( ) Only the paragraphs of the present judgment which the Court considers it appropriate to publish are reproduced here. |
JUDGMENT OF THE COURT (Fifth Chamber)
24 November 2016 ( *1 )
‛Failure of a Member State to fulfil obligations — Directive 2009/147/EC — Conservation of wild birds — Special protection areas — Directive 85/337/EEC — Assessment of the effects of certain public and private projects on the environment — Directive 92/43/EEC — Conservation of natural habitats’
In Case C‑461/14,
ACTION under Article 258 TFEU for failure to fulfil obligations, brought on 7 October 2014,
European Commission, represented by C. Hermes, E. Sanfrutos Cano, D. Loma-Osorio Lerena and G. Wilms, acting as Agents,
applicant,
v
Kingdom of Spain, represented by A. Gavela Llopis, acting as Agent,
defendant,
THE COURT (Fifth Chamber)
composed of J.L. da Cruz Vilaça, President of the Chamber, M. Berger, A. Borg Barthet (Rapporteur), E. Levits and F. Biltgen, Judges,
Advocate General: N. Wahl,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after hearing the Opinion of the Advocate General at the sitting on 23 February 2016,
gives the following
Judgment
By its action, the European Commission asks the Court to declare that, by failing to take appropriate steps to avoid, in the special protection area (‘the SPA’) ‘Campiñas de Sevilla’, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which that area was established, the Kingdom of Spain has failed to fulfil its obligations under Article 3 of Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment (OJ 1985 L 175, p. 40), as amended by Council Directive 97/11/EC of 3 March 1997 (OJ 1997 L 73, p. 5) (‘Directive 85/337’), Article 4(4) of Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ 2009 L 20, p. 7) (‘the Birds Directive’), and Article 6(2) of Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ 1992 L 206, p. 7) (‘the Habitats Directive’).
Legal context
Directive 85/337
In accordance with Article 2(1) of Directive 85/337, Member States are to adopt all measures necessary to ensure that, before consent is given, projects likely to have significant effects on the environment by virtue inter alia, of their nature, size or location are made subject to an assessment with regard to their effects. Those projects are defined in Article 4 of that directive.
Article 3 of that directive reads as follows:
‘The environmental impact assessment shall identify, describe and assess in an appropriate manner, in the light of each individual case and in accordance with Articles 4 to 11, the direct and indirect effects of a project on the following factors:
—
human beings, fauna and flora;
—
soil, water, air, climate and the landscape;
—
material assets and the cultural heritage;
—
the interaction between the factors mentioned in the first, second and third indents.’
Article 4 of that directive provides:
‘1. ... Projects listed in Annex I shall be made subject to an assessment in accordance with Articles 5 to 10.
2. ... For projects listed in Annex II, the Member States shall determine through:
(a)
a case-by-case examination,
or
(b)
thresholds or criteria set by the Member State
whether the project shall be made subject to an assessment in accordance with Articles 5 to 10.
Member States may decide to apply both procedures referred to in (a) and (b).
3. When a case-by-case examination is carried out or thresholds or criteria are set for the purpose of paragraph 2, the relevant selection criteria set out in Annex III shall be taken into account.
…’
Annex I to Directive 85/337 contains a list of projects referred to in Article 4(1) thereof. It mentions, in point 7(a) and (b), the ‘construction of lines for long-distance railway traffic and of airports with a basic runway length of 2100 m or more’ and the ‘construction of motorways and express roads’.
Point 2 of Annex III to that directive, entitled ‘Location of projects’ provides, with regard to the selection criteria set out in Article 4(3) of that directive:
‘The environmental sensitivity of geographical areas likely to be affected by projects must be considered, having regard, in particular, to:
—
the existing land use;
—
the relative abundance, quality and regenerative capacity of natural resources in the area;
—
the absorption capacity of the natural environment, paying particular attention to the following areas:
(a)
wetlands;
…
(d)
nature reserves and parks;
(e)
areas classified or protected under Member States’ legislation; special protection areas designated by Member States pursuant to [Council Directive 79/409/EEC of 2 April 1979 on the conservation of wild birds (OJ 1979 L 103, p. 1), and the Habitats Directive];
…’
The Birds Directive
Directive 79/409 has been substantially amended several times. Thus, in the interests of clarity and rationality that directive was codified by the Birds Directive.
According to its Article 1, the Birds Directive relates to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States to which the FEU Treaty applies. It covers the protection, management and control of these species and lays down rules for their exploitation.
Article 4 of that directive provides:
‘1. The species mentioned in Annex I shall be the subject of special conservation measures concerning their habitat in order to ensure their survival and reproduction in their area of distribution.
In this connection, account shall be taken of:
(a)
species in danger of extinction;
(b)
species vulnerable to specific changes in their habitat;
(c)
species considered rare because of small populations or restricted local distribution;
(d)
other species requiring particular attention for reasons of the specific nature of their habitat.
Trends and variations in population levels shall be taken into account as a background for evaluations.
Member States shall classify in particular the most suitable territories in number and size as special protection areas for the conservation of these species in the geographical sea and land area where this Directive applies.
2. Member States shall take similar measures for regularly occurring migratory species not listed in Annex I, bearing in mind their need for protection in the geographical sea and land area where this Directive applies, as regards their breeding, moulting and wintering areas and staging posts along their migration routes. To this end, Member States shall pay particular attention to the protection of wetlands and particularly to wetlands of international importance.
…
4. In respect of the protection areas referred to in paragraphs 1 and 2, Member States shall take appropriate steps to avoid pollution or deterioration of habitats or any disturbances affecting the birds, in so far as these would be significant having regard to the objectives of this Article. Outside these protection areas, Member States shall also strive to avoid pollution or deterioration of habitats.’
Amongst several other species, Otis tarda (the Great Bustard) is mentioned in Annex I to the directive.
The Habitats Directive
According to Article 2(1) of the Habitats Directive, the aim of the directive is to contribute towards ensuring biodiversity through the conservation of natural habitats and of wild fauna and flora in the European territory of the Member States to which the Treaty applies.
Article 6(1) to (3) of that directive provides:
‘1. For special areas of conservation, Member States shall establish the necessary conservation measures involving, if need be, appropriate management plans specifically designed for the sites or integrated into other development plans, and appropriate statutory, administrative or contractual measures which correspond to the ecological requirements of the natural habitat types in Annex I and the species in Annex II present on the sites.
2. Member States shall take appropriate steps to avoid, in the special areas of conservation, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which the areas have been designated, in so far as such disturbance could be significant in relation to the objectives of this Directive.
3. Any plan or project not directly connected with or necessary to the management of the site but likely to have a significant effect thereon, either individually or in combination with other plans or projects, shall be subject to appropriate assessment of its implications for the site in view of the site’s conservation objectives. In the light of the conclusions of the assessment of the implications for the site and subject to the provisions of paragraph 4, the competent national authorities shall agree to the plan or project only after having ascertained that it will not adversely affect the integrity of the site concerned and, if appropriate, after having obtained the opinion of the general public.’
Under Article 7 of that directive:
‘Obligations arising under Article 6(2), (3) and (4) of this Directive shall replace any obligations arising under the first sentence of Article 4(4) of Directive 79/409/EEC in respect of areas classified pursuant to Article 4(1) or similarly recognised under Article 4(2) thereof, as from the date of implementation of this Directive or the date of classification or recognition by a Member State under Directive 79/409/EEC, where the latter date is later.’
Background to the dispute and the pre-litigation procedure
Following a complaint lodged in the month of February 2010 concerning a project for the construction of a high-speed railway line between Seville (Spain) and Almería (Spain), sections ‘Marchena-Osuna I’, ‘Marchena-Osuna II’ and ‘Variante de Osuna’, the Commission sent, on 17 June 2011, a letter of formal notice to the Kingdom of Spain in which it stated that that State had failed to fulfil its obligations under Article 3 of Directive 85/337, Article 4(4) of the Birds Directive and Article 6(2) of the Habitats Directive. That complaint was accompanied by a report on the potential impacts of the works on the railway corridor crossing Andalucía as it passes through the SPA ‘Campiñas de Sevilla’.
Overall, the project makes provision, first, for infrastructure improvements and adaptation of the existing railway line and, secondly, further installation works required for the implementation and commissioning of the new railway platform.
With regard to the section relating to the improvement and adaptation of the existing track, the environmental impact assessment was submitted for public consultation on 4 July 2006. By decision of 26 November 2006, an environmental impact statement was adopted in accordance with that assessment. The works relating to the infrastructure began on 4 December 2007 and were interrupted in 2009. That project makes provision to cross a natural site, classified by the Spanish authorities on 29 July 2008 as an SPA for birds. That area was declared as an SPA after authorisation of the project in question and after the environmental impact statement in respect of that project by the Spanish authorities. However, the site in question was already included, since 1998, under No 238 of the list of areas of importance for the conservation of birds in Europe, namely in the Inventory of Important Bird Areas in the European Community (‘the IBA 98’).
On 20 July 2011, the Kingdom of Spain asked the Commission for an extension of the prescribed period for reply, which was granted.
On 20 September 2011, the Kingdom of Spain replied to the letter of formal notice.
By letter of 20 June 2013, the Commission delivered a reasoned opinion in which it complained that the Kingdom of Spain had failed to fulfil its obligations under Article 3 of Directive 85/337, Article 4(4) of the Birds Directive and Article 6(2) of the Habitats Directive.
On 21 August 2013, the Kingdom of Spain replied to that reasoned opinion by enclosing with its letter an annex presenting a report entitled ‘Análisis de la afección del Eje Ferroviario Transversal a la avifauna de la ZEPA Campiñas de Sevilla’ (Analysis of the impacts of the railway corridor crossing the bird areas of the SPA ‘Campiñas de Sevilla’), drawn up in the month of July 2013 by the Environment and Water Management Agency of the Consejería de Agricultura, Pesca y Medio Ambiente de la Junta de Andalucía (Regional Ministry for Agriculture, Fisheries and the Environment of the Region of Andalucía, Spain).
Taking the view that the measures taken by the Kingdom of Spain remained unsatisfactory, the Commission decided to bring the present action.
Admissibility of the action
Arguments of the parties
The Kingdom of Spain challenges the admissibility of the action on the ground that the application was based on a complaint different from that relied on during the pre-litigation procedure.
That Member State submits, in that regard, that, during the pre-litigation procedure, the subject matter of the dispute was clearly limited to the ‘Marchena-Osuna I’ and ‘Marchena-Osuna II’ sections of the railway line. However, in its application, the Commission also criticised the Kingdom of Spain for not having complied with the requirements of Directive 85/337 concerning the section ‘Variante de Osuna’, with a length of 3 km, thus broadening the subject matter of the dispute.
The Commission recalls that the infringement proceedings were initiated following a complaint concerning the project for the ‘Marchena-Osuna I’, ‘Marchena-Osuna II’ and ‘Variante de Osuna’ sections of a new high-speed railway line between Seville and Almería. Therefore, it is claimed that, although the facts constituting the failure explicitly referred to in the proceedings are those concerning the ‘Marchena-Osuna I’ and ‘Marchena-Osuna II’ sections, a reference to the wider context of the project is relevant.
Findings of the Court
First of all, in this case, the Court notes that the validity of the reasoned opinion and of the procedure which preceded it is not in dispute. Nevertheless, the Kingdom of Spain contends that the complaint put forward in the application differs from that contained in the letter of formal notice and the reasoned opinion.
It should be recalled in that regard that, in accordance with settled case-law, the letter of formal notice from the Commission to the Member State concerned, and then the reasoned opinion issued by the Commission, delimit the subject matter of the dispute, so that it cannot thereafter be extended. The opportunity for the Member State concerned to submit its observations, even if it chooses not to make use of it, is an essential guarantee intended by the Treaty, adherence to which is an essential formal requirement of the procedure for finding that a Member State has failed to fulfil its obligations. Consequently, the reasoned opinion and the proceedings brought by the Commission must be based on the same complaints as those set out in the letter of formal notice initiating the pre-litigation procedure (judgment of 3 September 2014, Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraph 23 and the case-law cited).
Nevertheless, the Commission may, after the letter of formal notice, clarify its complaints, provided that the subject matter of those complaints remains in substance the same (judgment of 3 September 2014, Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraph 24).
In the present case, it should be noted that the subject matter of the dispute, as defined during the pre-litigation procedure, has been extended or altered.
It should be pointed out that the section ‘Variante de Osuna’ was not examined during the pre-litigation procedure and that the action must, therefore, be declared inadmissible in so far as that section is concerned.
The infringement
The first complaint, alleging infringement of Article 3 of Directive 85/337
Arguments of the parties
The Commission states, above all, that it does not deny that an environmental impact assessment has been carried out for the entire project in question, nor does it claim that that project was divided into several sections in order to avoid the assessment of the cumulative effects of those sections on the environment. Its first complaint thus relates to the fact that the environmental impact assessment which was carried out does not satisfy the requirements of Article 3 of Directive 85/337.
The Commission criticises the Kingdom of Spain for having failed to fulfil the obligations arising under Article 3 of that directive, in so far as it has neither identified nor described, nor adequately assessed the effects of the high-speed railway line project in question on the environment and more specifically on bird areas. The environmental impact assessment in question did not take into account the fact that the railway line would pass through an ecologically sensitive area whose importance had been recognised by the scientific community since 1998 and was included in the IBA 98.
According to the Commission, the environmental impact statement in question did not mention habitats of vital importance for bird life, such as wetlands, namely the Ojuelos lagoon. In addition, the species of birds present in the area in question were simply listed and there was absolutely no assessment of the impact of the project on the affected species. Furthermore, the findings of the environmental impact assessment which was conducted are, it is claimed, limited to two general protective measures, namely the interruption of work during the periods of breeding and rearing of offspring and the requirement to adopt measures to prevent the risk of electrocution of birds.
The Commission also stresses that the project in question will continue to affect birds even after completion of the works. The operation of a high-speed railway line, it is claimed, clearly has an impact on bird life, such as noise and the risk of collision or even electrocution, which were not considered during the environmental impact assessment carried out by the Spanish authorities. In its reply, the Commission argues that, as the ultimate goal of the project is the implementation and commissioning of a new high-speed line, the operational phase of that line should have been taken into consideration in the initial impact assessment to avoid a situation where dividing up the project leads to inconsistencies in the full environmental protection that is sought.
Due to the absence of an adequate assessment of the environmental impact of the project in question, the Spanish authorities, it is claimed, also failed to fulfil their obligation to inform the public concerned of the likely effects of that project on the area concerned before the decision was taken regarding the application for implementation of that project.
The Commission considers that the fact that the proposed high-speed railway line runs parallel to an ordinary railway line does not have the effect of limiting the harmful effects on birds. A high-speed rail line, it claims, has more intense and invasive effects than those likely to occur in the case of an ordinary railway line, and those effects have not been correctly assessed with regard not only to the necessary works and installations, but also regarding the subsequent operation of the high-speed railway line.
The Commission submits that Directive 85/337 gives particular importance to the assessment of the likely effects of a project when it is to be implemented on sites of ecological importance, in particular in accordance with point 2, entitled ‘Location of projects,’ in Annex III to that directive, which indicates, with regard to the criteria referred to in Article 4(3) of that directive, that particular attention be paid to wetlands.
Furthermore, the Commission considers that the undertaking made by the Kingdom of Spain to carry out a further environmental impact assessment confirms that the authorisation of the project was not preceded by an appropriate assessment of those impacts.
The Kingdom of Spain denies the alleged failure to fulfil obligations. It contends, first, that there is no statutory requirement to mention in the environmental impact statements that a site is included in an inventory of important bird areas (IBA) in the European Union. The Court, it is contended, has acknowledged on several occasions that an IBA had no binding effect (judgment of 19 May 1998, Commission v Netherlands, C‑3/96, EU:C:1998:238, paragraph 70). The only value which the Court attributes to an IBA is that it can be used by a Member State as a basis of reference for assessing whether, in the absence of scientific proof to the contrary, it has classified a sufficient number and area of sites as SPAs (judgment of 28 June 2007, Commisson v Spain, C‑235/04, EU:C:2007:386, paragraphs 26 and 27).
Thus, the argument put forward by the Commission is, it is contended, irrelevant in that it assesses whether there is a breach of Article 3 of Directive 85/337 on account of the fact that the environmental impact assessment does not refer to direct and indirect effects on the environment in general and on birds in particular. The only relevant fact, it is argued, is that the environmental impact assessment identifies the wildlife affected and allows appropriate measures to be taken to avoid and remedy any damaging effects. The environmental impact assessment which was carried out, it is contended, did fully meet those requirements, even without mentioning the IBA 98.
Second, the Kingdom of Spain considers that the existence of wetlands or areas legally declared to be protected was not included in Annex I to Directive 85/337, but in Annex III thereto, so that such elements are considered by the European Union to be of relative importance rather than essential.
Third, as regards the Commission’s argument that the existence of a railway line parallel to the projected railway line produces more intense and more invasive effects that are likely to generate cumulative effects which have not been assessed, the Kingdom of Spain considers that the environmental impact assessment carried out makes it possible to conclude that those will be significantly alleviated by the construction of the new railway line parallel to, and at a short distance from, the existing railway line.
Fourth, the Kingdom of Spain considers that the environmental impact assessment which was carried out provides for adequate preventive and corrective measures, namely respecting the breeding periods of steppe birds, halting the works, creating walking paths along the route which have been completed after those works have been re-examined in order to avoid directly affecting bird life, as well as other measures to protect the air environment, the soil and the hydrological system, which also reinforce the prevention of negative effects on birds.
Moreover, those measures, it is contended, were extended with a view to declaring a part of the area concerned as an SPA.
Fifth, the Kingdom of Spain points out that the environmental impact assessment in question only concerns the project relating to earthworks, platform construction and fencing.
Furthermore, that Member State submits that the Commission makes a biased interpretation of the intention of the Spanish authorities to carry out a new environmental impact assessment, insofar as it was expressly provided that, at a later date, another project would be undertaken to carry out the work necessary for the commissioning of the railway line, including the power line, which will also necessarily be subject to the corresponding assessment. In that regard, it is contended, the Commission failed to establish that providing for two consecutive projects that are subject to their respective assessments would undermine the purpose and procedures laid down by Directive 85/337.
Finally, the Kingdom of Spain contends that the fact that the population of steppe birds has increased during and after the execution of the work proves that the assessment carried out is sufficient. According to the Kingdom of Spain, the measures adopted on the basis of the environmental impact assessment carried out protected the birds and helped to achieve the final objective of the directives in question.
Findings of the Court
As a preliminary remark, it must be recalled that the scope of the obligation to assess the impacts on the environment follows from Article 3 of Directive 85/337, according to which the environmental impact assessment is to identify, describe and assess in an appropriate manner, in the light of each individual case and in accordance with Articles 4 to 11 of that directive, the direct and indirect effects of a project on human beings, fauna and flora, soil, water, air, climate and the landscape, material assets and the cultural heritage, and the interaction between those factors (judgment of 24 November 2011, Commission v Spain, C‑404/09, EU:C:2011:768, paragraph 78).
The Court has also frequently pointed out that the scope of Directive 85/337 is wide and its purpose very broad (judgment of 28 February 2008, Abraham and Others, C‑2/07, EU:C:2008:133, paragraph 42). Furthermore, Article 2(1) of Directive 85/337 requires Member States to ensure that projects likely by virtue, inter alia, of their nature, size and location, to have significant effects on the environment are made subject to an assessment with regard to their effects. In that regard, that directive seeks an overall assessment of the environmental impact of projects or of their modification (judgment of 28 February 2008, Abraham and Others, C‑2/07, EU:C:2008:133, paragraph 42).
In the present case, the Commission contends, in essence, that the environmental impact assessment carried out pursuant to Directive 85/337, covering the infrastructure works necessary for the operation of the ‘Marchena-Osuna I’ and ‘Marchena-Osuna II’ sections of the high-speed railway line between Seville and Almería, and including the construction works on the tracks and the rail route, including the construction of a raised and expanded platform, is inadequate since it does not mention the existence of a site in the IBA 98 and does not take account of the fact that the contested project crosses a site of particular ecological importance.
In that regard, it must be pointed out that, according to established case-law, it is for the Commission to prove the alleged failure to fulfil obligations. It is the Commission which must provide the Court with the information necessary for it to determine whether the infringement is made out, and the Commission may not rely on any presumption for that purpose (judgment of 20 May 2010, Commission v Spain, C‑308/08, EU:C:2010:281, paragraph 23 and the case-law cited).
In the first place, as regards the Commission’s argument based, in essence, on the fact that the environmental impact assessment which was carried out should have mentioned that the site concerned by the contested project was an important area for birds in Europe and has been listed since 1998 in the IBA 98, before being classified as an SPA by the Spanish authorities in 2008, the Court has held that that inventory, although not legally binding, could be used by the Court as a basis of reference for assessing whether a Member State has classified a sufficient number and size of areas as SPAs (see, to that effect, judgment of 28 June 2007, Commission v Spain, C‑235/04, EU:C:2007:386, paragraph 26).
It must be held that the IBA 98 provides an up-to-date list of the areas of importance for the conservation of birds in Spain which, in the absence of scientific proof to the contrary, constitutes a basis of reference permitting an assessment to be made as to whether that Member State has classified areas of a sufficient number and size as SPAs to protect all the bird species listed in Annex I to Directive 79/409 and the migratory species not listed in that annex (see, to that effect, judgments of 28 June 2007, Commission v Spain, C‑235/04, EU:C:2007:386, paragraph 27, and of 18 December 2007, Commission v Spain, C‑186/06, EU:C:2007:813, paragraph 30).
It should be noted, however, that Directive 85/337 does not contain any provision requiring the environmental impact assessment to state that a site affected by a project subject to such assessment is included in an IBA. The Commission’s argument must therefore be rejected.
Second, as regards the Commission’s argument that the environmental impact assessment in question did not adequately identify, describe or assess the effects of the project in question on the environment, and more specifically on bird areas, it should be pointed out that, in the absence of more specific and detailed explanations, it cannot be concluded, as the Advocate General has pointed out, in essence, in point 41 of his Opinion, that it has been established to the requisite legal standard that such was the case.
As regards the identification of the bird species present in the area concerned by the project in question, it must be held that, despite the absence of a reference to the IBA 98, the environmental impact assessment at issue refers to the particularity of that area as regards bird life, contains an inventory of the bird species listed in Annex I to the Birds Directive present in that area, in particular Otis tarda, and indicates the category of protection applicable to each of them. That assessment also identifies certain measures intended to preserve those species, such as the interruption of works during periods of breeding and rearing of offspring, as well as the prohibition of removing vegetation between March and July in order to avoid a negative effect on reproduction. The Commission does not specify the reasons why, having regard to the project specifically referred to in the assessment at issue, those measures are insufficient.
As regards, thirdly, the Commission’s argument that the environmental impact statement did not cover the Ojuelos lagoon, which is located in an area subsequently classified as an SPA, examination of the elements in the case file reveals that that lagoon and its role and importance were described in the environmental impact assessment at issue.
As regards, in the fourth place, the Commission’s argument that the project in question would continue to affect the birds even after completion of the works, given that the operation of a high-speed railway line clearly has an impact on bird life, such as noise, the risk of collision or electrocution, which were not considered during the environmental impact assessment carried out by the Spanish authorities, it must be held that that assessment did not precisely identify the measures to be adopted in order to avoid those risks.
It should be noted, however, as the Advocate General pointed out, in essence, in points 37 and 51 of his Opinion, that, as the Commission pointed out in its reasoned opinion and in the context of the present proceedings, the environmental impact assessment at issue does not infringe Article 3 of Directive 85/337 because it does not relate to the entire contested project. In accordance with the case-law referred to in paragraph 26 of the present judgment, the complaint to that effect put forward by the Commission for the first time in its reply must therefore be declared inadmissible.
In the fifth place, the Commission submits that the environmental impact assessment at issue did not adequately consider the consequences related to the works and installations required for the construction of a high-speed railway parallel to an existing railway line and the subsequent operation of that planned line.
In that regard, it must be held that the environmental impact assessment at issue demonstrated that the route parallel to the existing railway line was the most appropriate solution from an environmental point of view, whereas the Commission, which, according to the case-law cited in paragraph 50 of this judgment, has the onus to adduce the evidence of the alleged breach, did not support its claims that the two parallel railway lines could have increased negative effects, in several respects, on the environment.
It follows that the complaint alleging breach of Article 3 of Directive 85/337 must be rejected.
The second complaint, alleging infringement of Article 4(4) of the Birds Directive
Arguments of the parties
By its second complaint, the Commission criticises the Kingdom of Spain for the harmful consequences arising from a project to build a high-speed railway line between Seville and Almería for certain bird species listed in Annex I to the Birds Directive.
The Commission considers that, by approving the construction of a high-speed railway line within an area mentioned in the IBA 98, the Kingdom of Spain failed to fulfil its obligations under Article 4(4) of the Birds Directive.
According to the Commission, given that the ‘Campiñas de Sevilla’ site was belatedly classified as an SPA, namely in July 2008, once the environmental impact assessment procedure had been completed, and even if the works had already begun, the Spanish authorities should have taken appropriate conservation measures in accordance with the provisions of Article 4(4) of the Birds Directive (judgments of 20 September 2007, Commission v Italy, C‑388/05, EU:C:2007:533, paragraph 18, and of 18 December 2007, Commission v Spain, C‑186/06, EU:C:2007:813, paragraph 27). This obligation, it is claimed, exists until the designation of the area as an SPA and, according to the case-law of the Court, it should be fulfilled before any reduction in the bird population or the risk of disappearance of protected species has materialised (judgment of 2 August 1993, Commission v Spain, C‑355/90, EU:C:1993:331, paragraph 15). Consequently, the Commission considers that, by authorising the high-speed railway line crossing a site included in the IBA 98, the Kingdom of Spain did not fulfil its obligations under the first sentence of Article 4(4) of the Birds Directive, namely to take appropriate measures to avoid prohibited disturbances in the areas affected by that project which should have been classified as SPAs.
The Commission submits that the construction works carried out have significantly altered the environmental characteristics of the area concerned, in particular as a result of the installation of a high platform and a double safety barrier. Those changes were, according to the Commission, likely to cause limitations to birds’ access to their breeding, resting and feeding grounds.
Furthermore, the Commission submits that the environmental impact assessment that was carried out was insufficient as regards the possible effects of the project in question on birds present in the area concerned and as regards corrective and compensatory measures, in accordance with Article 3 of Directive 85/337, which led to inadequate identification of the risks posed by the project.
The Kingdom of Spain submits that, in order to comply with Article 4(4) of the Birds Directive, it is not necessary to follow the procedures laid down by that directive for areas expressly designated as SPAs. On the contrary, it considers that it is sufficient for Member States to have adopted measures to preserve and protect birds even before those areas are classified. In that regard, the Kingdom of Spain considers that it has adopted appropriate conservation measures, in particular by limiting the dates of earthworks according to the breeding season of the birds, by creating walking paths along the route to avoid directly affecting bird life and by installing anti-collision equipment for birds.
In addition, it considers that Article 4(4) of the Birds Directive has been respected, given that the population of the SPA ‘Campiñas de Sevilla’ has not decreased, but increased during the period between 2001 and 2012.
Findings of the Court
Article 4(4) of the Birds Directive requires Member States to take appropriate steps to avoid, within SPAs, pollution or deterioration of habitats or any disturbances affecting the birds, in so far as those are significant having regard to the objectives of that article.
In that respect, it should be noted, in the first place, that, according to the case-law of the Court, Member States must fulfil the obligations arising under the first sentence of Article 4(4) of the Birds Directive, even where the areas in question have not been classified as SPAs, provided that they should have been so classified (judgments of 18 December 2007, Commission v Spain, C‑186/06, EU:C:2007:813, paragraph 27 and the case-law cited, and of 14 January 2016, Commission v Bulgaria, C‑141/14, EU:C:2016:8, paragraph 67).
However, in so far as concerns land classified as an SPA, Article 7 of the Habitats Directive provides that the obligations arising under the first sentence of Article 4(4) of the Birds Directive are replaced, inter alia, by the obligations arising under Article 6(2) of the Habitats Directive as from the date of implementation of the Habitats Directive or the date of classification under the Birds Directive, where the latter date is later (judgment of 18 December 2007, Commission v Spain, C‑186/06, EU:C:2007:813, paragraph 28 and the case-law cited).
Consequently, Article 4(4) of the Birds Directive applies only to the situation prior to the classification of the geographical area known as ‘Campiñas de Sevilla’ as an SPA.
In that regard, as has been pointed out in paragraph 52 of the present judgment, the Court considered that the IBA 98, which provides an up-to-date list of the areas of importance for the conservation of birds in Spain, constitutes, in the absence of scientific proof to the contrary, a basis of reference permitting an assessment to be made as to whether that Member State has classified areas of a sufficient number and size as SPAs to protect all the bird species listed in Annex I to the Birds Directive and the migratory species not listed in that annex.
It is common ground that the geographical area known as ‘Campiñas de Sevilla’, which is located in the province of Seville, is home to steppe bird species listed in Annex I to the Birds Directive, so that it was entered in IBA 98 before being designated as an SPA by a decision of 29 July 2008.
It seems, therefore, that such an area, which ought to have been classified as an SPA before 29 July 2008, falls within the protection scheme laid down in the first sentence of Article 4(4) of the Birds Directive, in accordance with the case-law cited in paragraphs 70 and 71 of the present judgment.
In the second place, in order to establish that there has been a failure to fulfil the obligations resulting from the first sentence of Article 4(4) of the Birds Directive, it is necessary to refer, by analogy, to the case-law of the Court relating to the failure to fulfil obligations under Article 6(2) of the Habitats Directive, since the content of the latter provision is largely the same as that of the first sentence of Article 4(4) of the Birds Directive (judgment of 14 January 2016, Commission v Bulgaria, C‑141/14, EU:C:2016:8, paragraph 69 and the case-law cited).
According to that case-law, an infringement of the provision in question is deemed to exist where the Commission establishes that there is a probability or risk that a project will cause deterioration to the habitats of protected species of birds or cause significant disturbance to those species (judgment of 14 January 2016, Commission v Bulgaria, C‑141/14, EU:C:2016:8, paragraph 70).
Consequently, it is necessary to examine whether the Commission has established that there is a probability or risk that the project at issue in the ‘Campiñas de Sevilla’ site, which was belatedly classified as an SPA, will cause the deterioration and disturbances referred to in the preceding paragraph.
It is apparent from the case file that the construction of a high-speed railway line requiring, in particular, the construction of roads, a high platform and earthworks and which crosses an area containing several species referred to in Annex I to the Birds Directive, is likely to cause significant disturbances and deterioration to the habitats of protected species of birds.
It is true that, as the Kingdom of Spain contends, that Member State took certain measures intended to compensate for the effects of the construction works, such as the limitation of such work during the birds’ reproductive seasons and the creation of walking paths along the railway line.
However, as the Advocate General pointed out in points 75 and 77 of his Opinion, those measures do not exclude the possibility that the new railway platform crossing an important habitat for certain species of birds, including Otis tarda, is likely to cause significant disturbance and deterioration of the habitats of protected bird species.
The fact that, according to the Kingdom of Spain, the population of birds in question has increased cannot call that reasoning into question.
It must be recalled that the obligations to protect exist even before any reduction in the number of birds has been observed or before the risk of a protected species becoming extinct has materialised (judgment of 14 January 2016, Commission v Bulgaria, C‑141/14, EU:C:2016:8, paragraph 76 and the case-law cited).
It is therefore necessary to find that, before 29 July 2008, the Kingdom of Spain failed to fulfil its obligations under Article 4(4) of the Birds Directive and the Commission’s action must succeed in that respect.
On the other hand, the Court cannot accept the Commission’s argument that the operation of the railway line at issue would have significant effects on birds present in the area concerned due, in particular, to disturbances caused by noise and the risks of electrocution and collision.
As the Advocate General pointed out in point 69 of his Opinion, those effects relate to the possible authorisation of works subsequently required for the operation of the railway line as a result of a further environmental impact assessment, whereas the contested project concerns the improvement of the existing infrastructure, namely the construction of a high platform.
The third complaint, alleging infringement of Article 6(2) of the Habitats Directive
Arguments of the parties
By its third complaint, the Commission submits that, since the ‘Campiñas de Sevilla’ site was classified as an SPA, the Kingdom of Spain has failed to fulfil its obligations under Article 6(2) of the Habitats Directive.
In that regard, the Commission reiterates, in essence, the arguments put forward in the context of the second complaint and referred to in paragraphs 65 and 66 of the present judgment.
The Kingdom of Spain considers that, since the area in question was designated as an SPA, all the measures necessary have been adopted in order to comply with Article 6(2) of the Habitats Directive.
It contends that the Commission has not adduced any evidence demonstrating the inadequacy or non-existence of appropriate protective measures to avoid a significant impact on birds during the construction works of the railway line in question and its operation.
Furthermore, the Kingdom of Spain argues that Article 6(2) of the Habitats Directive does not require the immediate adoption of corrective measures for risks that are likely to arise from future actions. In fact, the risks identified by the Commission would arise only in the event of implementation of the second works project, whose start date had not yet been provided for, and those risks would be neutralised before they arise.
Findings of the Court
It must be pointed out that, as regards areas classified as SPAs, Article 7 of the Habitats Directive provides that the obligations arising under Article 4(4) of the Birds Directive are replaced, inter alia, by the obligations arising under Article 6(2) of the Habitats Directive as from the date of implementation of the Habitats Directive or the date of classification under the Birds Directive, where the latter date is later (judgment of 18 December 2007, Commission v Spain, C‑186/06, EU:C:2007:813, paragraph 28 and the case-law cited).
It follows that, in the present case, as the ‘Campiñas de Sevilla’ area was classified as an SPA on 29 July 2008, Article 6(2) of the Habitats Directive applied to that area from that date.
It should nevertheless be recalled that an activity complies with Article 6(2) of the Habitats Directive only if it is guaranteed that it will not cause any disturbance likely significantly to affect the objectives of that directive, particularly its conservation objectives (judgment of 14 January 2016, Commission v Bulgaria, C‑141/14, EU:C:2016:8, paragraph 56 and the case-law cited).
In that regard, it should be noted that Article 6(2) of the Habitats Directive, like the first sentence of Article 4(4) of the Birds Directive, requires Member States to take appropriate steps to avoid, in SPAs classified in accordance with Article 4(1) of the Birds Directive, deterioration of habitats and disturbance significantly affecting the species for which the SPAs have been classified (judgment of 20 September 2007, Commission v Italy, C‑388/05, EU:C:2007:533, paragraph 26).
It follows that the third complaint is well founded only if the Commission demonstrates to a sufficient legal standard that the Kingdom of Spain has not taken appropriate protective measures, consisting in ensuring that the construction works relating to the high-speed railway line within the ‘Campiñas de Sevilla’ area, in so far as they took place after classification of the ‘Campiñas de Sevilla’ site as an SPA on 29 July 2008, do not lead to deteriorations of the habitats of the steppe bird species listed in Annex I to the Birds Directive or cause disturbances to those species, likely to have significant effects having regard to the objective of the Habitats Directive of ensuring the conservation of those species (see, by analogy, judgment of 24 November 2011, Commission v Spain, C‑404/09, EU:C:2011:768, paragraph 128).
However, in order to establish failure to fulfil obligations under Article 6(2) of the Habitats Directive, the Commission does not have to establish the existence of a cause-and-effect relationship between the construction of a high-speed railway line and significant disturbance caused to the species concerned. It is sufficient for the Commission to establish that there is a probability or risk that that construction will cause significant disturbance to those species (see, to that effect, judgment of 14 January 2016, Commission v Bulgaria, C‑141/14, EU:C:2016:8, paragraph 58 and the case-law cited).
In that regard, it is apparent from the case file, as the Advocate General pointed out in point 86 of his Opinion, that the construction works of the railway line in question continued after the area concerned was classified as an SPA on 29 July 2008 and were interrupted only in 2009, and that the execution of those works, in particular the construction of the high platform, is likely to cause significant disturbance and deterioration of the habitats of protected bird species. In that respect, the Kingdom of Spain has admitted that the project in question will surely lead to a reduction of habitats favourable to the population of Otis tarda.
In the light of the above, the Court finds that the third complaint is, in part, founded.
On the other hand, for the same reasons as those set out in paragraph 86 of the present judgment, the Court cannot accept the Commission’s argument that the operation of the railway line in question would have significant effects on birds present in the area concerned due, in particular, to disturbances caused by noise and the risks of electrocution and collision.
It follows from all the foregoing considerations that, by failing to take appropriate steps to avoid, in the SPA ‘Campiñas de Sevilla’, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which that area was established, the Kingdom of Spain failed, in respect of the period before 29 July 2008, to fulfil its obligations under Article 4(4) of the Birds Directive and, with regard to the period after that date, has failed to fulfil its obligations under Article 6(2) of the Habitats Directive.
Costs
Under Article 138(3) of the Rules of Procedure, where each party succeeds on some and fails on other heads, the parties are to bear their own costs.
In the present case, it must be taken into account that some of the Commission’s complaints have not been upheld.
Accordingly, the Commission and the Kingdom of Spain should be ordered to bear their own costs.
On those grounds, the Court (Fifth Chamber) hereby:
1.
Declares that, by failing to take appropriate steps to avoid, in the special protection area ‘Campiñas de Sevilla’, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which that area was established, the Kingdom of Spain failed, in respect of the period before 29 July 2008, to fulfil its obligations under Article 4(4) of Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds and, in respect of the period after that date, has failed to fulfil its obligations under Article 6(2) of Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora;
2.
Dismisses the action as to the remainder;
3.
Orders the European Commission and the Kingdom of Spain to bear their own costs.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (First Chamber)
21 July 2016 ( *1 )
‛Appeal — EU trade mark — Regulation (EC) No 207/2009 — Article 76(2) — Regulation (EC) No 2868/95 — Rule 50(1), third subparagraph — Figurative mark — Opposition by the proprietor of the earlier trade mark — Proof of the existence, validity and extent of the protection of the earlier trade mark — Consideration by the Board of Appeal of evidence submitted out of time — Rejection of the opposition by the Board of Appeal’
In Case C‑597/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 22 December 2014,
European Union Intellectual Property Office (EUIPO), represented by S. Palmero Cabezas and A. Folliard-Monguiral, acting as Agents,
applicant,
the other parties to the proceedings being:
Xavier Grau Ferrer, residing in Caldes de Montbui (Spain),
applicant at first instance,
Juan Cándido Rubio Ferrer,
Alberto Rubio Ferrer,
residing in Xeraco (Spain),
interveners at first instance,
THE COURT (First Chamber),
composed of R. Silva de Lapuerta, President of the Chamber, J.-C. Bonichot, C.G. Fernlund, S. Rodin (Rapporteur) and E. Regan, Judges,
Advocate General: M. Szpunar,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 21 October 2015,
after hearing the Opinion of the Advocate General at the sitting on 13 January 2016,
gives the following
Judgment
By its appeal, the European Union Intellectual Property Office (EUIPO) seeks to have set aside the judgment of the General Court of the European Union of 24 October 2014 in Grau Ferrer v OHIM — Rubio Ferrer (Bugui va) (T‑543/12, not published, EU:T:2014:911) (‘the judgment under appeal’), by which it annulled the decision of the Fourth Board of Appeal of EUIPO of 11 October 2012 (Joined Cases R 274/2011-4 and R 520/2011-4) relating to opposition proceedings between Mr Xavier Grau Ferrer, on one hand, and Messrs Juan Cándido Rubio Ferrer and Alberto Rubio Ferrer, on the other, (‘the contested decision’).
Legal context
Regulation (EC) No 207/2009
Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1) was codified by Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1).
Article 15(1) of Regulation No 207/2009, entitled ‘Use of EU trade marks’, provides:
‘If, within a period of five years following registration, the proprietor has not put the EU trade mark to genuine use in the Union in connection with the goods or services in respect of which it is registered, or if such use has been suspended during an uninterrupted period of five years, the EU trade mark shall be subject to the sanctions provided for in this Regulation, unless there are proper reasons for non-use.
The following shall also constitute use within the meaning of the first subparagraph:
(a)
use of the EU trade mark in a form differing in elements which do not alter the distinctive character of the mark in the form in which it was registered;
…’
Article 41(3) of that regulation, which governs the filing of an opposition to the registration of an EU trade mark, provides:
‘Opposition must be expressed in writing and must specify the grounds on which it is made. … Within a period fixed by the Office, the opponent may submit in support of his case facts, evidence and arguments.’
Article 76(2) of that regulation, entitled ‘Examination of the facts by the Office of its own motion’, provides:
‘The Office may disregard facts or evidence which are not submitted in due time by the parties concerned.’
The Implementing Regulation
Rule 15(2) of Commission Regulation (EC) No 2868/95 of 13 December 1995 implementing Regulation No 40/94 (OJ 1995 L 303, p. 1) as amended by Commission Regulation (EC) No 1041/2005 of 29 June 2005 (OJ 2005 L 172, p. 4) (‘the Implementing Regulation’), entitled ‘Notice of opposition’, states:
‘The notice of opposition shall contain:
…
(b)
a clear identification of the earlier trade mark or earlier right on which the opposition is based, namely:
(i)
where the opposition is based on an earlier mark within the meaning of Article 8(2)(a) or (b) of [Regulation No 40/94, the wording of which is identical to that of Article 8(2)(a) and (b) of Regulation No 207/2009] or where the opposition is based on Article 8(3) of [Regulation No 40/94, the wording of which is identical to that of Article 8(3) of Regulation No 207/2009], the indication of the file number or registration number of the earlier mark, the indication whether the earlier mark is registered or an application for registration, as well as the indication of the Member States including, where applicable, the Benelux, in or for which the earlier mark is protected, or, if applicable, the indication that it is an EU trade mark;
…
(e)
a representation of the earlier mark as registered or applied for; if the earlier mark is in colour, the representation shall be in colour;
…’
Rule 19 of the Implementing Regulation, entitled ‘Substantiation of the opposition’, provides:
‘1.
The Office shall give the opposing party the opportunity to present the facts, evidence and arguments in support of his opposition or to complete any facts, evidence or arguments that have already been submitted pursuant to Rule 15(3), within a time limit specified by it and which shall be at least 2 months starting on the date on which the opposition proceedings shall be deemed to commence in accordance with Rule 18(1).
2.
Within the period referred to in paragraph 1, the opposing party shall also file proof of the existence, validity and scope of protection of his earlier mark or earlier right, as well as evidence proving his entitlement to file the opposition. In particular, the opposing party shall provide the following evidence:
(a)
if the opposition is based on a trade mark which is not an EU trade mark, evidence of its filing or registration, by submitting:
…
(ii)
if the trade mark is registered, a copy of the relevant registration certificate and, as the case may be, of the latest renewal certificate, showing that the term of protection of the trade mark extends beyond the time limit referred to in paragraph 1 and any extension thereof, or equivalent documents emanating from the administration by which the trade mark was registered;
…’
Under the heading ‘Examination of the opposition’, Rule 20(1) of that regulation provides:
‘If until expiry of the period referred to in Rule 19(1) the opposing party has not proven the existence, validity and scope of protection of his earlier mark or earlier right, as well his entitlement to file the opposition, the opposition shall be rejected as unfounded.’
According to Rule 50(1), third subparagraph, of that regulation:
‘Where the appeal is directed against a decision of an Opposition Division, the Board shall limit its examination of the appeal to facts and evidence presented within the time limits set in or specified by the Opposition Division in accordance with the Regulation and these Rules, unless the Board considers that additional or supplementary facts and evidence should be taken into account pursuant to Article 74(2) of [Regulation No 40/94, the wording of which is identical to that of Article 76(2) of Regulation No 207/2009].’
Background to the dispute
The General Court summarised the facts giving rise to the dispute as follows:
‘1.
On 23 October 2008, the interveners, Juan Cándido Rubio Ferrer and Alberto Rubio Ferrer, filed an application for registration of an EU figurative mark with [EUIPO], pursuant to Regulation [No 40/94, codified by Regulation No 207/2009].
2.
Registration as a mark was sought for the following figurative sign: …
3.
The goods and services in respect of which registration was applied for are in Classes 31, 35 and 39 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended …
…
On 10 August 2009, [Mr] Grau Ferrer filed a notice of opposition, pursuant to Article 41 of Regulation No 207/2009, to registration of the EU figurative trade mark applied for in respect of the goods and services referred to in paragraph 3 above.
The opposition was based on the following earlier figurative marks:
—
Spanish registration No 2600724 of the figurative sign applied for on 8 June 2004 and registered on 22 November 2004 for all the goods in class 31:
…
—
European Union registration No 2087534 of the figurative sign below, applied for on 14 February 2001 and registered on 14 June 2002 for the goods and services in the following classes:
—
Class 31: …
—
Class 32: …
—
Class 39: …
…
8.
On 21 December 2010, the Opposition Division partially upheld the opposition. First, it held that [Mr Grau Ferrer] had not provided any documents representing the earlier Spanish figurative mark as registered within the period prescribed for that purpose … Therefore, it rejected the opposition based on the earlier Spanish figurative mark on the ground that its existence and validity had not been sufficiently substantiated within the period prescribed. Second, it upheld the opposition based on the earlier EU mark … It considered, first of all, that the evidence of genuine use of the earlier EU mark had been adduced …
On 10 February 2011, [Mr Grau Ferrer] filed a notice of appeal (R 520/2011-4) and on 14 February 2011, the interveners [Messrs Rubio Ferrer] filed a notice of appeal (R 274/2011-4) with EUIPO, pursuant to Articles 58 to 64 of Regulation No 207/2009, against the Opposition Division’s decision.
By decision of 11 October 2012 …, the Fourth Board of Appeal of EUIPO upheld the appeal in Case R 274/2011-4 and rejected the appeal in Case R 520/2011-4. Essentially, first, it confirmed the Opposition Division’s decision according to which the evidence of the existence of the earlier Spanish figurative mark had not been produced. Second, it held that the evidence produced was not sufficient to show that the earlier EU mark had, during the relevant period, been put to genuine use in the form under which it was registered or in a form which does not alter its distinctive character for one of the goods for which it was registered. Therefore, it annulled the Opposition Division’s decision of 21 December 2010 and rejected the opposition in its entirety.’
The proceedings before the General Court and the judgment under appeal
By application lodged at the Registry of the General Court on 18 December 2012 (Case T‑543/12), Mr Grau Ferrer brought an action for the annulment of the contested decision.
In support of his action, Mr Grau Ferrer relied on three pleas based, first, on the infringement of Articles 75 and 76(2) of Regulation No 207/2009 and Rule 50 of the Implementing Regulation, second, the genuine use of the earlier EU figurative mark No 2087534 registered by Mr Grau Ferrer on 14 June 2002 (‘the earlier mark’) and, third, the likelihood of confusion between the earlier mark and the earlier Spanish figurative mark, on the one hand, and the EU figurative mark for which registration was sought by Messrs Rubio Ferrer, on the other.
The General Court upheld the action for annulment holding, in paragraph 48 of the judgment under appeal, that the Board of Appeal of EUIPO had failed to exercise its discretion or to give reasons for its refusal to take account of the earlier Spanish mark and, in paragraphs 86 and 87 of the judgment under appeal, that the documents produced before the Board of Appeal contained a sign which only differed from the earlier mark by negligible elements, so that they point to genuine use of that mark.
The General Court held that the remainder of the pleas put forward by Mr Grau Ferrer were irrelevant or unfounded.
Accordingly, the General Court annulled the contested decision.
Forms of order sought
By its appeal, EUIPO claims that the Court should:
—
set aside the judgment under appeal and to rule itself on the substance of the case or to refer it back to the General Court, and
—
order Mr Grau Ferrer to pay the costs.
No other parties to the proceedings submitted any pleadings before the Court.
The appeal
In support of its appeal, EUIPO raises three grounds of appeal based on the infringement of Article 76(2) of Regulation No 207/2009, Rule 50(1), third subparagraph, of the Implementing Regulation, and Article 15(1), second subparagraph, point (a), of Regulation No 207/2009 respectively.
The second ground of appeal
By its second ground of appeal, which it is appropriate to examine first, EUIPO argues essentially that, in paragraphs 45 to 48 of the judgment under appeal, the General Court erred in law by holding that the Board of Appeal had discretion deriving from Rule 50(1), third subparagraph, of the Implementing Regulation and Article 76(2) of Regulation No 207/2009 ‘independently of whether the late evidence was supplementary’ or not, and consequently that it also had discretion as regards ‘new’ evidence.
In paragraph 45 of the judgment under appeal, the General Court stated that the case-law of the Court concerning the discretion of the Board of appeal and the grounds for taking into consideration late evidence makes no distinction between additional and supplementary evidence, then, in paragraph 46 of that judgment, it dismissed the argument that the Board of Appeal was not entitled to take into consideration the evidence submitted by Mr Grau Ferrer because it was new.
The General Court held essentially, in paragraph 48 of the judgment under appeal, that the Board of Appeal had discretion and had an obligation to give reasons for its refusal without distinguishing ‘new’ evidence from ‘supplementary’ evidence.
EUIPO maintains that the discretion and the obligation to state reasons do not concern new evidence. In support of that argument, it points out the differences between the various language versions of the judgment of 3 October 2013 in Rintisch v OHIM (C‑120/12 P, EU:C:2013:638); 3 October 2013 in Rintisch v OHIM (C‑121/12 P, EU:C:2013:639); and 3 October 2013 in Rintisch v OHIM (C‑122/12 P, EU:C:2013:628). According to EUIPO, on the basis of Article 42(2) of Regulation No 207/2009 and Rule 20(1) of the Implementing Regulation, in the absence of complete proof before the Opposition Division, the opposition is to be dismissed without being examined as to the substance. Therefore, it would be impossible to reopen the possibility of opposition at Board of Appeal level.
As far as concerns the wording of Rule 50(1), third subparagraph, of the Implementing Regulation, it must be observed that the French language version is different from the Spanish, German and English versions in one fundamental respect. Whereas the latter versions provide that the Board of Appeal must take into consideration only additional or supplementary facts and evidence, the French version describes that evidence as ‘nouveaux ou supplémentaires’ [‘new or supplementary’].
According to settled case-law, provisions of EU law must be interpreted and applied uniformly in the light of the versions existing in all the languages of the European Union. Where there is divergence between the various language versions of an EU legislative text, the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms part (see, to that effect, judgments of 15 November 2012in Kurcums Metal, C‑558/11, EU:C:2012:721, paragraph 48, and 9 April 2014 in GSV, C‑74/13, EU:C:2014:2058, paragraph 27).
In that connection, it must be recalled that Article 76(2) of Regulation No 207/2009, which constitutes the legal basis for Rule 50 of the Implementing Regulation, provides that the Office may disregard facts or evidence which are not submitted in due time by the parties concerned.
The Court has held that, when no proof of use of the mark concerned is submitted within the time limit set by the Office, the opposition must automatically be rejected by it. However, when evidence is produced within the time limit set by the Office, the production of supplementary evidence remains possible (see, to that effect, judgment of 18 July 2013 in New Yorker SHK Jeans v OHIM, C‑621/11 P, EU:C:2013:484, paragraphs 28 and 30).
As the Advocate General observed, in paragraphs 55 and 57 of his Opinion, Article 76(2) of Regulation No 207/2009 should be interpreted in the same way in relation to proof of the existence, validity and scope of protection of a trade mark since that provision contains a rule which applies horizontally within the scheme of that regulation, inasmuch as it applies irrespective of the nature of the proceedings concerned. It follows that Rule 50 of the Implementing Regulation cannot be interpreted as meaning that it extends the discretion of the Boards of Appeal to new evidence.
It must be stated that the General Court erred in law in paragraphs 45, 46 and 48 of the judgment under appeal by holding that the Board of Appeal had failed to exercise the discretion conferred on it to decide whether or not it was appropriate to take new evidence into consideration.
However, it must be recalled that it follows from settled case-law of the Court of Justice that where the grounds of a judgment of the General Court disclose an infringement of EU law but the operative part of the judgment is shown to be well founded for other legal reasons, the appeal must be dismissed (see, in particular, judgments of 15 December 1994 in Finsider v Commission, C‑320/92 P, EU:C:1994:414, paragraph 37; 16 December 1999 in CES v E, C‑150/98 P, EU:C:1999:616, paragraph 17, and 13 July 2000 in Salzgitter v Commission, C‑210/98 P, EU:C:2000:397, paragraph 58).
That is the position in the present case. The General Court did not uphold the only plea under consideration, but also relied on the fact that the Board of Appeal had rejected the evidence at issue without examining whether it could be regarded as being ‘supplementary’. By failing to undertake that examination, the Board of Appeal did in fact infringe Article 76(2) of Regulation No 207/2009 as the General Court held.
In those circumstances, and without its being necessary to consider the other pleas in law advanced by EUIPO in support of its appeal, the appeal must be dismissed in its entirety.
Costs
Under Article 137 of the Rules of Procedure of the Court of Justice, which is applicable to the procedure on appeal pursuant to Article 184(2) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since EUIPO has been unsuccessful, it must be ordered to bear its own costs.
On those grounds, the Court (First Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders the European Union Intellectual Property Office (EUIPO) to pay the costs.
[Signatures]
( *1 ) Language of the case: Spanish. |
JUDGMENT OF THE COURT (Third Chamber)
21 May 2015 ( *1 )
‛Judicial cooperation in civil matters — Jurisdiction and the enforcement of judgments in civil and commercial matters — Regulation (EC) No 44/2001 — Article 23 — Agreement conferring jurisdiction — Formal requirements — Communication by electronic means which provides a durable record of the agreement — Definition — General terms and conditions of sale which can be consulted and printed from a link which enables them to be displayed in a new window — Click-wrapping’
In Case C‑322/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Landgericht Krefeld (Germany), made by decision of 5 June 2014, received at the Court on 4 July 2014, in the proceedings between
Jaouad El Majdoub
v
CarsOnTheWeb.Deutschland GmbH,
THE COURT (Third Chamber),
composed of M. Ilešič, President of the Chamber, A. Ó Caoimh, C. Toader (Rapporteur), E. Jarašiūnas and C.G. Fernlund, Judges,
Advocate General: M. Szpunar,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
—
the German Government, by T. Henze and J. Kemper, acting as Agents,
—
the European Commission, by A.-M. Rouchaud-Joët and W. Bogensberger, acting as Agents,
—
the Swiss Government, by M. Jametti, acting as Agent,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 23(2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L 12, p. 1) (‘the Brussels I Regulation’).
The request has been made in proceedings between Mr El Majdoub, a car dealer, and CarsOnTheWeb.Deutschland GmbH, concerning the sale on the latter’s website of a motor vehicle to the applicant in the main proceedings.
Legal background
Article 17, first paragraph, of the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, signed at Brussels on 27 September 1968 (OJ 1978 L 301, p. 77), as amended by the successive conventions on the accession of new Member States thereto (‘the Brussels Convention’), is worded as follows:
‘If the parties, one or more of whom is domiciled in a Contracting State, have agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction. Such an agreement conferring jurisdiction shall be either:
(a)
in writing or evidenced in writing; or
(b)
in a form which accords with practices which the parties have established between themselves; or
(c)
in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.’
According to recital 2 to the Brussels I Regulation, the latter aims to unify the rules of conflict of jurisdiction in civil and commercial matters and to simplify the formalities with a view to rapid and simple recognition and enforcement of judgments from Member States bound by that regulation.
Recitals 11 and 12 to that regulation, which set out the relationship between the various rules of jurisdiction and their purpose, state as follows:
‘(11)
The rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is generally based on the defendant’s domicile and jurisdiction must always be available on this ground save in a few well-defined situations in which the subject-matter of the litigation or the autonomy of the parties warrants a different linking factor. The domicile of a legal person must be defined autonomously so as to make the common rules more transparent and avoid conflicts of jurisdiction.
(12)
In addition to the defendant’s domicile, there should be alternative grounds of jurisdiction based on a close link between the court and the action or in order to facilitate the sound administration of justice.’
Recital 19 in the preamble to that regulation states that it is necessary to ensure the continuity between the Brussels Convention and Regulation No 44/2001.
Article 2(1) of the Brussels I Regulation lays down the principle according to which persons domiciled in the territory of a Member State are, whatever their nationality, to be sued in the courts of that Member State.
Article 3(1) of that regulation, in Chapter II thereof, provides:
‘Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter.’
Chapter II of the regulation contains Section 7, entitled ‘Prorogation of jurisdiction’. Article 23(1) and (2) which appears in that section, provides:
‘1. If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be either:
(a)
in writing or evidenced in writing; or
(b)
in a form which accords with practices which the parties have established between themselves; or
(c)
in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.
2. Any communication by electronic means which provides a durable record of the agreement shall be equivalent to “writing”.’
The dispute in the main proceedings and the question referred for a preliminary ruling
The applicant in the main proceedings, a car dealer established in Cologne (Germany), purchased from the website of the defendant in the main proceedings, whose registered office is in Amberg (Germany), an electric car for a very good price. However, the sale was cancelled by the seller on account of damage allegedly sustained by that vehicle which was noted during preparations for its transport to the purchaser.
Taking the view that the reason given was only a pretext for the cancellation of that sale, which was disadvantageous to the seller on account of the low sale price, the applicant in the main proceedings brought an action before the Landgericht Krefeld seeking an order that the defendant transfer of ownership of that vehicle.
The applicant in the main proceedings claims that his contracting partner is the defendant in the main proceedings, established in Germany, and not its parent company, established in Belgium, and, therefore, that the referring court has jurisdiction to deal with the case concerned.
By contrast, the defendant in the main proceedings contends that the German courts do not have jurisdiction in the case. Article 7 of the general terms and conditions for internet sales transactions, accessible on its website, contains an agreement conferring jurisdiction on a court in Leuven (Belgium). In addition, it claims that it is not the contracting partner of the applicant in the main proceedings, its parent company having that status. The applicant in the main proceedings cannot be unaware of that, as he requested the Belgian parent company to issue an invoice without VAT, which was sent to him mentioning the parent company’s contact details, and he paid the price of the motor vehicle at issue into a Belgian bank account.
While not disputing that method of payment, the applicant in the main proceedings takes the view that the agreement conferring jurisdiction in Article 7 has not been validly incorporated into the sale agreement, as it is not in writing in accordance with the requirements in Article 23(1)(a) of the Brussels I Regulation. He submits that the webpage containing the general terms and conditions of sale of the defendant in the main proceedings does not open automatically upon registration and upon every individual sale. Instead, a box with the indication ‘click here to open the conditions of delivery and payment in a new window’ must be clicked on (known as ‘click wrapping’). The requirements of Article 23(2) of the Brussels I Regulation are met only if the window containing those general conditions opens automatically. Moreover, the agreement conferring jurisdiction is also invalid because it is arbitrary and unexpected.
The referring court wishes to know whether ‘click-wrapping’, by which a purchaser agrees to the general terms and conditions of sale on a website by clicking on a hyperlink which opens a window, meets the requirements of Article 23(2) of the Brussels I Regulation. In so far as those conditions may be saved and printed separately, that court asks whether such a technique may be regarded as a communication by electronic means which provides a durable record of the sale agreement and, therefore, as being in writing, within the meaning of that provision. If that were the case, the agreement conferring jurisdiction on a Belgian court would be valid and the Landgericht Krefeld would not have jurisdiction to hear the dispute.
Furthermore, that court considers that the contracting party of the applicant in the main proceedings is the company established in Germany, not the Belgian parent company. Accordingly, failing an agreement conferring jurisdiction, the action for transfer of ownership before it should be brought in Germany. However, the applicant cannot regard that agreement as unexpected, since he was aware of the foreign element in the sale agreement he had concluded, and had requested the issue of an international invoice which mentioned the contact details of the parent company.
The referring court considers that Article 23(2) of the Brussels I Regulation does not require the agreement conferring jurisdiction to have actually been printed or saved by one of the contracting parties. The only condition laid down by that provision is that it should be ‘possible’ to provide a durable record of the agreement. Thus, the communication by electronic means should be able to provide such a durable record in order to meet the requirements laid down in Article 23(2).
The referring court takes the view that ‘click-wrapping’, the subject of the dispute before it, allowed the general terms and conditions containing the agreement conferring jurisdiction both to be printed and saved, given that the text of those general terms and conditions opened on a separate page after clicking and could be printed or saved by a contracting party. Whether the window containing those conditions opened automatically or not is irrelevant in that respect.
In those circumstances, the Landgericht Krefeld decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Does so-called “click wrapping” fulfil the requirements relating to a communication by electronic means within the meaning of Article 23(2) of [the Brussels I Regulation]?’
Consideration of the question referred for a preliminary ruling
By its question, the referring court asks essentially whether Article 23(2) of the Brussels I Regulation must be interpreted as meaning that the method of accepting general terms and conditions of contract for sale by ‘click-wrapping’, such as that at issue in the main proceedings, concluded electronically, containing an agreement conferring jurisdiction, constitutes a communication by electronic means capable of providing a durable record of that agreement, within the meaning of that provision.
As is clear from the order for reference, it is an essential feature of the facts of the case in the main proceedings that a potential purchaser must expressly accept the seller’s general terms of sale by clicking the relevant box before making a purchase. However, that operation does not automatically lead to the opening of the document containing the seller’s general terms, as an extra click on a specific hyperlink for that purpose is still necessary.
In the case in the main proceedings, it is common ground that the general terms and conditions at issue contain a jurisdiction clause providing for the jurisdiction of a court in Leuven in disputes such as that at issue in the main proceedings. However, the applicant in the main proceedings takes the view that the click-wrapping method of accepting general terms and conditions does not fulfil the requirements laid down in Article 23(2) of the Brussels I Regulation, in that the window containing those conditions does not open automatically on registration on the site or during a transaction. Consequently, that jurisdiction clause cannot, in his view, be invoked against him.
It must be determined, therefore, whether, in such circumstances, the validity of a jurisdiction clause contained in a contract concluded by electronic means, within the meaning of Article 23(2) of the Brussels I Regulation, may be challenged if the click-wrapping technique is used.
In that connection, it must be recalled, as a preliminary point, that according to the terms of Article 23(1) of the Brussels I Regulation, the jurisdiction of a court or the courts of a Member State, agreed by the contracting parties in an agreement conferring jurisdiction is, in principle, exclusive. In order to be valid, that clause must be in writing or evidenced in writing, in a form which accords with practices which the parties have established between themselves or, in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware. Pursuant to Article 23(2) ‘any communication by electronic means which provides a durable record of the agreement’ must be regarded as ‘equivalent to “writing”’.
It should be observed that the requirements laid down by Article 23 of the Brussels I Regulation must be strictly interpreted in so far as they exclude both jurisdiction as determined by the general principle of the courts of the State in which the defendant is domiciled laid down in Article 2 thereof, and the special jurisdiction provided for in Articles 5 to 7 of that regulation (see, by analogy, judgment in MSG, C‑106/95, EU:C:1997:70, paragraph 14 and the case-law cited).
In the first place, it must be observed that the provisions of Article 23(1) of the Brussels I Regulation clearly indicate that its scope is limited to cases in which the parties have ‘agreed’ on a court. As appears from recital 11 in the preamble to that regulation, it is that consensus between the parties which justifies the primacy granted, in the name of the principle of the freedom of choice, to the choice of a court other than that which may have had jurisdiction under that regulation (judgment in Refcomp, C‑543/10, EU:C:2013:62, paragraph 26).
In that connection, it is to be observed that, in so far as the Brussels I Regulation replaces the Brussels Convention in the relations between Member States, the interpretation provided by the Court in respect of the provisions of that convention is valid also for those of the regulation whenever the provisions of those instruments may be regarded as equivalent (see, inter alia, judgment in Refcomp, C‑543/10, EU:C:2013:62, paragraph 18).
That is the case as far as concerns the first paragraph of Article 17 of that convention and Article 23(1) of the Brussels I Regulation, which are drafted in almost identical terms (judgment in Refcomp, C‑543/10, EU:C:2013:62, paragraph 19).
The Court has held with regard to Article 17, first sentence, of the Brussels Convention that, by making the validity of a jurisdiction clause subject to the existence of an ‘agreement’ between the parties, that provision imposes on the court before which the matter is brought the duty of examining, first, whether the clause conferring jurisdiction upon it was in fact the subject of consensus between the parties, which must be clearly and precisely demonstrated, and that the requirements as to form imposed by Article 17 ensure that consensus between the parties is in fact established (see judgment in MSG, C‑106/95, EU:C:1997:70, paragraph 15 and the case-law cited).
It follows that, like the aim pursued by the first paragraph of Article 17 of the Brussels Convention, ensuring the real consent of the parties is one of the aims of Article 23(1) of the Brussels I Regulation (see judgment in Refcomp, C‑543/10, EU:C:2013:62, paragraph 28 and the case-law cited).
In the present case, as is clear from the decision to refer, the purchaser expressly accepted the general terms and conditions at issue, by clicking the relevant box on the seller’s website.
In the second place, according to Article 23(2) of the Brussels I Regulation, which constitutes a new provision as compared with Article 17 of the Brussels Convention, added in order to take account of the development of new methods of communication, the validity of an agreement conferring jurisdiction, such as that at issue in the main proceedings, may depend, inter alia, on the possibility of providing a durable record.
In that connection, it follows from a literal interpretation of that provision that it requires there to be the ‘possibility’ of providing a durable record of the agreement conferring jurisdiction, regardless of whether the text of the general terms and conditions has actually been durably recorded by the purchaser before or after he clicks the box indicating that he accepts those conditions.
Furthermore, it is clear from the Explanatory Report of Professor Pocar on the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, signed in Lugano on 30 October 2007 (OJ 2009 C 319, p. 1, paragraph 109), that the test of whether the formal requirement in that provision is met is ‘whether it is possible to create a durable record of an electronic communication by printing it out or saving it to a backup tape or disk or storing it in some other way’, and that that is the case ‘even if no such durable record has actually been made’, meaning that ‘the record is not required as a condition of the formal validity or existence of the clause’.
That finding is also confirmed by a historical and teleological interpretation of Article 23(2) of the Brussels I Regulation. According to the Explanatory Memorandum on the Proposal for a Council Regulation (EC) on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, presented by the Commission in Brussels on 14 July 1999 (COM(1999) 348 final), the aim of that provision is that the need for an agreement ‘in writing or evidenced in writing’ should not invalidate a choice-of-forum clause concluded in a form that is not written on paper but accessible on screen.
The purpose of that provision is, therefore, to treat certain forms of electronic communications in the same way as written communications in order to simplify the conclusion of contracts by electronic means, since the information concerned is also communicated if it is accessible on screen. In order for electronic communication to offer the same guarantees, in particular as regards evidence, it is sufficient that it is ‘possible’ to save and print the information before the conclusion of the contract.
It is true that, interpreting Article 5(1) of Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (OJ 1997 L 144, p. 19), pursuant to which the consumer must ‘receive’‘written confirmation or confirmation in another durable medium’, the Court held, in paragraph 51 of the judgment in Content Services (C‑49/11, EU:C:2012:419), that a business practice consisting of making information accessible only via a hyperlink on a website does not meet the requirements of that provision, since that information is neither ‘given’ by that undertaking nor ‘received’ by the consumer, within the meaning of that provision, and a website cannot be regarded as a ‘durable medium’ within the meaning of Article 5(1).
However, it must be stated that that interpretation cannot be applied to Article 23(2) of the Brussels I Regulation, since both the wording of Article 5(1) of Directive 97/7, which expressly requires the communication of information to consumers in a durable medium, and the objective of that provision, which is specifically consumer protection, differ from those of Article 23(2).
In the case in the main proceedings, it is not disputed that click-wrapping makes printing and saving the text of the general terms and conditions in question possible before the conclusion of the contract. Therefore, the fact that the webpage containing that information does not open automatically on registration on the website and during each purchase cannot call into question the validity of the agreement conferring jurisdiction.
Having regard to the foregoing considerations, the answer to the question referred is that Article 23(2) of the Brussels I Regulation must be interpreted as meaning that the method of accepting the general terms and conditions of a contract for sale by ‘click-wrapping’, such as that at issue in the main proceedings, concluded by electronic means, which contains an agreement conferring jurisdiction, constitutes a communication by electronic means which provides a durable record of the agreement, within the meaning of that provision, where that method makes it possible to print and save the text of those terms and conditions before the conclusion of the contract.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Third Chamber) hereby rules:
Article 23(2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as meaning that the method of accepting the general terms and conditions of a contract for sale by ‘click-wrapping’, such as that at issue in the main proceedings, concluded by electronic means, which contains an agreement conferring jurisdiction, constitutes a communication by electronic means which provides a durable record of the agreement, within the meaning of that provision, where that method makes it possible to print and save the text of those terms and conditions before the conclusion of the contract.
[Signatures]
( *1 ) Language of the case: German. |
JUDGMENT OF THE COURT (Fifth Chamber)
5 March 2015 ( *1 )
‛Appeal — Restrictive measures taken against certain persons in view of the situation in Egypt — Freezing of the funds of persons subject to judicial proceedings for misappropriation of State funds — United Nations Convention against Corruption’
In Case C‑220/14 P,
APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 5 May 2014,
Ahmed Abdelaziz Ezz, residing in Giza (Egypt),
Abla Mohammed Fawzi Ali Ahmed, residing in London (United Kingdom),
Khadiga Ahmed Ahmed Kamel Yassin, residing in London,
Shahinaz Abdel Azizabdel Wahab Al Naggar, residing in Giza,
represented by J. Lewis QC, B. Kennelly, Barrister, J. Pobjoy, Barrister, and J. Binns, Solicitor,
appellants,
the other parties to the proceedings being:
Council of the European Union, represented by M. Bishop and I. Gurov, acting as Agents,
defendant at first instance,
European Commission, represented by F. Castillo de la Torre and D. Gauci, acting as Agents,
intervener at first instance,
THE COURT (Fifth Chamber),
composed of T. von Danwitz, President of the Chamber, C. Vajda, A. Rosas (Rapporteur), E. Juhász and D. Šváby, Judges,
Advocate General: E. Sharpston,
Registrar: A. Calot Escobar,
having regard to the written procedure,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
Mr Ahmed Abdelaziz Ezz and Others have appealed against the judgment of the General Court of the European Union (Third Chamber) of 27 February 2014 in Ezz and Others v Council (T‑256/11, EU:T:2014:93, ‘the judgment under appeal’), by which the General Court dismissed their action for annulment, first, of Council Decision 2011/172/CFSP of 21 March 2011 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Egypt (OJ 2011 L 76, p. 63) and, secondly, of Council Regulation (EU) No 270/2011 of 21 March 2011 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Egypt (OJ 2011 L 76, p. 4), in so far as those acts concern the appellants.
Legal context and background to the dispute
The United Nations Convention against Corruption
The United Nations Convention against Corruption (‘the Convention’) was adopted by Resolution 58/4 of 31 October 2003 of the General Assembly of the United Nations. It entered into force on 14 December 2005. It has been ratified by all the Member States and was approved by the European Union by Council Decision 2008/801/EC of 25 September 2008 (OJ 2008 L 287, p. 1).
Article 2 of the Convention states:
‘For the purposes of this Convention:
…
(f)
“freezing” or “seizure” shall mean temporarily prohibiting the transfer, conversion, disposition or movement of property or temporarily assuming custody or control of property on the basis of an order issued by a court or other competent authority;
(g)
“confiscation”, which includes forfeiture where applicable, shall mean the permanent deprivation of property by order of a court or other competent authority;
…’
Chapter III of the Convention, which contains Articles 15 to 42, relates to criminalisation and law enforcement. Articles 15 to 27 of that chapter list a large variety of acts of corruption which States must establish as criminal offences. Since the objective of the Convention is to enable an increasing number of acts of corruption to be criminalised in view of the threats to the stability and security of societies to which they give rise, the Convention covers not only the offer of undue benefits to a person or the embezzlement of public funds, but also trading in influence and the concealment or laundering of the proceeds of corruption.
Article 31(1) and (2) of the Convention is worded as follows:
‘1. Each State Party shall take, to the greatest extent possible within its domestic legal system, such measures as may be necessary to enable confiscation of:
(a)
Proceeds of crime derived from offences established in accordance with this Convention or property the value of which corresponds to that of such proceeds;
(b)
Property, equipment or other instrumentalities used in or destined for use in offences established in accordance with this Convention.
2. Each State Party shall take such measures as may be necessary to enable the identification, tracing, freezing or seizure of any item referred to in paragraph 1 of this article for the purpose of eventual confiscation.’
Article 55(2) of the Convention is worded as follows:
‘Following a request made by another State Party having jurisdiction over an offence established in accordance with this Convention, the requested State Party shall take measures to identify, trace and freeze or seize proceeds of crime, property, equipment or other instrumentalities referred to in Article 31(1) of this Convention for the purpose of eventual confiscation to be ordered either by the requesting State Party or, pursuant to a request under paragraph 1 of this Article, by the requested State Party.’
EU law
In the wake of the political events which took place in Egypt in and after January 2011, the Council of the European Union adopted Decision 2011/172 on 21 March 2011, citing Article 29 TEU.
Recitals 1 and 2 in the preamble to Decision 2011/172, in its original version, state:
‘(1)
On 21 February 2011, the European Union declared its readiness to support the peaceful and orderly transition to a civilian and democratic government in Egypt based on the rule of law, with full respect for human rights and fundamental freedoms and to support efforts to create an economy which enhances social cohesion and promotes growth.
(2)
In this context, restrictive measures should be imposed against persons having been identified as responsible for misappropriation of Egyptian State funds and who are thus depriving the Egyptian people of the benefits of the sustainable development of their economy and society and undermining the development of democracy in the country.’
Under Article 1(1) of Decision 2011/172, in its original version:
‘All funds and economic resources belonging to, owned, held or controlled by persons having been identified as responsible for misappropriation of Egyptian State funds, and natural or legal persons, entities or bodies associated with them, as listed in the Annex, shall be frozen.’
While the expression ‘persons having been identified as responsible’ was used in the English-language version of recital 2 and Article 1(1), the expression used in the French-language version of those provisions was ‘personnes reconnues comme responsables’ (persons having been found/recognised as responsible).
On 11 July 2014, that is after delivery of the judgment under appeal, a corrigendum to that decision was published in the Official Journal of the European Union in respect of the Bulgarian, Spanish, Czech, Estonian, French, Hungarian and Dutch-language versions (OJ 2014 L 203, p. 113). According to that corrigendum, those provisions must be read as referring to persons ‘having been identified’ as responsible and not to persons ‘having been recognised’ as responsible.
Decision 2011/172 includes, as an annex, a ‘[l]ist of natural and legal persons, entities and bodies referred to in Article 1’. That list contains three categories of information. The first column contains the ‘[n]ame (and any aliases)’ of the legal subjects concerned; the second contains ‘[i]dentifying information’ in respect of those subjects; and a third column states the ‘[g]rounds for designation’.
Mr Ahmed Abdelaziz Ezz is listed in seventh place. The second column contains the following information: ‘Former Member of the Parliament. Date of birth: 12.01.1959. Male’. The grounds for designation set out in the third column, which are the same for all 19 persons included on the list, are as follows: ‘[p]erson subject to judicial proceedings by the Egyptian authorities in respect of the misappropriation of State Funds on the basis of the United Nations Convention against corruption’.
Ms Abla Mohamed Fawzi Ali Ahmed is listed in eighth place. The second column contains the following information: ‘Spouse of Mr Ahmed Abdelaziz Ezz. Date of birth: 31.01.1963. Female’.
Ms Khadiga Ahmed Ahmed Kamel Yassin is listed in ninth place. The second column contains the following information: ‘Spouse of Mr Ahmed Abdelaziz Ezz. Date of birth: 25.05.1959. Female’.
Ms Shahinaz Abdel Aziz Abdel Wahab Al Naggar is listed in tenth place. The second column contains the following information: ‘Spouse of Mr Ahmed Abdelaziz Ezz. Date of birth: 09.10.1969. Female’.
Citing Article 215(2) TFEU and Decision 2011/172, the Council adopted Regulation No 270/2011. Article 2(1) and (2) of that regulation reproduces, in essence, the provisions of Article 1(1) and (2) of Decision 2011/172. The regulation includes an Annex I, which is identical to the Annex to Decision 2011/172. As is apparent from recital 2 in the preamble to the regulation, since the measures imposed by Decision 2011/172 ‘[fell] within the scope of the Treaty on the Functioning of the European Union …, regulatory action at the level of the Union [was] necessary in order to implement them’ and justified the adoption of that act.
Regulation No 270/2011 was not the subject of a corrigendum similar to that issued in relation to Decision 2011/172.
Procedure before the General Court and the judgment under appeal
By application lodged at the General Court Registry on 20 May 2011, the appellants brought an action for annulment of Decision 2011/172 and Regulation No 270/2011, in so far as those acts concern them.
They raised eight pleas in law in support of their action. Their fourth plea in law related to errors of fact and in the legal characterisation of the facts vitiating the grounds for their inclusion in the lists annexed to Decision 2011/172 and Regulation No 270/2011. They maintained in that respect that they were not subject to any judicial proceedings in Egypt.
The General Court found as follows in paragraphs 123 to 133 and 137 of the judgment under appeal:
‘123
By letter of 7 June 2011, the Council explained to the applicants’ lawyers that it had received a “letter dated 13 February 2011 from the Egyptian Ministry of Foreign Affairs with a request by the Egyptian Prosecutor General to freeze the assets of certain former Ministers and officials”, which included the first applicant. A copy of a document dated 13 February 2011 on the headed notepaper of the Office of the Egyptian Minister of Foreign Affairs was enclosed with that letter from the Council. In that unsigned document, reference was made to a request from the Egyptian Prosecutor General to freeze the assets of “former [Egyptian] Ministers, officials and nationals”. The first applicant was one of the persons the subject of that request, but not the second, third and fourth applicants.
…
By letter of 29 July 2011, the Council replied to the letters from the applicants’ lawyers dated 13 May, 9 June and 15 July 2011. In that reply, no reference is made to possible court proceedings against the second, third and fourth applicants. Only the following is stated:
“[They] appear on the list of persons subject to the above-mentioned request for judicial assistance by the Egyptian authorities (they appear under Nos. 2, 3 and 4 on the enclosed list). The request states that orders have been issued by the Egyptian Prosecutor General for the seizure of the assets of all the persons on the list, and that this order was endorsed by the criminal court.”
The Council’s letter of 29 July 2011 included in annex a note dated 24 February 2011 (Ref NV93/11/ms), by which the Embassy of the Arab Republic of Egypt in Brussels (Belgium) requested the High Representative of the Union for Foreign Affairs and Security Policy to transmit to the “competent [judicial] authorities” a request for judicial assistance from the Office of the Egyptian Prosecutor General.
Three documents were included in annex to that note.
The first document was the undated and unsigned text of the request for judicial assistance. That request, drafted in English, sought to “freeze, confiscate and return assets of some former ministers and officials”. It referred to “the investigation carried out by the Egyptian Prosecution General in the [Cases Nos] 162 and 234 for the year 2010 ...; 34, 36, 38, 39, 55 and 70 for the year 2011 ... and [in Case No] 137/2011 ... regarding crimes of corruption, usurping of public assets, and money laundering crimes committed by former ministers and officials” and listed fifteen individuals, including the four applicants. The request went on to state, first, that the Egyptian Prosecutor General had decided to seize the assets of the persons thus listed and, secondly, that that seizure had been “endorsed by the criminal court”.
The second document annexed to the note of 24 February 2011 was a “list of former officials, [their] wives and children” in which the second, third and fourth applicants appeared second, third and fourth, respectively.
The third document annexed to the note of 24 February 2011 was presented as a summary of the allegations against the first applicant in “[Case No] 38 for the year 2011”, a case referred to in the request for judicial assistance referred to in paragraph 128 above. That document was undated, and was not on headed notepaper or signed. However, as with the note of 24 February 2011 and all the other documents annexed thereto, it bore the stamp of the Embassy of the Arab Republic of Egypt in Brussels.
In short, none of the above-mentioned documents suggests that the second, third and fourth applicants have been prosecuted in Egypt for the misappropriation of State funds.
On the other hand, the request for judicial assistance referred to in paragraph 128 above shows, unequivocally, that, on 24 February 2011, less than one month before Decision 2011/172 and Regulation No 270/2011 were adopted, all the applicants were the subject of an order of the Egyptian Prosecutor General seeking to seize their assets, which had been endorsed by a criminal court and was linked to investigations concerning misappropriation of State funds.
The applicants have not moreover produced any evidence to cast doubt on the accuracy of the information entered on that request for judicial assistance. On the contrary, a decision of the Egyptian courts, a translation of which was lodged at the Court Registry on 5 March 2013, confirms that the second applicant still had her assets frozen on 30 January 2013. In addition, the applicants did not dispute, at the hearing, that the above-mentioned order for seizure existed.
…
… it is clear from the document referred to in paragraph 130 above that, in “[Case No] 38 for the year 2011”, the first applicant was “accused” first of “usurping the assets” of a “public sector company with State-owned shares” and, secondly, of “committing crimes of profiteering and [intentionally] harming public assets, as well as usurping and … facilitating the usurpation of [such] assets”.’
Since the General Court did not uphold any of the pleas, it dismissed the action in its entirety.
Forms of order sought
The appellants claim that the Court should:
—
set aside the judgment under appeal;
—
annul Decision 2011/172 and Regulation No 270/2011 in so far as those acts apply to them;
—
order the Council to pay the costs of the appeal and of the proceedings before the General Court; and
—
take any other measures that the Court considers appropriate.
The Council contends that the Court should:
—
dismiss the appeal; and
—
order the appellants to pay the costs.
The European Commission contends that the Court should:
—
dismiss the appeal; and
—
order the appellants to pay the costs of the appeal.
Appeal
The appellants put forward six grounds of appeal.
The first ground of appeal
By their first ground of appeal, the appellants argue that the General Court erred in law in holding that Decision 2011/172 was lawfully adopted on the basis of Article 29 TEU. That plea relates to paragraphs 44 to 47 of the judgment under appeal.
The judgment under appeal
In order to determine the meaning of Article 29 TEU, the General Court examined Articles 21 TEU, 23 TEU to 25 TEU and 28 TEU. It concluded the following in paragraph 41 of the judgment under appeal:
‘The combined effect of those provisions is that decisions which (i) come within the framework of the common foreign and security policy (CFSP), as defined in Article 24(1) TEU, (ii) relate to “a particular matter of a geographical or thematic nature” and (iii) are not in the nature of “operational action” within the meaning of Article 28 TEU constitute “approaches of the Union” within the meaning of Article 29 TEU.’
In paragraphs 44 to 46 of that judgment, the General Court found that the three criteria were met in the present case. It concluded in paragraph 47 of its judgment that Article 1 of Decision 2011/172 could be lawfully adopted on the basis of Article 29 TEU.
Arguments of the parties
The appellants submit that the conditions for adopting decisions on the basis of Article 29 TEU were not fulfilled in the present case. The grounds for entry on the list annexed to Decision 2011/172 did not come within the principles and objectives of the CFSP set out in Article 21 TEU. At no point had the Egyptian authorities suggested in the letters relied on by the Council that the appellants’ alleged actions undermined ‘democracy’ in Egypt or ‘the sustainable economic [or] social … development’ of Egypt.
The conduct of which the first appellant is accused, namely fraud against a company’s shareholders, does not justify EU action at international level under the CFSP. Furthermore, there is no substantive allegation against the spouses of Mr Ezz. To regard fraud committed in a third country as engaging the foreign and security policy of the European Union would have the effect of significantly extending the scope of that policy, to the detriment of the competences of the Member States in relation to mutual legal assistance.
In addition, the Egyptian authorities had not requested that the European Union adopt a decision under Article 29 TEU, but had requested mutual judicial assistance, which is a matter for the national judicial authorities.
Lastly, the request by the Egyptian authorities related to the preservation of funds which could be used to satisfy a judgment delivered by a national judicial authority against Mr Ezz and to enable the sums in question to be ‘repatriated’, for which there is no jurisdiction under the CFSP. In finding that one of the appellants was charged with activities considered by the Egyptian authorities to threaten democratic government in the Arab Republic of Egypt or sustainable economic or social development in that country, the General Court distorted the evidence before it.
The Council states that the first plea amalgamates two complaints, the first regarding the lack of a legal basis for Decision 2011/172 and the second regarding the appellants’ non-fulfilment of the criteria for their inclusion in the scope of Decision 2011/172 and Regulation No 270/2011. It observes that the General Court responded to their plea alleging the lack of a legal basis in paragraphs 44 to 47 of the judgment under appeal.
In the Council’s view, the appellants’ interpretation of the objectives of Decision 2011/172 is incorrect when there is nothing in that decision to suggest that the reason for the appellants’ inclusion in the list annexed to that decision of persons whose funds and economic resources were to be frozen was fraud committed in a third country, or that the aim of that decision is to provide mutual legal assistance.
The Council argues that Decision 2011/172 is an autonomous measure which was adopted in pursuit of the aims of the CFSP and in exercise of the discretionary powers available to the Council in this respect, rather than in response to the Egyptian authorities’ request. Accordingly, when examining the plea of illegality raised against Article 1 of Decision 2011/172, the General Court did not address the alleged actions of the appellants or the content of note verbale NV93/11/ms, nor did it need to do so.
The Commission contends that, in so far as it concerns the lack of a legal basis for Decision 2011/172, the first ground of appeal is inadmissible, since it was not relied on in the application for annulment lodged at first instance. It is also new in substance, in that the criterion based on responsibility for the misappropriation of State funds on the basis of which the appellants’ funds were frozen is incompatible with Article 21 TEU, since the measure does not pursue any of the objectives set out in paragraphs 1 or 2 of that article. Furthermore, the appeal does not discuss at all the reasoning of the General Court in paragraphs 34 to 54 of the judgment under appeal on the meaning and scope of Article 29 TEU. This ground of appeal should therefore be declared inadmissible.
In the alternative, the Commission maintains that the General Court did not err in law when it held that the conditions for the application of Article 29 TEU were fulfilled. It submits that, contrary to what the appellants suggest, this is not a matter of treating a foreign fraud case as engaging the foreign and security policy of the European Union, but of responding to requests of a newly established government in a third country to preserve the public funds of that country in order to ensure their future recovery and use for the benefit of the Egyptian people.
The Commission emphasises, moreover, that the fact that a request by the Egyptian authorities was expressly directed to the judicial authorities of the European Union has no bearing on whether Article 29 TEU is an appropriate legal basis for the adoption of Decision 2011/172 on restrictive measures. Those restrictive measures are autonomous measures, which the Council is entitled to take, even in the absence of any request from the third country concerned.
Lastly, the reference to the repatriation of funds is irrelevant in the present case, since that issue is outside the scope of Decision 2011/172 and Regulation No 270/2011.
Findings of the Court
By their first ground of appeal, the appellants maintain that the General Court erred in law in holding that Decision 2011/172 was lawfully adopted on the basis of Article 29 TEU.
Review of the legal basis of an act enables the powers of the author of the act to be verified (see, to that effect, judgment in Germany v Parliament and Council, C‑376/98, EU:C:2000:544, paragraph 83) and the procedure for the adoption of that directive to be checked as to whether it was vitiated by any irregularity (judgment in ABNA and Others, C‑453/03, C‑11/04, C‑12/04 and C‑194/04, EU:C:2005:741, paragraph 53). According to settled case-law, the choice of legal basis for an EU measure must rest on objective factors amenable to judicial review, including the purpose and content of that measure (see, in particular, judgment in Parliament v Council, C‑130/10, EU:C:2012:472, paragraph 42).
In paragraphs 44 to 46 of the judgment under appeal, the General Court examined the purpose and content of Decision 2011/172 and concluded that it could be lawfully adopted on the basis of Article 29 TEU. In particular, in paragraph 44 of the judgment under appeal, the General Court held that Decision 2011/172 forms part of a policy of supporting the new Egyptian authorities, intended to promote both the economic and political stability of Egypt and, in particular, to assist the authorities of that country in their fight against the misappropriation of State funds, and that, accordingly, that decision is fully based on the CFSP and satisfies the objectives referred to in Article 21(2)(b) and (d) TEU.
In that respect, the appellants have not developed any argument to demonstrate that the General Court erred in law in the reasoning set out in the preceding paragraph, but merely assert generally that the Egyptian authorities did not declare in the letters produced by the Council that the appellants’ alleged actions undermined democracy or the sustainable economic or social development of Egypt, within the meaning of Article 21(2)(b) and (d) TEU. Consequently, the appellants’ argument cannot be accepted.
In addition, the appellants dispute the merits of Decision 2011/172 in the light of Article 21 TEU.
However, in view of the broad scope of the aims and objectives of the CFSP, as expressed in Articles 3(5) TEU and 21 TEU, and specific provisions relating to the CFSP, in particular Articles 23 TEU and 24 TEU, that argument cannot call into question the General Court’s assessment regarding the legal basis of Decision 2011/172.
As regards the complaint concerning the distortion of the evidence, it must be noted that the appellants have not established which part of the section of the judgment under appeal challenged by the first ground of appeal is the target of that complaint.
It follows from this that the first ground of appeal must be rejected.
The second ground of appeal
By their second ground of appeal, the appellants submit that the General Court erred in law in holding that they satisfied the criteria set out in Article 1(1) of Decision 2011/172 and Article 2(1) of Regulation No 270/2011, and the grounds given in the annexes to those acts for imposing restrictive measures against them in relation to funds held and their economic resources, and for including their names on the list annexed to each of those acts.
The judgment under appeal
In view of the different wording of the English-language version of Article 1(1) of Decision 2011/172 as compared with that of other language versions, the General Court interpreted that provision in paragraphs 62 to 84 of the judgment under appeal. In the English-language version, Article 1(1) provides for the freezing of assets of ‘persons having been identified as responsible’, whereas the French-language version refers to persons having been ‘reconnues’ (found/recognised) as responsible for misappropriation.
In the light of the context and purpose of that provision, the General Court concluded, in paragraph 67 of the judgment under appeal, that it had to be interpreted broadly. In paragraphs 70 to 81 of that judgment, the General Court held that the principle that provisions imposing administrative penalties must be interpreted strictly did not preclude that interpretation. It made a similar finding, in paragraphs 82 to 84 of that judgment, with regard to the principle of the presumption of innocence.
Examining the grounds for the appellants’ inclusion in the list annexed to Decision 2011/172, the General Court compared the wording of those grounds in the various language versions of that decision. In paragraph 93 of the judgment under appeal, it noted that whichever language version was taken, the ground for listing was consistent with Article 1 of that decision, and found, in paragraph 94 of the judgment under appeal, that the English-language version of that annex was more consonant with the objective pursued by that article.
Relying, therefore, on the wording of Article 1(1) of Decision 2011/172 in its English-language version, the General Court found, in paragraph 95 of the judgment under appeal, that ‘the Council intended to freeze the applicants’ assets on the ground that they were subject to judicial proceedings in Egypt linked, in whatever form, to investigations concerning the misappropriation of State funds’. In paragraph 99 of that judgment, it concluded that, ‘in listing the applicants in the Annex to Decision 2011/172, the Council did not infringe the criteria which it had itself laid down in Article 1(1) of that decision’.
Arguments of the parties
The appellants challenge, first of all, the General Court’s interpretation of Article 1(1) of Decision 2011/172 and Article 2(1) of Regulation No 270/2011. They submit that the General Court erred in law in accepting the English-language version of those provisions. They maintain that it is not the case that the English-language version is more consonant with the objective pursued by Decision 2011/172, and that the General Court ought to have reconciled the various language versions. The General Court was obliged to interpret those provisions by reference to the general scheme and the purpose of the rules. The appellants also challenge the General Court’s interpretation in paragraphs 85 to 95 of the judgment under appeal of the ground for including each of them in the annexes to Decision 2011/172 and Regulation No 270/2011.
The appellants submit that, in the light of those erroneous interpretations, the General Court failed to carry out the full and rigorous review of the evidence required by EU law. It acted only on the allegations contained in the request for judicial assistance, without verifying their accuracy. In particular, it did not take account of the first appellant’s argument that the complaint made against him was actually politically motivated and was unfounded. Similarly, the General Court did not examine the appellant’s assertions that his treatment in Egypt violated basic guarantees of due process and the rule of law.
According to the appellants, the General Court erred in law in ruling, in paragraph 99 of the judgment under appeal, that, in listing the appellants in the Annex to Decision 2011/172, the Council had not infringed the criteria which it had itself laid down in Article 1(1) of that decision.
That error is particularly evident as regards the second, third and fourth appellants. The General Court found, in paragraph 131 of the judgment under appeal, that none of the documents produced by the Council suggests that those appellants have been prosecuted in Egypt for the misappropriation of State funds. In relying on an association of those appellants with the first appellant, the General Court failed to have any regard to the judgment of the Court in Tay Za v Council (C‑376/10 P, EU:C:2012:138, paragraph 66) or to the judgment of the General Court in Nabipour and Others v Council (T‑58/12,EU:T:2013:640, paragraphs 107 and 108), under which only a natural person’s own involvement in activities to which the relevant legislation relates justifies the adoption of restrictive measures against him.
The Council’s view is that the General Court did not err in law in its interpretation of Decision 2011/172 and that, in any event, the question of the intention of the author of the act has been definitively resolved by the publication of a corrigendum to that decision.
As regards evidence of the existence of judicial proceedings against the first appellant, the Council refers to note verbale NV93/11ms by the Egyptian Prosecutor General, and to the fact that that appellant had acknowledged being subject to such proceedings in the application which he lodged before the General Court. The proceedings are not based on infringement of the United Nations Convention against Corruption, but the matters of which the appellant is accused by the Egyptian authorities correspond to the infringements described in that convention, particularly in Articles 17 and 18 thereof. Consequently, the grounds for inclusion in the list in the Annex to Decision 2011/172 correspond to the existence of judicial proceedings brought by the Egyptian authorities as reported by the first appellant himself.
The Council notes that the appellants do not state on what basis the Council or the General Court should have given consideration to the argument that the complaint against the first appellant was actually politically motivated. It observes, moreover, that the restrictive measures taken against him do not constitute a criminal sanction, so that the argument regarding a violation of due process and of the rule of law is not relevant.
As regards the second, third and fourth appellants, the Council emphasises that their listing in the Annex to Decision 2011/172 is not based on the fact that they were associated with the first appellant. It recalls in that regard that the General Court found, in particular in paragraph 97 of the judgment under appeal, that the appellants were listed on the sole ground that they were subject to judicial proceedings in Egypt linked to investigations concerning the misappropriation of State funds.
The Commission notes that the appellants do not contest paragraphs 57 to 84 of the judgment under appeal, in which the General Court interprets Article 1(1) of Decision 2011/172. It maintains that the General Court legitimately favoured a broad interpretation of that provision. The objective of freezing funds, namely to enable those funds to be recovered subsequently by the Egyptian government, could not have been achieved if it had been necessary to wait for the prosecution to be underway. Furthermore, the wording of Decision 2011/172 does not preclude that interpretation. Article 1(1) of Decision 2011/172 and Article 2(1) of Regulation No 270/2011 are aimed at persons having been identified as responsible for misappropriation of State funds and those ‘associated’ with them. Moreover, paragraph 2 of those articles prescribes a measure intended to ensure that the persons concerned do not circumvent the restrictive measures imposed on them. The Commission thus concludes that the ground for listing in the annexes to Decision 2011/172 and Regulation No 270/2011, namely being ‘subject to judicial proceedings’ cannot be interpreted as meaning that the persons concerned must be ‘criminally prosecuted’.
With regard to the evidence, the Commission emphasises that the Council was entitled to rely on the letters issued by the Egyptian authorities without verifying the merits of the arguments contained in those letters or deciding on the basis of the outcome of those proceedings. While, in respect of the first appellant, the Egyptian Prosecutor General’s request for judicial assistance referred to detailed facts relating, in particular, to ‘crimes of profiteering and intentionally harming public assets’, the same does not apply with regard to the second, third and fourth appellants. The reason why their funds were seized by the Egyptian authorities and frozen by EU acts is that those persons may, by virtue of their relationship with the first appellant, divert State funds or be used for that purpose. Furthermore, according to the information contained in those letters, the seizure of the funds of those appellants was subject to orders issued by the Prosecutor General and endorsed by the criminal court. The Council therefore communicated the relevant information on which the listings at issue were based.
As regards the full review of the grounds for listing required by the appellants, the Commission states that it is not for the Council to verify whether the Egyptian authorities ‘have a good case’ or to judge on the merits of the national case. The letters from the Egyptian authorities are appropriate information on which the Council could rely when adopting the restrictive measures.
Like the Council, the Commission contends that the reference to the Convention constitutes the legal basis of the request for assistance and cannot be understood as establishing the particular grounds for the judicial proceedings against the first appellant.
In conclusion, the Commission maintains that the criticism that the reasoning of the General Court was sparse does not reflect the judgment under appeal. It notes that the appellants do not challenge paragraph 67 of the judgment under appeal and do not take into account the detailed analysis of the General Court on defining the relevant criteria for inclusion in the list annexed to Decision 2011/172 (paragraphs 57 to 84 of that judgment); defining the ground for listing (paragraphs 85 to 95 of that judgment); and the legal characterisation of the facts (paragraphs 118 to 157).
Lastly, the Commission contends that the judgment in Tay Za v Council (EU:C:2012:138) is not relevant in this instance. That case concerned the son of a businessman who was associated with the rulers of Burma/Myanmar, and the measures taken against the regime of that third country were aimed at officials ‘who formulate, implement or benefit from policies that impede Burma/Myanmar’s transition to democracy’. In the present case, the aim is to preserve State funds for their future return to the Arab Republic of Egypt. Thus, the mere fact of being married to a person who has links with the rulers of a State does not imply an association with the political regime of that State. By contrast, that situation is relevant where restrictive measures are aimed at preserving State funds, since husbands and wives may own certain assets jointly. The very fact that orders were made in Egypt, even if these were not strictly necessary for including the second, third and fourth appellants on the lists annexed to Decision 2011/172 and Regulation No 270/2011, is a good indication of such an association, since the Egyptian courts have a better knowledge of the matrimonial regime applicable to the first appellant and his wives.
Findings of the Court
By their second ground of appeal, the appellants challenge, in the first place, the General Court’s interpretation of the criteria for inclusion in the lists annexed to Decision 2011/172 and Regulation No 270/2011 and, in the second place, their listing in the light of those criteria and the reasons stated.
Contrary to what is submitted in the first place by the appellants, the General Court interpreted Article 1(1) of Decision 2011/172 and Article 2(1) of Regulation No 270/2011 taking into account the divergent wording of those provisions in the various language versions of Decision 2011/172 and Regulation No 270/2011, their context and their purpose.
The General Court did not err in law when, in paragraph 66 of the judgment under appeal, it identified the objective of those acts as being to assist the Egyptian authorities in their fight against the misappropriation of State funds. That objective is clear from recital 2 of Decision 2011/172.
Nor, in view of that objective, did the General Court err in law in holding, also in paragraph 66, that the effectiveness of Decision 2011/172 would be undermined if the adoption of restrictive measures were made subject to the criminal convictions of persons suspected of having misappropriated funds, since those persons would have enough time pending their conviction to transfer their assets to States having no form of cooperation with the Egyptian authorities.
The General Court correctly concluded, therefore, in paragraph 67 of the judgment under appeal, that Article 1(1) of Decision 2011/172 had to be interpreted as being directed not only at persons being prosecuted but also persons the subject of judicial proceedings connected to criminal proceedings for ‘misappropriation of Egyptian State funds’ who may on that basis be described as persons associated with the individuals the subject of those criminal proceedings.
Given the validity of that interpretation, the General Court was right in stating, in paragraph 93 of the judgment under appeal, that the ground on which the appellants were listed is consistent with Article 1(1) of Decision 2011/172, irrespective of the language version of that ground, and, in paragraph 94 of that judgment, that the English-language version is more consonant with the objective pursued by that provision. The General Court did not therefore err in law in concluding, in paragraph 95 of the judgment under appeal, that the Council intended to freeze the appellants’ assets on the ground that they were subject to judicial proceedings in Egypt linked, in whatever form, to investigations concerning the misappropriation of State funds.
The appellants challenge, in the second place, their inclusion in the lists annexed to Decision 2011/172 and Regulation No 270/2011 on the ground that it infringes Decision 2011/172. Although, as has just been stated in paragraph 72 of the present judgment, the appellants’ interpretation of that decision cannot be accepted, it is nevertheless appropriate to examine the arguments they put forward in that respect.
As regards the request for assistance made by the Egyptian authorities, it must be noted that this is examined, in particular, in paragraphs 128 to 134 and 137 of the judgment under appeal. In paragraph 128 of that judgment, the General Court found that that request referred to an investigation carried out by the Egyptian Prosecution General in respect of the four appellants regarding, inter alia, crimes of corruption and usurping of public assets. In paragraph 133 of that judgment, the General Court noted that the appellants had not produced any evidence such as to cast doubt on the accuracy of the information entered on that request for assistance. Similarly, it stated that the appellants had not disputed the existence of an order of the Egyptian Prosecutor General for seizure of their assets, which had been endorsed by a criminal court. As regards the first appellant specifically, in paragraphs 130 and 137 of the judgment under appeal the General Court examined one of the documents annexed to the request for assistance and found that the first appellant was ‘accused’, in ‘[Case No] 38 for the year 2011’, of ‘usurping the assets’ of a ‘public sector company with State-owned shares’ and of ‘committing crimes of profiteering and [intentionally] harming public assets, as well as usurping and … facilitating the usurpation of [such] assets’.
In those circumstances, since the appellants do not dispute the existence of the request for assistance and the documents annexed to it or of the order relating to the seizure of their assets, the General Court cannot, contrary to their submissions, be accused of having failed to carry out a full and rigorous review of that evidence.
It should be emphasised in that regard that it was not for the Council or the General Court to verify whether the investigations to which the appellants were subject were well founded, but only to verify whether that was the case as regards the decision to freeze funds in the light of the request for assistance. So far as concerns the findings of fact made by the General Court with regard to the existence of judicial proceedings concerning the four appellants, it must be borne in mind that the Court of Justice has consistently held that the General Court has exclusive jurisdiction, first, to find the facts except where the substantive inaccuracy of its findings is apparent from the documents submitted to it and, secondly, to assess those facts. Save where the evidence adduced before the General Court has been distorted, the appraisal of the facts therefore does not constitute a point of law which is subject as such to review by the Court of Justice (see, in particular, judgments in Versalis v Commission, C‑511/11 P, EU:C:2013:386, paragraph 66, and Telefónica and Telefónica de España v Commission, C‑295/12 P, EU:C:2014:2062, paragraph 84).
With regard to the first appellant, the appellants are in fact seeking a reassessment of the evidence without invoking any distortion of that evidence by the General Court, in so far as they argue that the Egyptian authorities’ request for judicial assistance, as described notably in paragraphs 128, 130 and 137 of the judgment under appeal, does not provide evidence that the first appellant is being prosecuted in Egypt and, in particular, that the General Court erred in law in finding that a judicial investigation was underway in respect of the first appellant for misappropriation of State funds in his capacity as a former member of the Egyptian Parliament. That argument must therefore be declared inadmissible.
The appellants’ argument that there is no evidence that the order was made in respect of the ‘misappropriation of State funds on the basis of the United Nations Convention against Corruption’ must also be rejected, since it is apparent from the request for assistance itself that the first appellant is being prosecuted in Egypt and that the Egyptian authorities have indicated that the Convention is the legal basis of the request for assistance, referring, inter alia, to Articles 17 to 19, 23 and 31 thereof.
As regards the second, third and fourth appellants, while the General Court recognised, in paragraph 131 of the judgment under appeal, that none of the documents suggested that those appellants had been prosecuted in Egypt for the misappropriation of State funds, it found, in paragraph 132 of that judgment, that their assets had been seized pursuant to an order of the Egyptian Prosecutor General which was endorsed by a criminal court and was linked to investigations concerning the misappropriation of State funds.
As to the appellants’ argument that the seizure of their assets in Egypt does not prove that there are judicial proceedings against the second, third and fourth appellants, suffice it to recall that that seizure was ordered by the Egyptian Prosecutor General and endorsed by a criminal court, which must be considered judicial bodies. The appellants’ argument that that seizure was merely preventative is unfounded, given that that seizure was ordered by the judicial authorities and the preventative nature of a measure does not divest it of its judicial character.
The General Court did not, therefore, err in law when it concluded, in paragraph 134 of the judgment under appeal, that the Council had not erred in fact or in its legal characterisation of the facts in describing the second, third and fourth appellants, in the Annex to Decision 2011/172, as persons subject to judicial proceedings in Egypt linked to investigations concerning misappropriation of State funds.
The appellants also invoke the political objective of the complaint made against the first appellant, and his treatment in Egypt contrary to the rule of law. However, they do not specify the plea before the General Court to which the General Court is said to have failed to respond, or show in what respect the General Court made an error of law.
The appellants submit, lastly, that the General Court should, when reviewing the entries on the lists annexed to Decision 2011/172 and Regulation No 270/2011, have taken into consideration the natural persons’ own involvement in carrying out the acts covered by the relevant legislation. It should be noted, however, that the criterion laid down in Article 1(1) of Decision 2011/172, under which all funds and resources of persons or entities having been identified as responsible for misappropriation of Egyptian State funds are to be frozen, must be interpreted as meaning that the existence of judicial proceedings connected to criminal proceedings for misappropriation of State funds may be accepted as a basis for restrictive measures, without there being any need to describe the personal involvement of the person concerned. It follows from this that the case-law invoked by the appellants and mentioned in paragraph 57 of the present judgment is not relevant.
In the light of all the foregoing, the second ground of appeal must be rejected.
The third ground of appeal
Arguments of the parties
By their third ground of appeal, the appellants maintain that the General Court erred in law in holding that the Council had complied with its obligation to state reasons in Decision 2011/172 and Regulation No 270/2011.
They submit that the Council gave just one reason for including them on the lists annexed to those acts, that reason being identical for each of them, namely that they were each ’subject to judicial proceedings by the Egyptian authorities in respect of the misappropriation of State funds on the basis of the United Nations Convention against Corruption’. In their view, that reason is vague and fails to identify the ‘actual and specific’ reasons for imposing restrictive measures on them. The lack of precision in the statement of reasons adopted by the Council is compounded by the significant disparities in the language versions of Decision 2011/172 and Regulation No 270/2011, and deprives the appellants of the ability to defend their rights in the best possible conditions.
The Council notes that the appellants do not explain in what way the General Court allegedly erred in law by upholding the validity of the wording of the grounds for listing. In any event, the appellants have obtained all the documents relevant for their defence.
It notes, moreover, that this is the first time that the appellants have invoked the difficulties generated by the disparities between the language versions of Decision 2011/172 and Regulation No 270/2011. It observes that the appellants have always used English during the proceedings, so that it is difficult to see how the reference to the English-language version of the contested measures would have prevented them from defending their rights in the best possible conditions.
The Commission contends that the statement of reasons for those acts was sufficient.
Findings of the Court
The General Court did not err in law in paragraphs 107 to 109 of the judgment under appeal when it recalled the case-law relating to statements of reasons for acts and, more specifically, for acts imposing restrictive measures such as the freezing of assets.
After reviewing the references relating to the legal basis of Decision 2011/172 and Regulation No 270/2011 in paragraph 113 of the judgment under appeal, it established, in paragraph 114 of that judgment, that the considerations of fact that were the basis for the Council’s decision to freeze assets were sufficiently detailed to enable the appellants to challenge their correctness before the Council and then before the Courts of the European Union. In paragraph 115 of that judgment, it established that those considerations were not stereotypical in nature but sought to describe the situation of the appellants.
The General Court did not err in law when it held, in paragraph 116 of the judgment under appeal, that Decision 2011/172 and Regulation No 270/2011 contain a statement of the points of law and facts on which, according to the Council, those acts are based, and that their wording discloses in a clear fashion the Council’s reasoning.
The third ground of appeal must therefore be rejected.
The fourth ground of appeal
Arguments of the parties
By their fourth ground of appeal, the appellants maintain that the General Court erred in law in holding, in paragraphs 158 to 185 of the judgment under appeal, that the appellants’ rights of defence and right to effective judicial protection had not been infringed.
According to the appellants, the General Court erred in holding that Decision 2011/172 and Regulation No 270/2011 were sufficiently reasoned. It also failed to give any consideration to the fact that the appellants did not receive a copy of the request for judicial assistance until four months after that decision and regulation were adopted, that is after the date on which the action was brought before the General Court. They submit that the information provided in the letter of 29 July 2011 is incomplete. The General Court failed to assess whether the facts accepted by the Council and underpinning the grounds for including the appellants on the lists annexed to those acts had been established. The General Court’s determination that the listing of the second, third and fourth appellants was lawful was based on a reason that differed from that given by the Council.
The Council contends that the appellants have not established in what respect they were prevented from exercising in full their rights of defence and their right to effective judicial protection, since they were able to bring an action for annulment within the legally prescribed period, and, in the context of that action, contested exactly the same documents as those provided to them in response to their requests for information after the adoption of Decision 2011/172 and Regulation No 270/2011.
The Council and the Commission note that the General Court found, in paragraphs 164 and 165 of the judgment under appeal, that the Council had communicated to the appellants the documents necessary for their defence. The appellants do not contest those paragraphs of the judgment under appeal.
As regards the other arguments, the Council submits that it has already responded to those in the context of the other grounds of appeal.
Findings of the Court
In paragraphs 158 to 185 of the judgment under appeal, to which the fourth ground of appeal relates, the General Court replied to three separate arguments put forward by the appellants.
First of all, in paragraphs 159 to 166 of the judgment under appeal, the General Court ruled that the appellants’ argument that the evidence on the basis of which their assets were frozen was not communicated to them had no basis in fact. Paragraphs 164 and 165 of the judgment under appeal, by which the General Court finds that the Council had communicated to the appellants the documents necessary for their defence, are worded as follows:
‘164
First, the documents in the file before the Court show that, by a letter of 7 June 2011 …, the Council replied to the request of 1 April 2011, stating that it was referring the applicants to a document “dated 13 February 2011 from the Egyptian Ministry of Foreign Affairs with a request by the Egyptian Prosecutor General to freeze the assets of certain former Ministers and officials, based on the United Nations Convention against Corruption, and which includes [the first applicant] on the list of persons concerned”. That document dated 13 February 2011 was enclosed with the Council’s letter.
Secondly, by a letter of 29 July 2011 referred to in paragraph 125 above, the Council replied, inter alia, to the letter of 13 May 2011. In the letter of 29 July 2011 it referred the applicants’ lawyers not only to the “information … already communicated … in the Council’s previous letter of 7 June 2011”, but also to a “communication … from the Egyptian Mission to the E[uropean] U[nion] dated 24 February 2011, enclosing a request for judicial assistance from the Egyptian Prosecutor General”. That communication together with the request for judicial assistance, described in paragraphs 126 and 128 above respectively, were enclosed with the Council’s letter of 29 July 2011.’
Since the appellants have not pleaded distortion of the facts or of the evidence, the fourth ground of appeal must, in accordance with the case-law cited in paragraph 77 of the present judgment, be declared inadmissible in so far as it relates to paragraphs 159 to 166 of the judgment under appeal.
Next, in paragraphs 167 to 170 of the judgment under appeal, the General Court rejected the appellants’ argument concerning the failure to state reasons for Decision 2011/172 and Regulation No 270/2011.
In that regard, it has already been held, in paragraph 93 of the present judgment, that the General Court did not err in law when it held that the reasons for those acts were stated to the requisite legal standard. Accordingly, the fourth ground of appeal must be rejected as unfounded in so far as it relates to paragraphs 167 to 170 of the judgment under appeal.
Lastly, in paragraphs 171 to 185 of the judgment under appeal, the General Court rejected a number of arguments put forward by the appellants to demonstrate that their right to effective judicial protection had been infringed. In the context of the present ground of appeal, the appellants allege that the General Court did not take into account the fact that they were provided with a copy of the request for judicial assistance, the principal piece of evidence on which Decision 2011/72 and Regulation No 270/2011 are based, on 29 July 2011, more than four months after those acts were adopted. Consequently, the appellants are of the view that the Council did not reply to them ‘in sufficient time’, contrary to the General Court’s assessment in paragraph 182 of the judgment under appeal.
Suffice it to note that the appellants did not rely on that argument before the General Court and, as a result, are not entitled to rely, at the stage of the appeal, on the existence of an error of law on the part of the General Court in that respect.
The fourth ground of appeal must therefore be rejected.
The fifth ground of appeal
Arguments of the parties
By their fifth ground of appeal, the appellants maintain that the General Court erred in law in holding that the interference with their property and/or freedom to conduct a business was proportionate.
The General Court did not, they submit, examine the possibility of applying measures less onerous than the restrictive measure in order to achieve the desired objectives. It merely stated in paragraph 207 of the judgment under appeal that the appellants had not proved that the Council could envisage adopting measures that were less onerous than but as appropriate as those provided for in Decision 2011/172 and Regulation No 270/2011. Nor, moreover, did the General Court consider the position of each of the appellants individually. Had such errors not been made, the only conclusion available to the General Court would have been that the restrictive measures at issue constituted a disproportionate interference with the appellants’ property and/or freedom to conduct a business.
The Council notes that the General Court addressed the proportionality of the measures at length in paragraphs 187 to 217 of the judgment under appeal. Furthermore, it was not necessary for the position of each of the appellants to be considered, since the restrictive measures in question do not constitute a punishment for any suspected or proved wrongdoing and therefore do not need to be adapted to the behaviour of the persons subjected to them. The Council states in this regard that neither before the General Court nor before the Court of Justice did the appellants invoke any circumstances that would justify such differentiated treatment. Therefore, they are wrong to claim that the General Court erred in not taking an argument into account, since no such argument was ever submitted to it.
Findings of the Court
According to settled case-law, an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside and the legal arguments specifically advanced in support of the appeal (see, in particular, judgments in France v Monsanto and Commission, C‑248/99 P, EU:C:2002:1, paragraph 68, and Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraph 46).
The appellants have not put forward any legal argument to establish the existence of an error of law in paragraphs 205 to 209 of the judgment under appeal, in which the General Court reviewed the proportionality of the restrictive measures at issue. The appellants merely challenge the General Court’s reason — stated in paragraph 207 of the judgment under appeal and recalled in paragraph 109 of the present judgment — for finding that the appellants had not adduced evidence proving that it was possible to adopt less onerous measures, and do not even attempt to show that they submitted such evidence to the General Court.
As regards the personal position of each of the appellants, suffice it to note that the validity of their inclusion in the lists annexed to Decision 2011/172 and Regulation No 270/2011 was reviewed by the General Court in its reply to the fourth plea of the action for annulment. It should be noted in that regard that the General Court referred to Article 1(3) of Decision 2011/172, according to which the competent authorities of the Member States may, under certain conditions, in any given case authorise that certain frozen funds or economic resources be released or be made available. Article 4 of Regulation No 270/2011 contains a similar provision. Having regard to the specific objective of the freezing of funds in relation to all the appellants (namely to immobilise assets likely to become part of the appellants’ estates following the misappropriation of State funds to the detriment of the Egyptian authorities), to the temporary and reversible nature of the measures, to which reference is made in paragraph 209 of the judgment under appeal, and to the fact that those provisions allow certain funds to be released in any given case, the General Court was not obliged to review the proportionality of the restrictive measure in relation to each appellant.
It follows from this that the fifth ground of appeal must be rejected as in part inadmissible and in part unfounded.
The sixth ground of appeal
Arguments of the parties
By their sixth ground of appeal, the appellants submit that the General Court erred in law in holding that the Council had not made a manifest error of assessment.
The General Court considered, in paragraphs 235 and 236 of the judgment under appeal, that the Council had complied with the criteria set out in Article 1(1) of Decision 2011/172 and Article 2(1) of Regulation No 270/2011. Furthermore, as is apparent from paragraph 237 of that judgment, the Council’s arguments ‘presuppose[d] that it was for the Council to ascertain whether they were criminally liable for misappropriation of Egyptian State funds’.
The Council and the Commission contend that a reply to those arguments has already been given in the context of the other grounds of appeal.
Findings of the Court
It must be noted that the appellants refer back to the arguments they put forward in support of the second ground of appeal, and thus call into question the General Court’s assessment of the validity of their inclusion in the lists annexed to Decision 2011/172 and Regulation No 270/2011. Since that assessment by the General Court has been upheld by the Court of Justice in its examination of the second ground of appeal, it follows that the sixth ground of appeal must be rejected as unfounded.
Since all the grounds of appeal have been rejected, the appeal must be dismissed.
Costs
In accordance with Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is unfounded, the Court is to make a decision as to the costs.
Under Article 138(1) of those rules, which apply to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the Council and the Commission have applied for costs and the appellants have been unsuccessful, the appellants must be ordered to pay the costs.
On those grounds, the Court (Fifth Chamber) hereby:
1.
Dismisses the appeal;
2.
Orders Mr Ahmed Abdelaziz Ezz, Ms Abla Mohammed Fawzi Ali Ahmed, Ms Khadiga Ahmed Ahmed Kamel Yassin and Ms Shahinaz Abdel Azizabdel Wahab Al Naggar to bear their own costs and to pay those incurred by the Council of the European Union and the European Commission.
[Signatures]
( *1 ) Language of the case: English. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 30 April 2015 ( )
Case C‑105/14
Ivo Taricco and Others
(Request for a preliminary ruling from the Tribunale di Cuneo (Italy))
‛Protection of the European Union’s financial interests — Tax offences in the field of value added tax — Duty of the Member States to impose effective, proportionate and dissuasive penalties — Criminal penalties — Limitation period for proceedings — Statutory restriction of the overall length of the limitation period in the event of its interruption — National limitation regime which, in many cases, may have the effect of exempting offenders from punishment — Legality of the penalties — Prohibition on retroactivity — Article 325 TFEU — Directive 2006/112/EC — Regulation (EC, Euratom) No 2988/95 — Convention on the protection of the European Communities’ financial interests (‘PIF Convention’’
I – Introduction
1.
Does EU law require the courts of the Member States to refrain from applying certain provisions of their national law on the limitation periods applicable to the prosecution of criminal offences in order to guarantee the effective punishment of tax offences? That, in essence, is the question which the Court of Justice is called upon to consider in the present case in the light of a request for a preliminary ruling from an Italian criminal court.
2.
That question has arisen in the context of a case of organised tax fraud in the trade in champagne which was uncovered in Italy. Mr Taricco and several other defendants are charged, as members of a criminal organisation, with having submitted fraudulent value added tax (‘VAT’) returns using invoices relating to non-existent transactions. Their practices were apparently similar to carousel fraud.
3.
In all likelihood, the prosecution of the criminal offences alleged to have been committed in that context will become time-barred even before a final criminal judgment is given. According to the information supplied by the referring court, this is due not only to the circumstances of this particular case, but also to a structural problem in the Italian criminal justice system, which provides for various ways of interrupting the limitation period applicable to the bringing of proceedings but not for its suspension while criminal proceedings are ongoing. That system also provides for an absolute limitation period, introduced by a statutory provision of 2005, which, in the event of interruption, is now only a quarter longer than the original period and not — as before — half as long again. In many cases, it would seem, the absolute limitation period in particular has the effect of exempting the offender from punishment.
4.
Relating as it does to VAT, a share of the revenue from which forms part of the European Union’s own resources, ( ) the present case provides the Court with an opportunity to clarify a number of fundamental questions relating to the protection of the European Union’s financial interests. In so doing, the Court must give due consideration to the rights of the accused in criminal proceedings. In this respect, the present case may be vaguely reminiscent of the famous case Berlusconi and Others. ( ) On closer consideration, however, the points of law raised here differ from those with which the Court was concerned on that occasion.
II – Legal framework
A – EU law
5.
The framework of EU law relevant to this case is, in essence, determined by various provisions on the protection of the financial interests of the European Union (formerly, the European Communities). Particular attention must be drawn to Articles 4(3) TEU and 325 TFEU, Regulation (EC, Euratom) No 2988/95 ( ) and the ‘PIF Convention’. ( ) Regard must also be had to Directive 2006/112/EC on the common system of value added tax. ( )
6.
In addition, the Court is also invited to consider the interpretation of Articles 101 TFEU, 107 TFEU and 119 TFEU, the wording of which I shall not reproduce below.
1. Provisions of the FEU Treaty
7.
Article 325 TFEU provides as follows:
‘1. The Union and the Member States shall counter fraud and any other illegal activities affecting the financial interests of the Union through measures to be taken in accordance with this Article, which shall act as a deterrent and be such as to afford effective protection in the Member States, and in all the Union’s institutions, bodies, offices and agencies.
2. Member States shall take the same measures to counter fraud affecting the financial interests of the Union as they take to counter fraud affecting their own financial interests.
…’
2. Regulation (EC, Euratom) No 2988/95
8.
Regulation No 2988/95 establishes general rules relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to EU law (formerly, Community law). Article 1(2) defines the constituent elements of an irregularity as follows:
‘“Irregularity” shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.’
9.
Article 3 of Regulation No 2988/95 governs the limitation period for proceedings:
‘1. The limitation period for proceedings shall be four years as from the time when the irregularity referred to in Article 1(1) was committed. However, the sectoral rules may make provision for a shorter period which may not be less than three years.
In the case of continuous or repeated irregularities, the limitation period shall run from the day on which the irregularity ceases. …
The limitation period shall be interrupted by any act of the competent authority, notified to the person in question, relating to investigation or legal proceedings concerning the irregularity. The limitation period shall start again following each interrupting act.
However, limitation shall become effective at the latest on the day on which a period equal to twice the limitation period expires without the competent authority having imposed a penalty, except where the administrative procedure has been suspended in accordance with Article 6(1).
…
3. Member States shall retain the possibility of applying a period which is longer …’
10.
Article 6(1) of Regulation No 2988/95 contains rules governing administrative proceedings when criminal proceedings in connection with the same facts are running in parallel:
‘Without prejudice to the Community administrative measures and penalties adopted on the basis of the sectoral rules existing at the time of entry into force of this Regulation, the imposition of financial penalties such as administrative fines may be suspended by decision of the competent authority if criminal proceedings have been initiated against the person concerned in connection with the same facts. Suspension of the administrative proceedings shall suspend the period of limitation provided for in Article 3.
…’
3. The PIF Convention
11.
A series of common provisions on the protection of the European Union’s financial interests under criminal law is also contained in the PIF Convention signed in Luxembourg on 26 July 1995, which was concluded by the then 15 Member States of the European Union on the basis of Article K.3(2)(c) EU ( ) ( ) and entered into force on 17 October 2002.
12.
Under the heading ‘General provisions’, Article 1 of the PIF Convention defines the constituent elements of fraud and requires the Member States to make the acts so covered criminal offences:
‘1. For the purposes of this Convention, fraud affecting the European Communities’ financial interests shall consist of:
…
(b)
in respect of revenue, any intentional act or omission relating to:
—
the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities,
—
non-disclosure of information in violation of a specific obligation, with the same effect,
—
misapplication of a legally obtained benefit, with the same effect.
2. Subject to Article 2(2), each Member State shall take the necessary and appropriate measures to transpose paragraph 1 into their national criminal law in such a way that the conduct referred to therein constitutes criminal offences.
3. Subject to Article 2(2), each Member State shall also take the necessary measures to ensure that the intentional preparation or supply of false, incorrect or incomplete statements or documents having the effect described in paragraph 1 constitutes a criminal offence if it is not already punishable as a principal offence or as participation in, instigation of, or attempt to commit, fraud as defined in paragraph 1.
…’
13.
Article 2 of the PIF Convention contains the following obligation on the Member States to introduce penalties:
‘1. Each Member State shall take the necessary measures to ensure that the conduct referred to in Article 1, and participating in, instigating, or attempting the conduct referred to in Article 1(1), are punishable by effective, proportionate and dissuasive criminal penalties, including, at least in cases of serious fraud, penalties involving deprivation of liberty which can give rise to extradition, it being understood that serious fraud shall be considered to be fraud involving a minimum amount to be set in each Member State. This minimum amount may not be set at a sum exceeding ECU 50000.
2. However, in cases of minor fraud involving a total amount of less than ECU 4000 and not involving particularly serious circumstances under its laws, a Member State may provide for penalties of a different type from those laid down in paragraph 1.
…’
4. The VAT Directive (Directive 2006/112/EC)
14.
Under Title IX of Directive 2006/112, which carries the heading ‘Exemptions’, Article 131, which forms part of the ‘General provisions’ of Chapter 1, provides:
‘The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which the Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.’
15.
Article 138(1), which is one of the provisions concerning ‘exemptions for intra-Community transactions’ under Chapter 4 of Title IX of Directive 2006/112, provides as follows in connection with exemptions related to the supply of goods:
‘Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.’
16.
In addition, the provisions on ‘exemptions for transactions relating to international trade’, contained in Chapter 10 of Title IX of Directive 2006/112, include Article 158, paragraph 1 of which, concerning ‘customs warehouses, warehouses other than customs warehouses and similar arrangements’, reads, in part, as follows:
‘1. By way of derogation from Article 157(2), Member States may provide for warehousing arrangements other than customs warehousing in the following cases:
(a)
where the goods are intended for tax-free shops, for the purposes of the supply of goods to be carried in the personal luggage of travellers taking flights or sea crossings to third territories or third countries, where that supply is exempt pursuant to point (b) of Article 146(1);
(b)
where the goods are intended for taxable persons, for the purposes of carrying out supplies to travellers on board an aircraft or a ship in the course of a flight or sea crossing where the place of arrival is situated outside the Community;
(c)
where the goods are intended for taxable persons, for the purposes of carrying out supplies which are exempt from VAT pursuant to Article 151.’
2. Where Member States exercise the option of exemption provided for in point (a) of paragraph 1, they shall take the measures necessary to ensure the correct and straightforward application of this exemption and to prevent any evasion, avoidance or abuse.
…’
B – Italian law
17.
Article 157 of the Italian Codice penale, ( ) as amended by Law No 251 of 5 December 2005 ( ) (‘Law No 251/2005’) provides as follows under the heading ‘Limitation, limitation period’:
‘Prosecution of an offence shall be time-barred after a period equal to the maximum duration of the penalty laid down in the criminal-law provision for the offence itself; the foregoing notwithstanding, the limitation period shall be no less than six years for serious offences and four years for other offences, even where the latter are punishable only by a fine.
For the purposes of determining the limitation period, regard shall be had to the penalty laid down by law for the committed or attempted offence, with no account being taken of mitigating or aggravating circumstances, with the exception of those circumstances for which the law provides a penalty other than the standard penalty …
…’
18.
Article 158 of the Codice penale governs the starting point of the limitation period:
‘Time shall start to run from the day on which the offence was committed or, in the case of attempted or continuing offences, from the date on which the offender’s activity or continuing activity ceased.
…’
19.
Article 159 of the Codice penale determines the cases in which the limitation period is suspended. These include cases where the matter is brought before another court or where the defence counsel or the accused is prevented from entering an appearance. ‘Time shall start to run again on the date when the cause of its suspension ceases to exist.’
20.
Article 160 of the Codice penale contains the following provision on the interruption of the limitation period:
‘The limitation period shall be interrupted by judgment or conviction.
An order applying protective measures ratione personae or confirming detention in custody or arrest; examination before the court or public prosecuting authority or an invitation to appear before the public prosecuting authority for questioning; an order fixing the hearing on the request for the case to be discontinued; a committal for trial; and an order fixing the preliminary hearing … shall also interrupt the limitation period.
Where it is interrupted, the limitation period shall start to run again from the day of the interruption. If there is more than one interruption, the limitation period shall start to run from the last such interruption; however, the periods laid down in Article 157 may not, in any circumstances, be extended beyond the periods fixed in the second subparagraph of Article 161 …’
21.
Prior to the revision of the rules on limitation introduced by Law No 251/2005, the limitation period could be extended by no more than half in the event of an interruption of that period.
22.
The effects of suspending and interrupting the limitation period are determined as follows in Article 161 of the Codice penale:
‘The suspension and interruption of the limitation period shall affect all those who committed the criminal offence.
With the exception of the prosecution of offences provided for in Article 51(3)(b) and (c) of the Code of Criminal Procedure, an interruption of the limitation period may give rise to an extension of that period by no more than one quarter, an extension by no more than half in the cases provided for in the second indent of Article 99, an extension by no more than two thirds in the cases provided for in the fourth indent of Article 99, or an extension by no more than double in the cases provided for in Articles 102, 103 and 105.’
23.
Article 416 of the Codice penale provides that the establishment of an organisation the purpose of which is to commit crime shall be punishable by a term of imprisonment of between three and seven years. The mere participation in such an organisation shall be punishable by a term of imprisonment of between one and five years.
24.
In accordance with Article 2 of Decreto legislativo ( ) No 74 of the President of the Republic of 10 March 2000 (‘Legislative Decree 74/2000’), ( ) the submission of a fraudulent VAT return through the use of invoices or other documents relating to non-existent transactions (false invoices) is punishable by a term of imprisonment of between one year and six months and six years. In accordance with Article 8 of Legislative Decree 74/2000, the issuing of false invoices to enable third parties to evade VAT is punishable by the same penalty.
III – Facts and main proceedings
25.
Mr Ivo Taricco and a number of other persons (also referred to as ‘the accused’) are charged with having established a criminal organisation or having participated as a member in such an organisation in the period from 2005 to 2009. The purpose of that criminal organisation is said to have been the commission of the criminal offences of producing false invoices and submitting fraudulent VAT returns through the use of false invoices.
26.
The false invoices, which amounted in total to several million euros, related to commercial transactions involving champagne. It is alleged that, on the basis of agreements between the accused, domestic sales of champagne were, with the assistance of a number of undertakings each statutorily represented by persons from among the accused, falsely recorded as intra-Community supplies.
27.
At the centre of those activities was the company Planet Srl. It knowingly took receipt of false invoices from a number of other undertakings (so-called ‘missing traders’ ( )) which in turn acted as purported importers of champagne. Planet entered those invoices in its accounts, deducting the VAT recorded in each of them as input tax and, subsequently, submitting false annual VAT returns. In this way, Planet was able to procure champagne at costs far below the market price and, ultimately, to distort competition. As for the ‘missing traders’, some of them did not submit any annual VAT returns at all, while others submitted returns but did not actually pay the corresponding VAT.
28.
On completion of the preliminary investigations, charges were brought against the defendants. The application to commit the defendants for trial was initially made to the Tribunale di Mondovì (District Court, Mondovì). Following a series of objections raised by the defendants’ lawyers at the preliminary hearing, ( ) as a result of which the proceedings were put back to the preliminary investigation stage, the criminal proceedings are again at the stage of the preliminary hearing, now pending before the Tribunale di Cuneo (District Court, Cuneo), the referring court. ( ) At this point in the proceedings, the judge conducting the preliminary hearing ( ) has to determine whether, on the basis of the results of the investigations, there are grounds for committing the defendants for trial and fixing a date for the trial.
29.
The referring court states that, under the Italian provisions on the limitation period for proceedings, the prosecution of all the tax offences with which the defendants are charged will — even taking into account the statutory extension of the limitation period on account of various measures which have caused that period to be interrupted — become time-barred on 8 February 2018 at the latest. Indeed, the prosecution of one of the defendants, Mr Anakiev, has been time-barred since 11 May 2013.
30.
As the referring court points out, it is ‘quite likely’ that the prosecution of all the defendants in the present case will become time-barred before a final judgment is given. As the referring court says, that state of affairs is not peculiar to the present case but is found in many criminal proceedings brought in Italy, particularly those relating to economic offences, which, by their very nature, often require particularly extensive investigations and are highly complex.
31.
In the light of the foregoing, the referring court expresses the concern that the limitation regime in Italy — contrary to the purpose it is actually intended to serve — is in reality becoming a ‘guarantee of impunity’ for economic criminals and that Italy is effectively neglecting its obligations under EU law. It attributes this primarily to Law No 251/2005, under which limitation periods which are interrupted are now extended by only a quarter, whereas they were previously extended by half.
IV – Request for a preliminary ruling and procedure before the Court
32.
By order of 17 January 2014, received on 5 March 2014, the Tribunale di Cuneo referred the following questions to the Court for a preliminary ruling:
‘(1)
In so far as it provides for the limitation period to be extended by only a quarter following interruption and, therefore, allows crimes to become time barred, resulting in impunity, even though criminal proceedings were brought in good time, has the amendment to the last subparagraph of Article 160 of the Italian Criminal Code made by Law No 251 of 2005 led to infringement of the provision protecting competition in Article 101 TFEU?
(2)
Has the Italian State, in amending by Law No 251 of 2005 the last subparagraph of Article 160 of the Italian Criminal Code, in so far as this provides for the limitation period to be extended by only a quarter following interruption, which means therefore that there are no penal consequences for crimes committed by unscrupulous economic operators, unlawfully introduced a form of aid prohibited by Article 107 TFEU?
(3)
Has the Italian State, in amending by Law No 251 of 2005 the last subparagraph of Article 160 of the Italian Criminal Code, in so far as this provides for the limitation period to be extended by only a quarter following interruption, thus conferring impunity on those who exploit the Community directive, unlawfully added a further exemption to those exhaustively listed by Article 158 of Council Directive 2006/112/EC of 28 November 2006?
(4)
In so far as it provides for the limitation period to be extended by only a quarter following interruption and, therefore, fails to penalise conduct that deprives the State of the resources necessary in order to meet its obligations to the European Union also, has the amendment to the last subparagraph of Article 160 of the Italian Criminal Code made by Law No 251 of 2005 led to breach of the principle of sound public finances laid down by Article 119 TFEU?’
33.
Mr Anakiev was the only one of the accused in the dispute in the main proceedings to take part in the preliminary ruling procedure by submitting written pleadings. The Italian, German and Polish Governments and the European Commission also took part in the written procedure. With the exception of Mr Anakiev and the Polish Government, the same parties were also represented at the hearing on 3 March 2015.
V – Preliminary remarks of a procedural nature
34.
Before I turn to the substantive assessment of the questions referred, I must first, in the light of the doubts expressed by a number of parties to the proceedings, make a number of preliminary points of a procedural nature which have to do, on the one hand, with the Court’s jurisdiction to answer the questions referred (see Section A immediately below) and, on the other hand, with the admissibility of those questions (see Section B below).
A – The Court’s jurisdiction to answer the questions referred
35.
In accordance with Article 267 TFEU, the Court has jurisdiction to give preliminary rulings on the interpretation of the Treaties and the acts of the institutions, bodies, offices or agencies of the Union, which is to say that its powers extend in principle to the interpretation of the whole of EU law. ( )
36.
In the present case, that jurisdiction is not precluded by the fact that the main proceedings concern tax offences under national law. Even though competence in matters of criminal law and criminal procedure continues to lie largely with the Member States, the national authorities are none the less required to exercise their respective powers in accordance with the provisions of EU law. ( ) Moreover, with regard specifically to criminal proceedings in the field of VAT, the Court held only recently that such proceedings fall within the scope of EU law. ( )
37.
In this context, the Court has jurisdiction to interpret EU law in its entirety, including the PIF Convention, in so far as the latter may prove to be relevant to the resolution of the present case. It is true that that convention was concluded in 1995, under the former ‘third pillar’ of the European Union, on the basis of the original version of the EU Treaty. ( ) In accordance with Article 9 of the Protocol on transitional provisions, ( ) however, the PIF Convention continues to apply even after the abolition of the European Union’s pillar structure following the entry into force of the Treaty of Lisbon. It therefore remains an integral part of EU law.
38.
Furthermore, since 1 December 2014, there have been no restrictions on the jurisdiction of the Court of Justice to give preliminary rulings in the area covered by the former third pillar of the European Union (see Article 10(1) and (3) of the Protocol on transitional provisions). This also applies to requests for a preliminary ruling made even before 1 December 2014, such as the present request. ( )
39.
That said, even before 1 December 2014, the Court of Justice had jurisdiction in any event to hear and determine requests for a preliminary ruling made by any Italian court with respect to the interpretation of the PIF Convention. This is because the Italian Republic had from the outset already recognised on other bases the Court’s jurisdiction to give such preliminary rulings, that is to say, on the one hand, on the basis of an additional protocol to the PIF Convention, ( ) and, on the other hand, on the basis of Article 35(2) and (3)(b) EU, ( ) having consistently granted all national courts the right to make a reference for a preliminary ruling. ( )
40.
In the light of the foregoing, the Court’s jurisdiction to consider all the legal issues raised by the present request for a preliminary ruling is beyond question.
B – Admissibility of the questions referred
41.
A number of parties to the proceedings also raise objections to the admissibility of the questions referred to the Court (Article 267 TFEU, Article 94 of the Rules of Procedure). In essence, they doubt whether those questions are relevant to the judgment to be given in resolution of the dispute in the main proceedings.
42.
It should be pointed out in this regard that, in accordance with settled case-law, it is solely for the referring court to determine, in the light of the particular circumstances of the case, the need for a preliminary ruling by the Court as well as the relevance of the questions submitted to the Court. Consequently, where the questions submitted concern the interpretation of EU law, the Court is in principle required to give a ruling. Where a national court refers to the Court of Justice questions relating to EU law, there is also a presumption of relevance in favour of the request for a preliminary ruling. ( )
43.
Accordingly, the Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ( )
44.
There is no such risk in the present case.
45.
The information contained in the order for reference with respect to the facts of the main proceedings, the applicable national law and the need for a preliminary ruling is sufficient to enable both the Court and the parties to the proceedings within the meaning of Article 23 of the Statute of the Court to adopt an informed position on the questions referred.
46.
It is after all readily apparent from the account given by the referring court what the subject-matter and issues of the dispute in the main proceedings are, in other words that charges have been brought against a number of persons in Italian criminal proceedings relating to tax offences and the referring court fears that they — like many other suspected offenders in similar situations — may escape the penalty prescribed for those offences because the time-limits for proceedings laid down in the domestic provisions on limitation periods, in particular the period by which those time-limits are extended where they are interrupted, are too short, with the result that the prospect of the defendants being definitively convicted before the proceedings become time-barred seems illusory.
47.
Furthermore, it cannot be said that the questions referred to the Court are of a hypothetical nature or that they obviously have no bearing on the actual facts of the dispute in the main proceedings. For, according to the order for reference, the answer to be given by the Court is crucial to determining whether the provisions on limitation periods laid down in the national law are applicable in the main proceedings and whether a final resolution of the dispute in the main proceedings before the limitation period expires is realistically possible.
48.
What is more, contrary to the view taken by the Italian Government, the referring court is not prevented from making the systemic shortcoming of Italian criminal law identified by it the subject-matter of a reference to the Court on the basis of a specific dispute pending before it. On the contrary, the Court has on a number of occasions already considered structural problems alleged to exist in a domestic system of penalties, including, in particular, in response to requests for a preliminary ruling made in ongoing national criminal proceedings. ( )
49.
Even if the general principles of EU law, such as the principle of the legality of penalties, prohibited a deviation from the national provisions on limitation periods at issue, this would not, contrary to the view of the Italian Government and of Mr Anakiev, affect the admissibility of the request for a preliminary ruling, but would at most require the Court to provide some clarification in this regard as part of its substantive response to the questions referred. ( )
50.
There may, it is true, be some uncertainty as to the relevance of the questions referred in so far as the referring court asks the Court for an interpretation of a number of provisions of primary law (Articles 101 TFEU, 107 TFEU and 119 TFEU) which at first sight appear to have no bearing on the matters relating to limitation periods in criminal law at issue here. None the less, it does not strike me as being obvious that the aforementioned provisions bear no relation at all to the dispute in the main proceedings. Only an examination — however brief — of the substance of the aforementioned provisions of the TFEU by the Court can show whether or not they preclude rules on limitation in criminal law such as those laid down in the Italian legislation at issue. ( )
51.
Finally, for the sake of completeness, it must also be pointed out that the comparatively early stage of the dispute in the main proceedings — that is to say the stage prior to committal for trial — also does not detract from the admissibility of the request for a preliminary ruling. ( )
52.
In short, the concerns expressed to the Court with respect to the admissibility of this request for a preliminary ruling must therefore be dismissed.
VI – Substantive assessment of the questions referred
53.
As is clear from the order for reference, the Tribunale di Cuneo proceeds on the assumption that the limitation period applicable to most of the criminal offences relevant to the main proceedings is six years and that the limitation period applicable to the establishment of a criminal organisation is seven years. If, as in this case, the limitation period is interrupted by particular investigative or prosecution measures, it is, according to the order for reference, extended by one quarter, thus increasing the six-year limitation period to seven years and six months and the seven-year limitation period to eight years and nine months, with those periods, in principle, continuing to run as a pending criminal trial progresses. In many cases, that absolute limitation regime has the effect of exempting offenders from punishment.
54.
Against that background, the referring court, by its request for a preliminary ruling, seeks to ascertain, in essence, whether EU law precludes a provision of domestic law on the limitation of criminal prosecutions such as the fourth paragraph of Article 160 of the Codice penale, as amended by Law No 251/2005, pursuant to which, the limitation period applicable to tax offences in the field of VAT, if interrupted, is extended by only one quarter of the original period, after which action is absolutely time-barred.
55.
More specifically, by its four questions, the referring court seeks information on how to interpret Articles 101 TFEU, 107 TFEU and 119 TFEU and Article 158 of Directive 2006/112.
56.
I shall now look first of all at those provisions (see in this regard Section A immediately below), before making a number of further comments concerning the duty of the Member States to impose effective penalties (see in this regard Section B below) and going on, finally, to examine the impact which any incompatibility on the part of the domestic limitation regime with EU law will have on the dispute in the main proceedings (see Section C below).
A – The provisions of EU law raised by the referring court
57.
The Tribunale di Cuneo has devoted its questions, four in total, to EU competition law (see in this regard Section 1 immediately below), the possibilities of exemption from VAT (see Section 2 below) and the principle of sound public finances (see Section 3 below).
1. EU competition law (first and second questions referred)
58.
By its first two questions, the referring court wishes to ascertain, in essence, whether a limitation regime such as that laid down in Italian law adversely affects competition on the European internal market and thus infringes the provisions of Article 101 TFEU and 107 TFEU.
59.
It should be noted in this regard that, while an excessively lax limitation regime and the associated absence of effective criminal penalties for irregularities in matters of VAT may well afford the undertakings involved in such irregularities an unfair competitive advantage on the internal market, this does not constitute an infringement of Article 101 TFEU or 107 TFEU.
60.
It is true that Article 101 TFEU, read in conjunction with Article 4(3) TEU, prohibits the Member States from creating a situation in which it is easier for undertakings to conclude anti-competitive agreements with each other. ( ) However, it would be going too far to conclude from a potentially inadequate enforcement of the national provisions of criminal law governing tax offences in matters of VAT that such a state of affairs necessarily promotes collusive conduct between undertakings. Moreover, should any anti-competitive agreements between undertakings none the less be concluded, these are – entirely independently of criminal law in matters of taxation – punishable under the procedures provided for in competition law and by the specific penalties laid down there.
61.
With regard to the prohibition on State aid under Article 107 TFEU, it is true that the inadequate enforcement of penalties in matters of VAT may potentially give rise to a financial advantage for undertakings. However, that advantage is not selective because it does not favour certain undertakings or sectors over others, but applies equally to all undertakings which are subject to the national criminal law. ( )
62.
The referring court is right to say that systemic shortcomings in the regime which a Member State applies to the punishment of tax offences in matters of VAT may give rise to a distortion of competition vis-à-vis undertakings from other Member States in which the national authorities adopt a stricter response to irregularities. However, that issue cannot be assessed by reference to antitrust or State aid law but must be considered in the context of the system of VAT and the associated duty to impose effective penalties. ( )
2. Exemptions under the VAT Directive (third question)
63.
By its third question, the referring court wishes to ascertain whether a limitation regime such as that laid down in Italian law has the effect of creating a new exemption from VAT not provided for in Directive 2006/112.
64.
In this regard, it should be pointed out first of all that the Tribunale di Cuneo appears to have made an error in its determination of the applicable provision of Directive 2006/112. Article 158 of that directive, cited in the order for reference, concerns the exemption from VAT of certain transactions in very specific circumstances, for example in tax-free shops, on board aircraft or ships and in diplomatic and consular exchanges. Such circumstances quite clearly do not exist here.
65.
As the Commission has rightly pointed out, however, the applicable provision might conceivably be Article 138 of Directive 2006/112, which governs the circumstances in which the intra-Community supply of goods is exempt from VAT. There is definitely a connection between that provision and the facts of the main proceedings, in so far as the defendants are accused of having fraudulently misrepresented their domestic trade in champagne as intra-Community supplies.
66.
However, the situation described by the referring court, whereby, in many cases, criminal prosecutions of tax offences become time-barred on account of shortcomings in national law, does not in itself have the effect of exempting the undertakings in question from VAT. After all, the existence of a right to levy tax on them is not dependent upon the enforceability of any right on the part of the State to punish them.
3. The principle of sound public finances (fourth question)
67.
Last but not least, by its fourth question, the referring court seeks information on whether a limitation regime such as that laid down in Italian law is consistent with the principle of sound public finances, as expressed in Article 119 TFEU.
68.
As the introductory provision on the Economic and Monetary Union in Title VIII of the FEU Treaty, Article 119(3) TFEU sets out certain ‘guiding principles’ applicable to the activities of the Member States and the European Union, including, among others, the principle of sound public finances.
69.
Contrary to the view which the Commission appears to take, Article 119(3) TFEU not only provides the Member States with guidance on policy; it also imposes on them a binding EU-law requirement as regards the formulation of their public budgets. That requirement is no less legal because its content is not particularly specific and requires further clarification by other provisions and legal acts. ( ) However, it does necessarily follow from the comparatively general nature of Article 119(3) TFEU that the Member States have a broad discretion in the choice of the national measures which they consider — on the basis of complex economic assessments — to be best suited to guaranteeing sound public finances within their respective areas of competence. ( )
70.
Not every measure impacting on expenditure or revenue that is adopted by national authorities, nor every failure to enforce a right to tax that actually exists, is necessarily to be regarded as an infringement of the principle of sound public finances. What matters is, rather, whether the finances of the Member State in question, when considered in their entirety, may be described as ’sound’, a factor which is measured by reference in particular to the provisions and criteria relating to the avoidance of excessive government deficits (Article 126(1) and (2) TFEU in conjunction with Protocol No 12 to the EU Treaty and the FEU Treaty).
71.
Consequently, the mere fact that the Italian rules on limitation in matters relating to the criminal prosecution of tax offences may exhibit the systemic shortcomings described by the referring court is not such as to support the assumption of an infringement of the principle of sound public finances as enshrined in Article 119(3) TFEU.
4. Interim conclusion
72.
In summary, it may be concluded that none of the provisions of EU law specifically referred to by the referring court precludes a regime applicable to limitation periods for proceedings such as that introduced into Italian criminal law by the last subparagraph of Article 160 of the Codice penale, as amended by Law No 251/2005.
73.
However, that conclusion is not in itself sufficient to provide the referring court with a useful response that will facilitate its decision on the dispute in the main proceedings. A number of further comments on the duty on the Member States to impose effective penalties are required (see in this regard Section B immediately below); we must also look briefly at the impact which any incompatibility on the part of the national limitation regime with EU law will have on the dispute in the main proceedings (see Section C below).
B – The duty on the Member States to impose effective penalties
74.
The question of the duty on the Member States to impose effective penalties for tax offences in matters of VAT is not expressly raised by the referring court in its request for a preliminary ruling.
75.
It is true that it is, in principle, for the referring court alone to determine the subject-matter of the questions it intends to refer to the Court, ( ) and that, for its part, the Court does not have jurisdiction to consider points of law which the national court has expressly or implicitly omitted from its request for a preliminary ruling. ( )
76.
That said, the Court does have jurisdiction, when ruling on a request for a preliminary ruling, to give clarifications, in the light of the information in the case-file, to guide the referring court in giving judgment in the main proceedings and, in so doing, also to consider provisions to which the referring court has not referred. ( )
77.
A theme that runs throughout the order for reference in the present case is the national court’s concern that the limitation regime laid down in the last subparagraph of Article 160 of the Codice penale, as amended by Law No 251/2005, might reflect a systemic shortcoming which, in the case of many tax offences in Italy, has the effect of exempting offenders from punishment.
78.
As a result, the request for a preliminary ruling raises — at least implicitly — the additional question of whether a limitation regime such as that laid down in Italian law is compatible with the duty on the Member States under EU law to impose penalties for irregularities in matters of VAT. A useful response to the request for a preliminary ruling is inconceivable without an analysis of that additional question.
79.
I shall now consider first of all whether a regime such as that laid down in Italian law discharges the general duty incumbent on the Member States to impose effective penalties for infringements of EU law (see Section 1 below), before then turning to the more specific duty incumbent on the Member States to punish as a matter of criminal law fraud affecting the European Union’s financial interests (see in this regard Section 2 below).
1. The general duty to impose effective penalties
80.
It is a general principle of EU law, which can ultimately be traced back to the duty of sincere cooperation (Article 4(3) TEU), that for infringements of EU law by individuals Member States must provide penalties which are effective, proportionate and dissuasive, ( ) and that infringements of EU law must also — at the very least — be punishable under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance. ( ) These principles are, ultimately, specific expressions of the principles of effectiveness and equivalence
81.
With regard, first, to the principle of equivalence, the Commission argued at the hearing that there are indeed offences under Italian criminal law which are not subject to any absolute limitation period at all. If these were to include offences in the field of economic crime which are equivalent to VAT fraud, an absolute limitation period could not be applied to VAT fraud either.
82.
The Court recently made express reference to the requirement of effective, proportionate and dissuasive penalties that follows from the principle of effectiveness in connection with VAT too. Alongside various provisions of Directive 2006/112, the Court again relied in this regard on the Member States’ duty of sincere cooperation under Article 4(3) TEU. ( )
83.
A functioning system of penalties for infringements of EU law is particularly important in matters of VAT, since it not only serves to ensure that all undertakings active on the internal market are treated equally, but is also intended to protect the European Union’s financial interests, the own resources of which include part of the VAT charged by Member States. ( ) In accordance with Article 325 TFEU, Member States are therefore required to counter illegal activities affecting the financial interests of the European Union ‘through effective deterrent measures’. ( ) The same requirement follows from Regulation No 2988/95, which also serves to protect the financial interests of the European Union.
84.
It is true that neither the provisions of primary law (Article 4(3) TEU and Article 325 TFEU) nor the relevant provisions of secondary law (Regulation No 2988/95 and Directive 2006/112) impose any kind of obligation on Member States to punish irregularities in the field of VAT necessarily as matters of criminal law. On the contrary, Member States are free — subject to the provisions of the PIF Convention ( ) — to choose the applicable penalties, with the result that the national system may even, in principle, comprise a combination of administrative and criminal penalties. ( ) It is, however, inherent in the concept of a ‘penalty’ that Member States must do more than simply collect VAT that is owed anyway, together with any default interest due.
85.
The penalties actually applied in the Member State concerned — be they administrative or criminal in nature — must none the less be effective, proportionate and dissuasive. ( ) It is contrary to the requirements of EU law for a Member State to found its national system of penalties, drawn from a combination of administrative- and criminal-law provisions, on two pillars which neither individually nor jointly satisfy the criteria of being effective, proportionate and dissuasive.
86.
It is for the referring court to assess whether the penalties provided for in the national system are effective, proportionate and dissuasive. As part of that assessment, the provision laying down the penalty in question must be analysed by reference to the role of that provision in the legislation as a whole, including the progress and special features of the procedure before the various national authorities, in each case in which that question arises. ( )
87.
As I stated in my Opinion in Berlusconi and Others, ( ) there is in principle no reason why Member States should not make subject to limitation penalties which they are required to introduce under EU law, since limitation periods serve to ensure legal certainty and protect defendants, and do not in principle preclude the effective imposition of penalties. Furthermore, Article 3 of Regulation No 2988/95 also provides for a limitation period applicable to the administrative penalties laid down there.
88.
It must be ensured, however, that the limitation rules applicable do not have the general effect of undermining the effectiveness and dissuasiveness of the penalties provided for. Consequently, irregularities in matters of VAT must not be subject to penalties in theory alone. The system of penalties must rather be framed in such a way as to ensure that anyone who provides false information in connection with VAT or participates in such practices fears, in fact also, that penalties will be imposed on him. ( )
89.
Account must also be taken, as the Commission rightly points out, of any interaction between criminal and administrative penalties. Thus, deficiencies in the system of criminal penalties may adversely affect the system of administrative penalties. This will be the case, for example, where the national law provides that administrative proceedings are to be stayed for the duration of ongoing criminal proceedings ( ) and, once the limitation period for criminal prosecution has expired, cannot subsequently be resumed because the infringement concerned has become time-barred in accordance with criteria laid down in administrative law, too.
90.
In this connection, it is worth mentioning the existing case-law on certain rules of procedure in Italian tax law. According to that case-law, although Member States may in certain circumstances terminate lengthy tax proceedings, ( ) they must not refrain on a general and indiscriminate basis from verifying the taxable transactions effected in a series of tax years from the point of view of any liability to VAT. ( )
91.
If, in the light of all those criteria, the effect of national rules on limitation periods is, by virtue of the scheme of those rules, that the effective, proportionate and dissuasive penalties provided for are, in reality, likely to be imposed only rarely, those rules will be contrary to the general duty on Member States to impose effective penalties for infringements of EU law. ( )
2. The specific duty to provide for effective criminal penalties
92.
In addition to the general duty to impose effective penalties which we have just considered, there is a further specific duty on Member States to punish as a matter of criminal law fraud affecting the European Union’s financial interests.
93.
That duty to provide for criminal penalties arises from the PIF Convention, in particular from Article 2(1) thereof, which stipulates that fraud affecting the European Union’s financial interests must be punished by effective, proportionate and dissuasive criminal penalties; in cases of serious fraud, provision is even to be made for criminal penalties involving deprivation of liberty.
94.
It is true that the Council of the European Union interprets the scope of the PIF Convention narrowly and would like to exclude VAT from it. In its Explanatory Report, ( ) it adopted the position that, for the purposes of the PIF Convention, ‘revenue’ means the first two categories of the European Union’s own resources only, that is to say, on the one hand, customs duties and, on the other hand, certain agricultural levies and contributions. Conversely, the Council takes the view that European Union revenue within the meaning of the PIF Convention does not include revenue from the application by Member States of a uniform rate of VAT, as that own resource is not collected directly for the account of the European Union.
95.
Consequently, in accordance with the view expressed by the Council in its Explanatory Report, which was also endorsed by Germany at the hearing before the Court, the duty under EU law to impose criminal sanctions would not apply to irregularities in matters of VAT. ( )
96.
However, the Council’s Explanatory Report is simply the non-legally binding opinion of an institution of the European Union which, moreover, is not itself a party to the PIF Convention but merely took part in the associated preparatory work by drawing up the text of the Convention and recommending it to the Member States for adoption in accordance with their respective constitutional requirements (Article K.3(2)(c) EU).
97.
The Council’s Explanatory Report cannot therefore be regarded as the authoritative interpretation of the PIF Convention, particularly since neither the Convention itself nor the additional protocol thereto makes any reference whatsoever to that report. The Court alone is entitled to give an interpretation of the PIF Convention which is legally binding within the European Union; this was made apparent from the very outset by the additional protocol to the PIF Convention, which empowered the Court to interpret that convention, and now follows from the second sentence of Article 19(1) TEU, Article 19(3) TEU and Article 267 TFEU.
98.
In my view, the Court should not treat the Council’s Explanatory report on the PIF Convention any differently from the press releases which the EU institutions issue in connection with legislative acts or the statements entered in the minutes on the occasion of the adoption of such legal acts: it is settled case-law that such communications cannot be used for the purposes of interpreting a provision of secondary law if they are not referred to in the wording of that provision. ( )
99.
That is the situation here. In order to justify the exclusion of VAT from the scope of the PIF Convention, the Council, in its Explanatory Report, refers only to the fact that VAT ‘is not an own resource collected directly for the account of the [European Union]’. ( ) That particular consideration does not, however, appear in the wording of the PIF Convention and is not capable of justifying a restrictive interpretation of its scope.
100.
The scope of the PIF Convention is actually very broadly defined. It is clear from Article 1(1)(b) of the Convention that its scope extends without restriction to all of the European Union’s ‘revenue’ from the ‘resources’ of its ‘general budget’. Those resources include not least the European Union’s own resources arising from VAT. ( ) There is, after all, a direct link between the collection of VAT by the Member States and the availability to the European Union budget of the corresponding VAT resources. ( )
101.
Furthermore, a broad interpretation of its scope as including VAT is consistent with the objective of the PIF Convention, which is intended, very generally, to combat fraud affecting the European Union’s financial interests and by means of which such fraud is to be combatted with the utmost vigour. ( )
102.
Restricting the scope of the PIF Convention exclusively to cases of fraud relating to customs duties and agricultural levies and contributions, on the other hand, would significantly reduce the contribution made by that legal instrument to the protection of the European Union’s financial interests. Such a narrow interpretation of the scope of the PIF Convention, as the Council appears to have in mind, would be contrary to the rule to the effect that the interpretation of a provision of EU law proposed by an institution of the European Union must not affect the effectiveness of that provision. ( )
103.
The PIF Convention therefore imposes a duty on the Member States to punish as a matter of criminal law cases of fraud affecting the European Union’s financial interests in the field of VAT — and in any event fraud of some seriousness. That duty is particularly important here, given that, because of the circumstances in which VAT fraud often takes place, administrative penalties alone — in particular fines and additional charges for late payment — would be unlikely to have a sufficiently dissuasive effect. After all, many individuals and undertakings involved in such fraud are in an extremely precarious financial position in any event.
104.
It is for the referring court to assess whether the criminal penalties provided for in the national system are ‘effective, proportionate and dissuasive’ within the meaning of Article 2(1) of the PIF Convention. That assessment must take into account the submissions made above: ( ) the provision laying down the penalty in question must be analysed by reference to the role of that provision in the legislation as a whole, including the progress and special features of the procedure before the various national authorities, in each case in which that question arises.
105.
If, in the light of all those criteria, the effect of national rules on limitation periods is, by virtue of the scheme of those rules, that the effective, proportionate and dissuasive penalties provided for are, in reality, likely to be imposed in fact only rarely, those rules will be contrary to the duty incumbent on Member States under Article 2 of the PIF Convention to provide for adequate criminal penalties for fraud affecting the European Union’s financial interests.
C – The impact on the dispute in the main proceedings of any incompatibility on the part of the national limitation regime with EU law
106.
In the event that the referring court reaches the conclusion, on the basis of the criteria set out above, that the national limitation regime, and in particular the provision, as referred to in the order for reference, contained in the last subparagraph of Article 160 of the Codice penale, as amended by Law No 251/2005, is contrary to EU law, consideration must be given finally to what impact that conclusion has on the dispute in the main proceedings.
107.
It is settled case-law that the national courts are required to give full effect to EU law. ( )
108.
To that end, they have a duty first and foremost to interpret and apply national law as a whole in a manner consistent with EU law. In so doing, the national courts are required to interpret national law as far as possible in the light of the wording and the purpose of the applicable provisions of EU law in order to achieve the result envisaged by those provisions. ( ) Taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law, they must do whatever lies within their jurisdiction with a view to ensuring that the provisions of European Union are fully effective and achieving an outcome consistent with the objective pursued by EU law. ( )
109.
In particular, the referring court will have to assess whether, on the basis of an interpretation consistent with EU law, it is able to achieve an outcome the effect of which is to suspend the limitation period for such time as the main proceedings are pending before the Italian criminal courts — or at least before particular judicial bodies.
110.
Nevertheless, the obligation to interpret national provisions in a manner consistent with EU law is limited by general principles of law and it cannot serve as the basis for an interpretation of a national law contra legem. ( )
111.
If the referring court were unable to interpret the national law in such a way as to achieve an outcome consistent with EU law, it would be required to give full effect to EU law, if necessary refusing of its own motion to apply any conflicting provision of national legislation, even if adopted subsequently, there being no requirement for that court to request or await the prior setting aside of such provision by legislative or other constitutional means. ( )
112.
Consequently, the referring court would, if appropriate, have to refrain from applying a provision such as the last subparagraph of Article 160 of the Codice penale, as amended by Law No 251/2005, in the main proceedings if that provision were to reflect a systemic shortcoming which prevents the achievement of an outcome consistent with EU law because the limitation periods are excessively short.
113.
More detailed consideration must be given first, however, to the question of whether such an approach is precluded by the general principles of EU law, namely the principle of the legality of penalties (nullum crimen, nulla poena sine lege). That principle is one of the general legal principles underlying the constitutional traditions common to the Member States ( ) and now enjoys the status of a fundamental right of the European Union under Article 49 of the Charter of Fundamental Rights. In accordance with the requirement of homogeneity (first sentence of Article 52(3) of the Charter), in interpreting Article 49 of the Charter, regard must be had not least to Article 7 ECHR and the case-law of the European Court of Human Rights (ECtHR) on that provision.
114.
The principle of the legality of penalties states that no one is to be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national law or international law at the time when it was committed, and, furthermore, that a heavier penalty is not to be imposed than the one that was applicable at the time the criminal offence was committed (first and second sentences of Article 49(1) of the Charter). That principle goes hand in hand with the rule that directives cannot be relied upon directly in order to determine or aggravate liability in criminal law. ( )
115.
Contrary to the view taken by Mr Anakiev and the Italian Government, however, in a case such as that at issue, there is no risk of any conflict with the principle of the legality of penalties. After all, from a material point of view, that principle requires only that legislation must provide a clear definition of offences and the penalties which they attract. ( ) Provisions on limitation periods, however, say nothing about the criminal liability of an act or the penalty which that act attracts, but deal only with whether a criminal offence may be prosecuted, and, consequently, are not even caught by the rule of nullum crimen, nulla poena sine lege. ( ) For the same reason, the principle of the retroactive application of the more lenient penalty (third sentence of Article 49(1) of the Charter of Fundamental Rights ( )) also does not apply to matters of limitation periods.
116.
It is in this respect, moreover, that the present case differs fundamentally from Berlusconi and Others, which, unlike this dispute, concerned an amendment of the substantive provisions of the national law, in particular the applicable framework of penalties for certain criminal offences, that gave rise, inter alia, to more lenient penalties and thus had an indirect impact on the limitation period for proceedings. ( )
117.
Against that background, the requirements governing the legality of penalties are fully satisfied in a case such as that at issue here, given that the criminal liability of the conduct of which the defendants are accused and the penalty which that conduct attracts follow unaltered from Italian criminal law, more specifically from Articles 2 and 8 of Legislative Decree 74/2000. Neither the criminal liability of, nor the penalty for, the conduct in question follows in any way directly from provisions of EU law such as Article 4(3) TEU, Article 325 TFEU, Directive 2006/112, Regulation No 2988/95 or the PIF Convention.
118.
Unlike in Berlusconi and Others, therefore, in this case, the application of requirements under EU law would not, by itself, give rise to obligations on the part of an individual. In particular, it would not determine or aggravate the liability in criminal law of individuals. It would simply — at a procedural level — release the national prosecution authorities from shackles which are contrary to EU law.
119.
It cannot be inferred from the principle of the legality of penalties that the applicable rules on the length, course and interruption of the limitation period must of necessity always be determined in accordance with the statutory provisions that were in force at the time when the offence was committed. No legitimate expectation to that effect exists.
120.
Rather, the period of time within which a criminal offence may be prosecuted can still be altered even after the offence has been committed, so long as the limitation period has not expired. ( ) The position here is ultimately no different from that which obtains in the context of the application of new procedural rules to situations which, although they began in the past, have not yet come to an end. ( )
121.
Within the context of the procedural autonomy enjoyed by the Member States, this means that, in all cases where the limitation period has not yet expired, ( ) a measure of discretion is available to take into account assessments of EU law which the courts of the Member States must fully exhaust, with due regard for the principles of equivalence and effectiveness, when applying their respective national laws.
122.
This does not mean, however, that new limitation periods would be derived directly from EU law. In any event, there are no provisions in Article 4(3) TEU, Article 325 TFEU, Regulation No 2988/95 or the PIF Convention that are sufficiently specific to be capable of being applied directly to individuals. The same is true — by reason not least of its legal nature — of Directive 2006/112. ( )
123.
The length and course of the limitation periods must, rather, be the subject of specific provisions of national law which are consistent with EU law. In this regard, EU law has, at most, an indirect effect on the dispute in the main proceedings, in so far as it helps the national courts to set the correct parameters for applying domestic law in a manner consistent with EU law.
124.
This does not involve the complete abolition of limitation but the application of an adequate limitation regime ( ) which makes the imposition of effective, proportionate and dissuasive penalties in a fair trial of an appropriate length (second paragraph of Article 47 of the Charter of Fundamental Rights; first sentence of Article 6(1) ECHR) seem like a realistic prospect.
125.
One of the steps to be taken by the referring court in this regard might be to apply the provisions on limitation without the absolute limitation period laid down in the last subparagraph of Article 160 of the Codice penale, as amended by the Law No 251/2005. As I have already said, ( ) it would appear from information supplied by the Commission at the hearing that Italian law does indeed provide for criminal offences — including in the area of economic crime — which are not subject to an absolute limitation period at all.
126.
An alternative approach might conceivably be to apply the revised limitation periods applicable to tax offences, which have been extended by a third, as now provided for in Law No 148/2011. ( ) ( ) Finally, a further possibility would be to regard the earlier rules on limitation periods, as provided for in the Codice penale before its amendment by Law No 251/2005, as still being applicable to the present case.
127.
Which of those various options is to be selected is ultimately a matter of national law and its interpretation, the assessment of which falls to the national courts alone. From the point of view of EU law, the only requirement is that the solution adopted should be applied in a fair trial (second paragraph of Article 47 of the Charter of Fundamental Rights, first sentence of Article 6(1) ECHR), in a non-discriminatory manner and on the basis of clear, comprehensible and generally applicable criteria.
VII – Conclusion
128.
In the light of the foregoing considerations, I propose that the Court reply as follows to the questions referred to it by the Tribunale di Cuneo:
(1)
Articles 4(3) TEU and 325 TFEU, Regulation (EC, Euratom) No 2988/95 and Directive 2006/112/EC are to be interpreted as meaning that they require the Member States to provide for effective, proportionate and dissuasive penalties for irregularities in matters of VAT.
(2)
Article 2(1) of the Convention on the protection of the European Communities’ financial interests, signed in Luxembourg on 26 July 1995, requires the Member States to punish fraud in matters of VAT by means of effective, proportionate and dissuasive criminal penalties which must, in serious cases of fraud at least, also include penalties involving deprivation of liberty.
(3)
A provision of national law on limitation periods for proceedings which, for reasons relating to the scheme of that provision, has the effect in many cases of exempting from punishment the perpetrators of fraud in matters of VAT is incompatible with the aforementioned provisions of EU law. In pending criminal proceedings, the national courts must refrain from applying such a provision.
( ) Original language: German.
( ) See Article 2(1)(b) of Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources (OJ 2007 L 163, p. 17), ‘the Own Resources Decision’.
( ) Judgment in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270).
( ) Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests (OJ 1995 L 312, p. 1).
( ) Convention on the protection of the European Communities’ financial interests, signed in Luxembourg on 26 July 1995 (OJ 1995 C 316, p. 49). The abbreviation ‘PIF’ stands for the French version of the phrase ‘protection of financial interests’ (‘protection des intérêts financiers’).
( ) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).
( ) Treaty on European Union, as amended by the Treaty of Maastricht.
( ) OJ 1995 C 316, p. 48.
( ) Criminal Code.
( ) GURI No 285 of 7 December 2005.
( ) Legislative Decree.
( ) Legislative Decree 74/2000 is entitled ‘Nuova disciplina dei reati in materia di imposte sui redditi e sul valore aggiunto’ (New rules governing offences in matters of income tax and VAT) and is published in GURI No 76 of 31 March 2000.
( ) The term ‘missing traders’ refers to undertakings exclusively engaged in the production of tax documentation for the purposes of tax evasion.
( ) In the language of the case: udienza preliminare.
( ) The functions of Tribunale di Mondovì were since consolidated with those of the Tribunale di Cuneo.
( ) Giudice dell’Udienza Preliminare.
( ) The only exceptions to its jurisdiction to give preliminary rulings are certain parts of EU law relating to the Common Foreign and Security Policy (see the sixth sentence of the second subparagraph of Article 24(1) TEU and Article 275(1) TFEU).
( ) Judgments in Cowan (186/87, EU:C:1989:47, paragraph 19); Placanica (C‑338/04, C‑359/04 and C‑360/04, EU:C:2007:133, paragraph 68); and Achughbabian (C‑329/11, EU:C:2011:807, paragraph 33).
( ) Judgment in Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraphs 27 and 28).
( ) Treaty on European Union, as amended by the Treaty of Maastricht.
( ) Protocol No 36 to the EU Treaty and the FEU Treaty (OJ 2008 C 115, p. 322).
( ) See to this effect the judgment in Weryński (C‑283/09, EU:C:2011:85, paragraphs 30 and 31).
( ) Protocol on the interpretation, by way of preliminary rulings, by the Court of Justice of the European Communities of the Convention on the protection of the European Communities’ financial interests, signed in Brussels on 29 November 1996 (OJ 1997 C 151, p. 1). Like the PIF Convention itself beforehand, this additional protocol was also concluded on the basis of Article K.3(2)(c) EU and entered into force on 17 October 2002.
( ) Treaty on European Union, as amended by the Treaty of Amsterdam.
( ) See, on the one hand, the declaration by the Italian Republic under Article 35(2) and (3)(b) EU (notice published in OJ 1999 L 114, p. 56) and, on the other hand, the declaration by the Italian Republic of 19 July 2002 under the additional protocol to the PIF Convention, the latter being available for download on the following webpage of the Council of the European Union (last visited on 20 February 2015): http://www.consilium.europa.eu/en/documents-publications/agreements-conventions/ratification/?v=decl&aid= 1996090&pid=I.
( ) Judgments in Beck and Bergdorf (C‑355/97, EU:C:1999:391, paragraph 22); Régie Networks (C‑333/07, EU:C:2008:764, paragraph 46); and Križan and Others (C‑416/10, EU:C:2013:8, paragraph 54).
( ) Judgments in Bosman (C‑415/93, EU:C:1995:463, paragraph 61); Beck and Bergdorf (C‑355/97, EU:C:1999:391, paragraph 22); Régie Networks (C‑333/07, EU:C:2008:764, paragraph 46); and Križan and Others (C‑416/10, EU:C:2013:8, paragraphs 53 and 54).
( ) See, inter alia, judgments in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270) and Åkerberg Fransson (C‑617/10, EU:C:2013:105).
( ) See to this effect judgment in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270) and order in Mulliez and Others (C‑23/03, C‑52/03, C‑133/03, C‑337/03 and C‑473/03, EU:C:2006:285), in which the Court made no mention of the objections of inadmissibility raised by various parties to the proceedings but proceeded directly to give answers on the substance of the questions referred.
( ) See points 57 to 72 of this Opinion, below.
( ) The Court replied to the same effect, in the judgment in E and F (C‑550/09, EU:C:2010:382), to a request for a preliminary ruling from a German court which was also required to rule on the opening of the criminal trial on the basis of an indictment drawn up by the Public Prosecutor’s Office. See also — more generally — judgments in AGM-COS.MET (C‑470/03, EU:C:2007:213, paragraph 45) and Coleman (C‑303/06, EU:C:2008:415, paragraphs 28 to 32).
( ) Judgments in Asjes and Others (209/84 to 213/84, EU:C:1986:188, paragraphs 71 and 72); Vlaamse Reisbureaus (311/85, EU:C:1987:418, paragraph 10); Cipolla and Others (C‑94/04 and C‑202/04, EU:C:2006:758, paragraphs 46 and 47); and API and Others (C‑184/13 to C‑187/13, C‑194/13, C‑195/13 and C‑208/13, EU:C:2014:2147, paragraphs 28 and 29).
( ) See to that effect judgments in Germany v Commission (C‑156/98, EU:C:2000:467, paragraph 22); Commission v Government of Gibraltar and United Kingdom (C‑106/09 P and C‑107/09 P, EU:C:2011:732, paragraphs 72 and 73); 3M Italia (C‑417/00, EU:C:2012:184, paragraphs 41 to 44); and P (C‑6/12, EU:C:2013:525, paragraph 18).
( ) See in that regard points 74 to 121 of this Opinion, below.
( ) The latter point is emphasised in the judgment in Caja de Ahorros y Monte de Piedad de Madrid (C‑484/08, EU:C:2010:309, paragraph 46), in connection with the principle of an open market economy with free competition, also enshrined in Article 119 TFEU.
( ) See to the same effect the judgment in Échirolles Distribution (C‑9/99, EU:C:2000:532, paragraph 25), again in connection with the principle of an open market economy with free competition enshrined in Article 119 TFEU.
( ) Judgments in Franzén (C‑189/95, EU:C:1997:504, paragraph 79) and Belgian Electronic Sorting Technology (C‑657/11, EU:C:2013:516, paragraph 28), as well as order in Szabó (C‑204/14, EU:C:2014:2220, paragraph 16).
( ) Judgments in Alsatel (247/86, EU:C:1988:469, paragraphs 7 and 8) and Hennen Olie (C‑302/88, EU:C:1990:455, paragraph 20); see also the recent Opinion of Advocate General Mengozzi in Wagner-Raith (C‑560/13, EU:C:2014:2476, points 16 to 48).
( ) Judgments in SARPP (C‑241/89, EU:C:1990:459, paragraph 8); Ritter-Coulais (C‑152/03, EU:C:2006:123, paragraph 29); Promusicae (C‑275/06, EU:C:2008:54, paragraph 42); Aventis Pasteur (C‑358/08, EU:C:2009:744, paragraph 50); and Centre public d’action sociale d’Ottignies-Louvain-La-Neuve (C‑562/13, EU:C:2014:2453, paragraph 37).
( ) Judgments in Commission v Greece (68/88, EU:C:1989:339, paragraph 24); Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraph 65); Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 94); and Fiamingo and Others (C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraphs 62 and 64).
( ) Judgments in Commission v Greece (68/88, EU:C:1989:339, paragraphs 23 and 24) and Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraphs 64 and 65); see to the same effect the judgment in SGS Belgium and Others (C‑367/09, EU:C:2010:648, paragraph 41).
( ) Judgment in Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraphs 25 and 36).
( ) Article 2(1)(b) of the Own Resources Decision; see also the judgments in Commission v Italy (C‑132/06, EU:C:2008:412, paragraph 39); Belvedere Costruzioni (C‑500/10, EU:C:2012:186, paragraph 22); and Commission v Germany (C‑539/09, EU:C:2011:733, paragraphs 71 and 72).
( ) Judgment in Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraphs 26 and 36).
( ) See points 92 to 105 of this Opinion, below.
( ) Judgment in Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraph 34). It is clear from Article 6 of Regulation No 2988/95 that Member States are free to use criminal penalties.
( ) See to that effect — albeit in a different context — the judgments in Colson and Kamann (14/83, EU:C:1984:153, paragraph 28); Adeneler and Others (C-212/04, EU:C:2006:443, paragraphs 102 to 104); and Fiamingo and Others (C‑362/13, C‑363/13 and C‑407/13, EU:C:2014:2044, paragraph 61 in fine).
( ) As I have pointed out before, in my Opinion in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2004:624, point 91).
( ) See again in this regard my Opinion in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2004:624, point 107).
( ) See my Opinion in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2004:624, point 108).
( ) This possibility is made available to the Member States by Article 6 of Regulation No 2988/95.
( ) Judgment in Belvedere Costruzioni (C‑500/10, EU:C:2012:186, paragraph 28).
( ) Judgment in Commission v Italy (C‑132/06, EU:C:2008:412, paragraphs 43 to 47 and 52).
( ) See to the same effect my Opinion in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2004:624, point 110).
( ) Explanatory Report on the Convention on the protection of the European Communities’ financial interests, approved by the Council on 26 May 1997 (OJ 1997 C 191, p. 1); in that report, see in particular the explanations relating to Article 1(1) of the Convention (OJ 1997 C 191, p. 4, last paragraph).
( ) The German Government takes the view that the inclusion of VAT within the areas in which EU law requires the Member State to introduce criminal penalties is only provided for in a legislative proposal by the Commission, which is still pending: Proposal for a Directive of the European Parliament and of the Council on the criminal-law protection of the Community’s financial interests, COM(2001) 272 final (OJ 2001 C 240 E, p. 125).
( ) Judgments in Antonissen (C‑292/89, EU:C:1991:80, paragraph 18); Skov and Bilka (C‑402/03, EU:C:2006:6, paragraph 42); and Quelle (C‑404/06, EU:C:2008:231, paragraph 32).
( ) See in this regard the relevant passage from the Explanatory Report in OJ 1997 C 191, p. 4, final paragraph.
( ) Article 2(1)(b) of the Own Resources Decision.
( ) Judgments in Commission v Germany (C‑539/09, EU:C:2011:733, paragraph 72) and Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraph 26).
( ) First and second recitals in the preamble to the Council Act drawing up the PIF Convention (OJ 1995 C 316, p. 48).
( ) Commission v Belgium (C‑437/04, EU:C:2007:178, at the end of paragraph 56).
( ) See above, points 86 to 90 of this Opinion.
( ) Opinion 1/09 (EU:C:2011:123, paragraph 68); with specific regard to directives, see also, inter alia, the judgment in Kücükdeveci (C‑555/07, EU:C:2010:21, paragraph 48).
( ) With regard to the interpretation of national law in a manner consistent with primary law, see the judgments in Murphy and Others (157/86, EU:C:1988:62, paragraph 11) and ITC (C‑208/05, EU:C:2007:16, paragraph 68); with regard to the interpretation of national law in a manner consistent with secondary law, see the judgments in Marleasing (C‑106/89, EU:C:1990:395, paragraph 8); Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 113); Dominguez (C‑282/10, EU:C:2012:33, paragraph 24); and Asociaţia Accept (C‑81/12, EU:C:2013:275, paragraph 71).
( ) Judgments in Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraphs 115 to 119); Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 111); Dominguez (C‑282/10, EU:C:2012:33, paragraph 27); Association de médiation sociale (C‑176/12, EU:C:2014:2, paragraph 38); and Schoenimport ‘Italmoda’ Mariano Previti (C‑131/13, C‑163/13 and C‑164/13, EU:C:2014:2455, paragraph 52); similarly, see the earlier judgment in Colson and Kamann (14/83, EU:C:1984:153, paragraph 28: ‘in so far as it is given discretion to do so under national law’).
( ) Judgment in Association de médiation sociale (C‑176/12, EU:C:2014:2, paragraph 39); see also judgments in Kolpinghuis Nijmegen (80/86, EU:C:1987:431, paragraph 13) and Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 110).
( ) Judgments in Simmenthal (106/77, EU:C:1978:49, paragraphs 21 and 24); Melki and Abdeli (C‑188/10 and C‑189/10, EU:C:2010:363, paragraph 43); and Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraph 45).
( ) Judgments in Advocaten voor de Wereld (C‑303/05, EU:C:2007:261, paragraph 49) and Intertanko and Others (C‑308/06, EU:C:2008:312, paragraph 70).
( ) Judgments in X (14/86, EU:C:1987:275, paragraph 20); Kolpinghuis Nijmegen (80/86, EU:C:1987:431, paragraph 13); X (C‑74/95 and C‑129/95, EU:C:1996:491, paragraph 24); Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraph 74); and Grøngaard and Bang (C‑384/02, EU:C:2005:708, paragraph 30).
( ) Judgments in Advocaten voor de Wereld (C‑303/05, EU:C:2007:261, paragraph 50); Intertanko and Others (C‑308/06, EU:C:2008:312, paragraph 71); and Lafarge v Commission (C‑413/08 P, EU:C:2010:346, paragraph 94).
( ) See in this regard the judgments of the ECtHR in Coëme and Others v. Belgium, nos. 32492/96, 32547/96, 32548/96, 33209/96 and 33210/96, § 149, ECHR 2000-VII, and Scoppola v. Italy (no. 2), no. 10249/03, § 110, 17 September 2009; in connection with the judgment of the ECtHR in Coëme and Others v. Belgium, see: judgment No 236 of the Italian Constitutional Court (Corte costituzionale) of 19 July 2011, paragraph 15; to the same effect, see the earlier judgment of the German Federal Constitutional Court (Bundesverfassungsgericht) (BVerfGE 25, 269, 286 et seq.).
( ) On the fact that that principle is enshrined in the constitutional traditions common to the Member States and in the general legal principles of EU law, see also the judgment in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraphs 68 and 69) and my Opinion in that case (EU:C:2004:624, points 155 to 157). The ECtHR, too, has recently recognised that principle in the context of Article 7 ECHR (judgment in Scoppola v. Italy (no. 2), no. 10249/03, §§ 105 to 109, 17 September 2009).
( ) See the judgment in Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraphs 18 to 22) and my Opinion in that case (EU:C:2004:624, point 31).
( ) Judgment of the ECtHR in Coëme and Others v. Belgium, nos. 32492/96, 32547/96, 32548/96, 33209/96 and 33210/96, § 149, ECHR 2000-VII.
( ) See to that effect judgments in Meridionale Industria Salumi and Others (212/80 to 217/80, EU:C:1981:270, paragraph 9); Pokrzeptowicz-Meyer (C‑162/00, EU:C:2002:57, paragraph 49); Molenbergnatie (C‑201/04, EU:C:2006:136, paragraph 31); and Commission v Spain (C‑610/10, EU:C:2012:781, paragraph 45). See also my Opinion in Commission v Moravia Gas Storage (C‑596/13 P, EU:C:2014:2438, points 28 to 31).
( ) According to the information supplied by the referring court, prosecution of the offences forming the subject-matter of the indictment against one of the defendants, Mr Anakiev, has already become time-barred.
( ) Judgments in Arcaro (C‑168/95, EU:C:1996:363, paragraph 36); X (C‑74/95 and C‑129/95, EU:C:1996:491, paragraph 23); and Berlusconi and Others (C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraph 73).
( ) See in this regard points 87 and 88 of this Opinion, above.
( ) See in this regard point 81 of this Opinion, above.
( ) See Article 2(36-21)(1) thereof (GURI No 216 of 16 September 2011).
( ) One of the defendants, Mr Anakiev, referred to these new rules in the proceedings before the Court. |
JUDGMENT OF THE EUROPEAN UNION CIVIL SERVICE TRIBUNAL
(First Chamber)
6 October 2015 ( * )
‛Civil service — Recruitment — Open competition — Inclusion on the reserve list — Decision of the appointing authority not to recruit a successful candidate — Respective competences of the selection board and the appointing authority — Conditions of admission to the competition — Minimum duration of professional experience — Rules for calculation — Manifest error of assessment by the selection board — None — Loss of a chance of recruitment — Compensation’
In Case F‑119/14,
ACTION brought under Article 270 TFEU, applicable to the EAEC Treaty pursuant to Article 106a thereof,
FE, residing in Luxembourg (Luxembourg), represented by L. Levi and A. Blot, lawyers,
applicant,
v
European Commission, represented by J. Currall and G. Gattinara, acting as Agents,
defendant,
THE CIVIL SERVICE TRIBUNAL (First Chamber)
composed of R. Barents, President, E. Perillo (Rapporteur) and J. Svenningsen, Judges,
Registrar: P. Cullen, Administrator,
having regard to the written procedure and further to the hearing on 11 June 2015,
gives the following
Judgment
By an application lodged at the Tribunal Registry on 24 October 2014, FE brought this action seeking annulment of the decision of the appointing authority of the European Commission (‘the appointing authority’), of 17 December 2013, refusing to recruit her to Directorate-General (DG) Justice from the reserve list for competition EPSO/AD/42/05, together with compensation for material and non-material damage claimed to have been suffered as a result of that decision.
Legal context
In the field of recruitment of officials, Article 5 of the Staff Regulations of Officials of the European Union, in the version which was in force at the time of the events at issue (‘the Staff Regulations’) provides, specifically in paragraph 3, as follows:
‘Appointment shall require at least:
...
c)
in [the administrators’] function group ... for grades 7 to 16:
i)
a level of education which corresponds to completed university studies attested by a diploma when the normal period of university education is four years or more, or
ii)
a level of education which corresponds to completed university studies attested by a diploma and appropriate professional experience of at least one year when the normal period of university education is at least three years, or
iii)
where justified in the interest of the service, professional training of an equivalent level.’
Article 28 of the Staff Regulations reads:
‘An official may be appointed only on condition that:
(a)
he is a national of one of the Member States of the [Union], unless an exception is authorised by the [appointing authority], and enjoys his full rights as a citizen;
(b)
has fulfilled any obligations imposed on him by the laws concerning military service;
(c)
produces the appropriate character references as to his suitability for the performance of his duties;
(d)
he has, subject to Article 29(2) [of the Staff Regulations], passed a competition based on either qualifications or tests, or both qualifications and tests, as provided for in Annex III [of the Staff Regulations];
(e)
he is physically fit to perform his duties;
(f)
produces evidence of a thorough knowledge of one of the languages of the [Union] and of a satisfactory knowledge of another language of the [Union] to the extent necessary for the performance of his duties.’
Article 30 of the Staff Regulations provides:
‘For each competition, a selection board shall be appointed by the [appointing authority]. This board shall draw up a list of suitable candidates.
The [appointing authority] shall decide which of these candidates to appoint to the vacant posts.’
Article 4 of Annex III to the Staff Regulations reads as follows:
‘The [appointing authority] shall draw up a list of candidates who satisfy the conditions laid down in Article 28(a), (b) and (c) of the Staff Regulations and shall send it, together with the candidates’ files, to the chairman of the Selection Board.’
Article 5 of Annex III to the Staff Regulations states:
‘After examining these files, the Selection Board shall draw up a list of candidates, who meet the requirements set out in the notice of competition.
Where the competition is on the basis of tests, all candidates on the list shall be admitted to the tests.
...’
Lastly, section A.II of competition notice EPSO/AD/42/05 (see paragraph 8 of this judgment) reads, in connection with the profile sought and the first two conditions of eligibility, as follows:
Background to the dispute
On 8 December 2005, the European Personnel Selection Office (EPSO) published competition notice EPSO/AD/42/05 (the ‘competition’) to constitute a reserve of lawyer-linguists in grade AD 7 with Polish as their main language, from which to fill vacant posts in the EU institutions (notably the Court of Justice of the European Communities) (OJ 2005 C 310 A, p. 3, ‘the competition notice’). The closing date for registration was 11 January 2006.
In section A.I of the competition notice, headed ‘Duties’, the duties to be performed were described in the following terms:
—
Translating legal texts into Polish from at least two of the official languages of the European Union and/or revising such texts.
—
Checking the Polish version of legislative texts (already translated and revised) for linguistic and legal consistency with the other language versions. Checking their drafting and compliance with formal presentational rules.
...’
Furthermore, Section A.II.2 of the competition notice stipulated that, in order to be admitted to the competition tests, candidates were required, as at the closing date for registration for the competition, to show that, ’since completing the required abovementioned degree, [they had] had at least two years’ professional experience’.
The applicant applied for the competition on 27 December 2005. She stated under the heading ‘Professional Experience’ in her application form for the competition (‘the application form’) that she had six periods of professional experience with a total duration of 31 months, of which 15 months had been as a freelance lawyer-linguist for the Court of Justice, from 15 October 2004 up to the date of her application form, and three months had been as an intern in the W. law firm in Brussels (Belgium), from 1 July to 30 September 2005.
The applicant was admitted to the competition tests. Upon completion of its work, the selection board included her name on the reserve list for the competition, the expiry date of which had initially been fixed at 31 December 2007 but was deferred, after several extensions, to 31 December 2013, when the list definitively expired.
By email of 22 May 2013, the applicant was invited by DG Justice to attend for interview on 28 May, in connection with her potential recruitment to an administrator’s post in that Directorate-General. With a view to the applicant being so recruited, DG Human Resources and Security (‘DG Human Resources’) also informed the applicant, by an email sent to her on 24 May 2013 with copy to DG Justice, that as she was currently a member of the temporary staff at the Court of Justice, ‘the [pre-recruitment] medical examination [was] not necessary, since, in the event of her being recruited to the Commission, [DG Human Resources] [would] ask for [her] medical fitness [records] to be transferred’.
In June 2013, the applicant was informed by DG Justice that she had been selected for the post of administrator and that a recruitment request had been sent to DG Human Resources.
According to the documents on the file, in June 2013, the relevant departments of the Commission had also informed the applicant that ‘as the Commission was not involved in organising the competition ... and the reserve list produced by that competition, on which the applicant’s name appeared, was a list of lawyer-linguists and not administrators, it was necessary to seek a derogation from the Commissioner for Human Resources and Security, as it was Commission policy not to use such lists, with notable exceptions relating to its Legal Service and certain specialised tasks in other [Directorates-General], subject to certain conditions’.
By email of 26 July 2013, the head of the contract law unit of DG Justice informed the applicant that DG Human Resources had given its approval for her [derogating] recruitment as an administrator [from] the reserve list of lawyer-linguists, making it clear that DG Human Resources would contact her and that she did not need to take any action before receiving an official communication from that DG.
At the end of August 2013, DG Human Resources asked the applicant to provide evidence of the professional experience she had had prior to the date of her application form, with reference to the eligibility condition requiring a minimum of two years’ work experience set out in the competition notice.
During the period from the end of August 2013 to November 2013, the applicant had several meetings with representatives of DG Human Resources and provided various documents and explanations so as to clarify matters relating to the professional experience she had relied on in her application form. On several occasions during that period, the representatives of DG Justice confirmed their interest in recruiting her.
By letter of 17 December 2013, the appointing authority informed the applicant that she could not be recruited by DG Justice, on the ground that she did not meet the condition of eligibility for the competition concerning the professional experience required (‘the contested decision’). According to the appointing authority, on the closing date for registration for the competition, the applicant had only 22 months of professional experience, rather than the two years required by the competition notice. In arriving at that conclusion the appointing authority had only given credit for seven months of professional experience as a ‘freelance translator’ for the Court of Justice, and two months of professional experience as an intern in the W. law firm, which did not correspond to the 15 months and 3 months which the applicant had declared in the application form. The contested decision also stated that, in relation to the ‘freelance [work] for the [Court of Justice]’, the duration of the applicant’s professional experience had been calculated on the basis of the total number of pages translated (721) and a standard rate of 5 pages per day, regarded as adequate by the Commission and considerably below the rate of 8 pages per day used by the Court of Justice.
On 14 March 2014, the applicant lodged a complaint against the contested decision. That complaint was rejected by a decision of the appointing authority of 14 July 2014 (‘the decision rejecting the complaint’).
Forms of order sought
The applicant claims that the Tribunal should:
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annul the contested decision;
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annul the decision rejecting the complaint;
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order the Commission to pay the sum of EUR 26132.85, together with default interest, as well as pension scheme contributions as from September 2013, and a symbolic euro for the non-material harm caused;
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order the Commission to pay the costs.
The Commission contends that the Tribunal should:
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dismiss the action as in part inadmissible and in part unfounded;
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order the applicant to pay the costs.
Law
1. Subject-matter of the action
It is settled case-law that claims for annulment formally directed against the decision rejecting a complaint have, where that decision has no independent content, the effect of bringing before the Tribunal the act against which the complaint was submitted (see, to that effect, judgment of 17 January 1989 in Vainker v Parliament, 293/87, EU:C:1989:8, paragraph 8).
In the present case, the decision rejecting the complaint confirms the contested decision. The claim for annulment directed against that decision thus has no independent content and, accordingly, should be regarded as formally directed against the contested decision, as clarified by the decision rejecting the complaint (see, to that effect, judgment of 10 June 2004 in Eveillard v Commission, T‑258/01, EU:T:2004:177, paragraph 32).
2. Claim for annulment of the contested decision
In support of her claim for annulment the applicant raises four pleas in law, based essentially:
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as to the first, on a lack of competence of the appointing authority;
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as to the second, which is relied on in the alternative, on a manifest error of assessment by the appointing authority, as well as infringement of the competition notice and the principles of legal certainty and equal treatment;
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as to the third, on infringement of the principle of good administration and the duty to have regard for the welfare of officials, as well as failure to act within a reasonable time;
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as to the fourth, on unlawfulness of the condition of eligibility for the competition concerning professional experience.
The first plea, based on a lack of competence of the appointing authority
Arguments of the parties
According to the applicant, the appointing authority exceeded the limits of its power to review decisions of the selection board, as established by the case-law, since in the present case there was nothing to show that the selection board’s decision to admit her to the competition tests, and subsequently to include her on the reserve list, was vitiated by a manifest error of assessment.
In this regard, the applicant asserts, first, that the competition notice did not specify, in relation to the requisite two years’ professional experience, whether this was required to be full time or part-time.
Secondly, in relation to the work carried out by the applicant as a lawyer-linguist for the Court of Justice, the applicant maintains that both the freelance nature of this work and the fact that she had been studying at the same time were clear from the documents she had attached to her application form. She also argues that there is no rule requiring the total number of pages translated to be divided by any standard daily rate in order to determine the full-time duration of such professional experience.
Thirdly, in relation to the internship with the W. law firm, it is argued that there was nothing to prevent the selection board from comparing the statements made by the applicant in her application form with the supporting evidence which she had attached, so that there is no reason to believe that the selection board had been misled by the way in which the duration of that professional experience had been presented in the application form.
It is argued that, accordingly, the appointing authority, which would not have had knowledge of the methodology or rules of calculation used by the selection board to assess the duration of the applicant’s professional experience, could not justify re-examining her eligibility for the competition without infringing the principles of legal certainty and legitimate expectations which ought to characterise the system by which officials of the EU institutions are selected.
For its part, the Commission points out, first, that according to the case-law, where a competition notice requires a minimum duration of professional experience, that requirement is to be understood as relating to a period of full-time work of that duration, or a period of part-time work which is equivalent, in terms of working time, to the full-time period required.
Having regard to the wording of the competition notice and the fact that the activity of ‘freelance translator’ to the Court of Justice cannot be assimilated to full-time work, since the applicant had been completely free to manage her own working time, and indeed had been studying simultaneously, the selection board for the competition ought to have accounted for this professional experience in terms of equivalent full-time work.
The fact that the applicant’s name was included on the reserve list for the competition demonstrates, according to the Commission, the manifest error of assessment made by the selection board, which had given credit for the applicant’s professional experience as a freelance translator to the Court of Justice on the basis of the dates when that activity began and ended, as stated in the application form, without concerning itself with the fact that it was not full-time work, without regard to the freelance nature of the work and, ultimately, without adopting any method for calculating the corresponding full-time duration.
Secondly, again according to the Commission, the selection board could not, without making a manifest error of assessment, have proceeded on the basis that three months of professional experience were to be attributed to the internship at the W. law firm, as stated by the applicant in the application form, when the only supporting document available to it, namely the internship certificate attached to the application form, only evidenced an internship of 40 days, taking place over the period from May to September 2005.
Consequently, the selection board, which ought in any event to have been alerted by the documents attached to the application form, is said to have made several manifest errors of assessment in concluding that the applicant met the condition of eligibility for the competition relating to professional experience. In those circumstances, the appointing authority had been obliged not to give effect to the selection board’s decision to include the applicant on the reserve list, and could not have done otherwise than to refuse to recruit her. The first plea in law should therefore be rejected as unfounded.
Findings of the Tribunal
The plea of lack of competence advanced by the applicant relates essentially to the issue of what are the conditions for the exercise and the legal scope of the appointing authority’s power to review decisions taken by the selection board in the exercise of its own competence.
Having regard to the various and numerous arguments advanced in this regard by the applicant and by the Commission, it is useful to organise the analysis of the first plea into five distinct but closely related parts, namely: a first part relating to the division of competences between the appointing authority and the selection board; a second part on whether the professional experience required by the competition notice was full-time or part-time experience; a third part on the method for calculating the minimum duration of two years’ professional experience; a fourth part on the scope of the appointing authority’s power to exclude a successful candidate from the reserve list and, lastly, a fifth part on the manifest error potentially made by the selection board in assessing the duration of the applicant’s professional experience.
At the conclusion of this analysis it will be appropriate to uphold the first plea, as the appointing authority, in deciding at the recruitment stage to exclude the applicant from the reserve list on grounds of eligibility which were not set out in the competition notice, went beyond the limits of its competence, which had been precisely laid down by the competition notice and which the selection board had duly observed.
– As to the division of competences between the appointing authority and the selection board
In the area of recruitment of staff of the European institutions by means of open competitions, the EU judicature has consistently affirmed that, by reason of the principle of the independence of competition selection boards, the appointing authority does not have the power to annul or amend a decision taken by such a board within its sphere of competence, as defined, in particular, by Article 30 of the Staff Regulations and Article 5 of Annex III to those regulations (see judgment of 20 February 1992 in Parliament v Hanning, C‑345/90 P, EU:C:1992:79, paragraph 22, and Order of 10 July 2014 in Mészáros v Commission, F‑22/13, EU:F:2014:189, paragraph 48).
However, since the appointing authority is required to take decisions free of irregularities, it cannot be bound by the decision of a selection board the illegality of which decision is liable to vitiate its own decisions (see, to this effect, judgment of 20 February 1992 in Parliament v Hanning, C‑345/90 P, EU:C:1992:79, paragraph 22). It is for that reason that the appointing authority is obliged to verify, before appointing an official, that the candidate satisfies the conditions laid down by the Staff Regulations (in default of which the recruitment decision is invalid) in order for the recruitment of that official into the service of the European Union to be regular. Where, for example, it is evident that the selection board’s decision to allow a candidate to take the competition tests is unlawful, because it is vitiated by a manifest error, the appointing authority to which the selection board has sent the reserve list on which the candidate’s name appears (the candidate having passed the tests in the meantime) must thus refuse to appoint that successful candidate (see, to this effect, judgments of 23 October 1986 in Schwiering v Court of Auditors, 142/85, EU:C:1986:405, paragraphs 19 and 20, and 23 October 2012 in Eklund v Commission, F‑57/11, EU:F:2012:145, paragraph 49).
While that is so, and still in relation to the division of competences between the appointing authority and the competition selection board, it is also necessary to point out that the purpose of a competition notice is essentially to inform the members of the selection board and those applying to take part in the competition, in as transparent, thorough and precise a manner as possible, of the legal conditions which must be met (if and when the issue arises) in order to be appointed to the post in question. Moreover, this purpose of the competition notice meets the basic requirement to observe the principle of legal certainty.
Accordingly, the competition notice would be deprived of its purpose if the appointing authority were able to exclude a successful candidate from the reserve list on the basis of eligibility conditions or arrangements which were not stated in that notice or in the Staff Regulations, or in any case, which had not been published, prior to the adoption of the competition notice, in such a way as to be accessible or necessarily known to both the selection board and the candidates concerned (see to this effect, in relation to vacancy notices, judgments of 14 April 2011 in Šimonis v Commission, F‑113/07, EU:F:2011:44, paragraph 74, and 15 October 2014 in Moschonaki v Commission, F‑55/10 RENV, EU:F:2014:235, paragraph 42).
The competition notice thus constitutes the legal framework for any selection procedure to fill a post within the EU institutions, in that, subject to the relevant higher-ranking provisions of the Staff Regulations, including Annex III to those regulations, it governs the division of competences between the appointing authority and the selection board with regard to the organisation and conduct of the competition tests, as well as laying down the conditions relating to the participation of candidates, in particular their profile and their specific rights and obligations.
In the present case, as to the division of competences between the appointing authority and the selection board in relation to the competition, the competition notice specified in section B, which was concerned with the conduct of the competition, at 1.a, that, as regards admission to the competition, ‘the appointing authority will draw up a list of candidates who meet the general requirements set out at A.II.4 [of the competition notice] and send it to the Chair of the selection board together with their application files’. The ‘general requirements set out at A.II.4 [of the competition notice]’ were general conditions of eligibility for the competition, which in fact restated Article 28 of the Staff Regulations (see paragraph 3 of this judgment).
By contrast, in accordance with the wording of section B.1.b: ‘after consulting [the candidates’ files], the selection board will [as in fact is required by Article 5 of Annex III to the Staff Regulations] draw up a list of candidates who meet the specific requirements set out at A.II.1, 2 and 3 [of the competition notice] and can therefore be admitted to the competition’. The ’specific requirements set out at A.II.1, 2 and 3 [of the competition notice]’ were requirements for qualifications, professional experience and language skills which had to be met in order to be admitted to the competition (see paragraph 7 of this judgment).
In particular, under section A.II.2 of the competition notice, candidates were required, in order to be admitted to the tests, not only to fulfil the condition set out in Article 5(3)(c) of the Staff Regulations (that is, to hold a Polish university diploma in law) but also to prove, as an additional requirement, that since completing the required university studies, they had had ‘at least two years’ professional experience’. Neither that provision nor section B.1.b of the competition notice gave the competition selection board any precise instructions to follow or any indication as to the nature of the minimum professional experience of two years or how it related to the duties to be performed as an EU official. Equally, those provisions gave no details as to the arrangements relating to the work carried out during those two years of professional experience, for example whether it was required to have been on a full-time or part-time basis, or on an employed or self-employed basis.
Furthermore, the ‘Guide for applicants’ (OJ 2005 C 327 A, p. 3), to which the competition notice, in the introduction to section C, headed ‘How to apply,’ invited candidates to refer, in order to help them submit their applications correctly (‘the guide for applicants’), also did not contain any useful explanation such as to provide effective guidance for either the members of the competition selection board in performing the duties set out in the competition notice or the applicants in completing their application forms. The guide limited itself to clarifying in section A.II.4, under the heading ‘Details of professional experience’, that applicants were to ‘state in [their] application the exact dates when [they] started and finished each period of employment, the position [they] held and the nature of [their] duties in that position’. The guide specifically stated that ‘for any unsalaried employment (such as self-employed or freelance activity in one of the liberal professions), we will accept copies of ... tax returns or any other relevant official document’.
Those being the provisions of the competition notice and the guide for applicants relating to the division of competences between the appointing authority and the selection board, it must be observed, as regards the body responsible for verifying the nature and duration of the professional experience required to take part in the competition, and for verifying that the factors taken into account in calculating its duration had been correctly applied, that the legal framework established by those two documents was silent on the point, but the competition notice left it to the jury alone to draw up, in the performance of its functions and in the exercise of its broad discretion, the list of applicants who were admitted to the competition tests.
– Whether the professional experience required by the competition notice was full-time or part-time
In this regard, particularly in relation to the professional experience which the applicant acquired at the Court of Justice as a freelance lawyer-linguist, a professional activity which is, by definition, carried out independently and which, in the present case, was the most relevant having regard to the purpose of the competition, which was precisely to recruit lawyer-linguists, neither the competition notice nor the other acts which could be taken into account legally in relation to the competition contained any indication as to what was to be understood by ‘professional experience’, or as to the basis on which the working time relating to such ‘professional experience’ was to be calculated, for example the number of hours worked or the number of pages translated per day, and in the latter case, whether it was necessary to distinguish between the translation of complex legal documents and that of documents of other kinds.
In circumstances where, as intended by the competent appointing authority, the competition notice and the guide for applicants were silent as to the factors to be taken into account in assessing the duration of the required professional experience, the Commission nevertheless asserts that, where a competition notice provides, as a condition of eligibility for the tests, that the applicant must have professional experience of a minimum duration, that period of work must be understood, both by the selection board and by applicants, as relating, by definition, to professional activity carried out on a full-time basis.
As to this, it should be borne in mind, first of all, that, in the cases referred to by the Commission, which gave rise to the judgment of 31 January 2006 in Giulietti v Commission (T‑293/03, EU:T:2006:37), and the Orders of 14 December 2006 in Klopfer v Commission (F‑118/05, EU:F:2006:137) and 10 July 2014, Mészáros v Commission (F‑22/13, EU:F:2014:189), the EU judicature undoubtedly held that the duration of the required professional experience was, even where there was no specific indication in the relevant competition notices, to be understood as a duration of full-time professional experience. However, those cases related to professional activity carried out very largely on an employed basis, the duration of which could therefore be readily determined from the contracts of employment or statements of employment provided by the employers. By contrast, in the present case, while the competition notice undoubtedly required a minimum of two years’ professional experience in the field of translation or, more realistically, legal translation, it contained no explanation as to how professional experience acquired as a self-employed individual was to be taken into account or quantified in terms of duration, despite the fact that experience of freelance work of that kind corresponds exactly to the nature of the duties described in the competition notice.
Accordingly, in default of any express indication in the competition notice as to how the duration of the required professional experience was to be calculated, or any other useful indication in that regard, the legal rationale of that eligibility condition, particularly as regards candidates, such as the applicant, who were able to declare specific experience of freelance work as a lawyer-linguist, certainly could not be to require candidates, in order to prove that the experience in question was equivalent to full-time work, to have translated, on each day of work carried out in that capacity during the two-year reference period, a given number of pages of legal documents. No such condition was laid down by the competition notice, either expressly or by implication, particularly having regard to the other conditions set out in the competition notice.
Thus, in the absence of any criteria or detailed provision in the competition notice as to the calculation of the professional experience required to be admitted to the competition, it must be held that the selection board, even on the basis that the duration of professional experience at issue was supposed to be a duration of full-time work, was entitled to rely, in assessing whether to admit the applicant to the tests, on the fact that what was required was ‘professional’ activity as a lawyer-linguist — and thus that the activity could not be ‘occasional’ in nature, and that it was required to concern, mainly, the translation of legal documents — carried out on a continuing basis, or in other words for a significant period of time, to fulfil an order from a professional party, being a public or private person who, on the basis of the relevant contract, was entitled to call for translations of legal documents at any time and, where applicable, within strict deadlines, precisely because its professional or institutional activity required legal translations of a certain standard.
Secondly, again in assessing the professional experience that was required, the selection board was obliged to base its assessment, under the relevant provisions of the guide for applicants, on evidence that the professional services had in fact been provided, not only over a continuing period, but also, in quantitative terms, to a consistent extent, which it was for the selection board, made up of persons with expertise in that area, to assess by reference to the duties described in the competition notice and by reference to all other activities which might have been carried out, by each candidate, during the reference period of two years.
Thus, the guide for applicants requiring candidates to state, in their application forms, the nature of the duties which they had carried out, the selection board, in the exercise of the competences assigned to it by the competition notice, was required to assess whether the experience acquired was professional experience differently according to whether it related to activity as a ‘freelance translator’ or as a ‘freelance lawyer-linguist’, particularly where the latter activity had been carried out for the benefit of an EU institution which, like the Court of Justice, requires its service providers to translate only documents which are entirely legal in content.
Accordingly, since, having regard to the fact that the wording of the competition notice is silent on the point, it is not possible to ascribe any other scope to this additional condition of eligibility than that described above, as the principle of legal certainty (see paragraph 41 of this judgment) would otherwise be infringed, the Commission’s argument that the minimum duration of two years’ professional experience must, in the specific case of the competition, be understood as relating, by definition, to professional activity carried out on a full-time basis, the duration of which, moreover, is to be calculated in the manner set out in the contested decision (see paragraph 19 of this judgment), cannot be accepted, in default of any indication having been given in the competition notice that, particularly in relation to candidates declaring professional experience as a freelance lawyer-linguist, the full-time duration in question was required to correspond to that calculated by the method used internally by that institution, or in any event by a specific method.
– The method of calculation of the minimum duration of two years’ professional experience
In this regard, it must be held that the selection board, which was not bound by any specific provision in the competition notice as to the calculation of the duration of the minimum two years’ professional experience required for admission to the competition, could reasonably consider, on the basis of its broad discretion in the area, that it was not appropriate to follow the specific method of calculation of any particular institution, the Commission not being, in any case, the institution principally concerned by the competition notice. According to the second paragraph of section A of the competition notice, the reserve list in question was to be used to ‘fill vacant posts in the EU institutions (notably the Court of Justice ... )’.
If, in order to calculate the period of two years’ professional experience, the selection board had to draw upon a method of calculation which was already in existence in one or other of the EU institutions, it could, on the basis of the criteria of good administration of the competition and effectiveness of the procedure, have referred in the first instance to the method of calculation used by the Court of Justice, and not necessarily or solely that used by the Commission which, as appears from paragraph 15 of this judgment, does not consider that it played any part in organising the competition.
On this point, furthermore, the Commission’s argument that the method of calculation in use at the Court of Justice, as regards the number of pages translated per working day, would be less favourable, in relation to the applicant’s professional experience, than that adopted by the Commission (see paragraph 19 of this judgment) is not relevant, given that, according to the Commission, the question is whether the selection board ought to have used the Commission’s method of calculation and not that of other institutions or its own method of calculation.
Still on this point, it should also be observed that the Commission referred, both in the decision rejecting the complaint and in its defence, to the applicant’s professional experience as a ‘freelance translator’, whereas it is apparent from the documents attached to the application form that she had provided the selection board with employment statements relating to work as a freelance‘lawyer-linguist’ to the Court of Justice. These are, in the present case, clearly different roles, as the competition selection board, made up of specialists in the field, must have been aware, in relation to a competition which was intended precisely to recruit lawyer-linguists (who, in administrative terms, are recruited directly into grade AD 7 for this reason) and not translators (who, by contrast, are recruited at the entry grade, AD 5, of the administrators’ function group).
It follows that the fact that the competition selection board did not adopt the method of calculation that is used by the Commission, in order to calculate the minimum duration to be ascribed to a period of professional experience which is to be credited on the basis of full-time work experience, does not automatically mean that the selection board erred in assessing the condition requiring the applicant to demonstrate a minimum of two years’ professional experience in order to be admitted to the competition tests.
– As to the appointing authority’s power to exclude the applicant from the reserve list of successful candidates
On the basis of the foregoing considerations and in particular those set out in paragraphs 39 to 48 concerning the division of competences between the appointing authority and the competition selection board, it should be observed that where, as in the present case, in relation to the prior professional experience required, a competition notice requires, as a specific condition of eligibility for the tests, at least two years of professional experience, the appointing authority cannot, when it is on the point of recruiting a successful candidate selected as such by the selection board, remove that successful candidate from the reserve list in reliance on methods of assessment and calculation of the requisite professional experience which the appointing authority itself did not set out in the competition notice, or which do not appear in a measure which is binding on the members of the selection board and on any candidate in the competition.
The principle of legal certainty, which is one of the governing principles of any competition procedure (see paragraph 41 of this judgment), would otherwise be irremediably undermined if a candidate who had duly provided the exact dates of the beginning and end of each of her contracts, amounting to a total duration sufficient to meet the requirement of professional experience provided for by a competition notice, only learned of the existence of other detailed provisions, essential to the fulfilment of the condition as to the duration of professional experience, at the point in time when, having received an offer of recruitment as a successful candidate in the competition, the appointing authority informed her of the existence of those arrangements and the fact that, having regard to them, she ought not have been admitted to the competition tests.
Furthermore, in a case such as this, concerning an interinstitutional open competition, in addition to infringement of the principle of legal certainty there would also be infringement of the principle of equal treatment. The appointing authority of each of the institutions potentially concerned by the competition could, at the recruitment stage, take the view that it was entitled and empowered to make its own independent assessment as to whether the eligibility condition relating to professional experience was met, and that, wherever the selection board had used a method of calculating the requisite minimum duration of professional experience which differed from its own, the selection board had necessarily made a manifest error of assessment, justifying the appointing authority in reopening the selection board’s assessment. If such reasoning were to be adopted, each appointing authority would be entitled to replace the method of calculation that the selection board had applied indiscriminately to all candidates, in calculating the requisite duration of professional experience, with its own method of calculation. The entirety of the work done by the selection board in carrying out its responsibilities and in the interest of all the institutions concerned by a competition could ultimately be called into question on the basis of requirements which varied from one institution to the next, or even on the basis of a certain propensity of the departments responsible for recruitment in a particular institution to wish to substitute their own assessment for that of the selection board.
Admittedly, in the present case, the competition notice provided, as is usual, in section D, headed ‘General information’, that ‘if you are offered a post you will subsequently be asked to produce the originals of all the requisite documents such as diplomas, certificates and statements of employment so that copies can be authenticated’ and that ‘recruitment will depend on posts and funds becoming available’.
However, such clauses do not, in themselves, provide a legal basis empowering and entitling the appointing authority to exclude a successful candidate from the reserve list, after the event, on the basis that she had not met a condition of eligibility which did not appear in the competition notice that the appointing authority itself had adopted and which, equally, did not appear in a provision of the Staff Regulations or any other legal text which was binding on candidates.
The unlawfulness on which the appointing authority would seek to rely, in those circumstances, as against the successful candidate, would not arise from a manifest error made by the selection board in assessing a specific condition of eligibility intended by the competition notice or appearing in a provision of the Staff Regulations, but from the error made by the appointing authority itself in not incorporating, in the competition notice, an additional clause stipulating that the minimum of two years’ professional experience which was required for admission to the competition tests was two years of full-time professional experience, and that this was to be calculated according to principles laid down clearly in advance, non-observance of which would prevent the candidate from being admitted to the competition tests. Ultimately, the appointing authority cannot regularise the competition notice after the event in this way, at the recruitment stage, without encroaching on the competence of the selection board, which, during the competition, is bound by the terms set out in the competition notice, or without causing prejudice to the successful candidate concerned.
Accordingly, there is no room for the argument seeking to maintain that the appointing authority was unable, in any circumstances, to adopt a recruitment decision which would have been unlawful because of an unlawful decision previously taken by the selection board, since, in the present case, the decision of the selection board to which the appointing authority refers is not vitiated by unlawfulness with regard to the Staff Regulations or the conditions clearly set out in the competition notice. It is a question, at the very most, of a difference between the method used by the selection board in assessing, in the exercise of its competence, the minimum professional experience required by the competition notice, and the method of calculating the full-time duration in accordance with specific principles which the appointing authority considers itself entitled to use at the appointment stage. However, since the appointing authority did not state in the competition notice that the condition requiring two years’ professional experience was to be understood as two years’ full-time professional experience, which would have been a legally binding requirement as regards both the selection board and the candidates, such that candidates who did not fulfil it would have been eliminated from the competition, that difference of assessment, which arises from the choice of method made by the appointing authority, has been brought about by the appointing authority alone, since it is only the appointing authority, and not the selection board, which has power to lay down conditions of eligibility in the competition notice.
In this regard, the Commission also argues that in the present case the selection board, in breach of the provisions of the competition notice specifically requiring it to verify, in respect of each candidate, that the eligibility condition relating to professional experience was met, totally failed, in practical terms, to take account of those provisions. The DG Human Resources of the Commission, which tried to understand how the selection board could have calculated the duration of the applicant’s professional experience, were forced to the conclusion that the board had not used any method to calculate the duration of that professional experience. That omission is thus said to justify a competence on the part of the appointing authority to exclude the applicant, legitimately, from the reserve list.
Those, however, are not the facts of the present case, since the Commission has not produced evidence of any such manifest omission on the part of the selection board or, for that matter, evidence that the applicant was admitted to the competition tests on the basis of a decision of the selection board which had been taken in a manifestly arbitrary way as regards the terms of the competition notice. It is apparent from the material on the file submitted to the Tribunal that, as regards the applicant’s admission to the tests, the selection board had documents before it, attached by the applicant to her application form, evidencing professional activity as a freelance lawyer-linguist to the Court of Justice over an uninterrupted period of 15 months, and that there is nothing to indicate that the board had not examined those documents, for example on the basis set out in paragraphs 53 to 55 of this judgment, which, by contrast, the appointing authority, regarding itself as bound only to use the internal method of calculation of the institution, certainly did not take into account.
It follows that, in adopting the contested decision, the appointing authority overstepped its competence to review compliance with the additional condition of eligibility relating to professional experience and thus encroached on the competence which the competition notice had expressly reserved, in this regard, to the selection board, as well as the prerogatives of autonomy and independence of competition selection boards.
Equally, the Commission has not demonstrated that the competition selection board, if it had nevertheless proceeded, in respect of each candidate, to assess the duration of the professional experience required by the competition notice, would at that stage have made a manifest error in calculating that duration, thus justifying the appointing authority in revising the list of candidates admitted to the competition and therefore also justifying a competence on the part of the appointing authority to exclude the applicant from the reserve list, even on the eve of possible recruitment.
– As to the manifest error potentially made by the competition selection board in assessing the duration of the applicant’s professional experience
In this regard, it should be observed that an error is manifest where it can be readily detected, in the light of the criteria which the legislature intended to apply to the exercise by the administration of its broad discretion. In particular, there can be no manifest error if the contested assessment may be accepted as true or valid (judgment of 23 October 2012 in Eklund v Commission, F‑57/11, EU:F:2012:145, paragraph 51, and Order of 10 July 2014 in Mészáros v Commission, F‑22/13, EU:F:2014:189, paragraph 52).
As has been pointed out in paragraphs 45 and 48 of this judgment, the competition selection board, to which the competition notice had expressly assigned the task of verifying that candidates met the condition of eligibility relating to professional experience, and in particular the duration of such experience, without, however, requiring specific principles of calculation to be observed, was obliged to carry out that task on the basis of the evidence that each candidate was required to provide, in accordance with the provisions set out in the guide for applicants (see paragraph 47 of this judgment), particularly as regards ‘the exact dates when [they] started and finished each period of employment, the position [they] held and the nature of [their] duties in that position’.
In the present case, it should be observed that, in her application form, the applicant relied specifically on several periods of professional experience with a total duration of 31 months. On the one hand, she set out various professional activities with a cumulative duration of 13 months, which were not challenged by the Commission. On the other, she stated that she had completed 15 months of activity as a freelance lawyer-linguist for the Court of Justice and three months of internship at the W. law firm, as regards which the appointing authority only credited her, respectively, with seven and two months of professional experience.
The Commission, however, asserts that the selection board did not in fact take account of the freelance nature of the activity of ‘translator’ carried out by the applicant for the Court of Justice, in that the applicant ‘did not receive consideration in the form of a salary, was not subject to a work schedule or hierarchy and was not required to be present at the Court [of Justice] in order to perform her duties’ (see, in that regard, paragraph 87 of this judgment).
Nonetheless, it is clear from the statement from the Court of Justice and the purchase orders that, between 1 October 2004 and the submission of her application form, the applicant was called on to work for the Court of Justice, in an uninterrupted fashion, as a ‘freelance lawyer-linguist’. There is thus no reason to believe, as the Commission suggests, that the selection board, made up of experts in the field, overlooked the freelance nature of this professional activity which, by its nature, is not subject to a predetermined schedule of work. It is the Commission which seems, potentially, to have confused the activity of freelance ‘translator’ with that of freelance ‘lawyer-linguist’, by treating them in the same way.
Similarly, as regards the specialised studies in international law pursued by the applicant from October 2004 until June 2005, simultaneously with part of her activity as a freelance lawyer-linguist to the Court of Justice, it suffices to point out that the documents attached to the application form confirmed this fact unequivocally. Thus there is, equally, no reason to believe that the selection board did not duly take it into account in assessing the duration of the professional experience required for admission to the competition.
Furthermore, it should be observed that the purchase orders attached to the application form highlighted, by the regularity and volume of the orders raised by the Court of Justice and fulfilled by the applicant during her 15 months of working with that institution, that the work carried out by the applicant as a freelance lawyer-linguist (and thus not as a ‘freelance translator’) was continuing and consistent in nature, notwithstanding that she was pursuing studies in international law at the same time.
Finally, as has already been noted in paragraph 57 of this judgment, the selection board had a broad discretion concerning the equivalence, in terms of working time, between activity carried out on a freelance basis with variable working hours and work carried out on a full-time basis, and in particular, to that end, had significant room for manoeuvre given that the cumulative duration of the applicant’s periods of professional experience, taken together, exceeded the required minimum of two years by seven months.
Having regard to those observations, it is appropriate to conclude that the Commission has equally not proved that the selection board made a manifest error in calculating the duration of the applicant’s professional experience.
In the light of all of the preceding considerations, the first plea, based on a lack of competence on the part of the appointing authority, must be upheld.
The second, alternative, plea, based on a manifest error of assessment by the appointing authority and on infringement of the competition notice and the principles of legal certainty and equal treatment
As this plea relates essentially to the assessment of the facts of the case, the Tribunal considers, on that basis and in the interests of administration of justice, that it is able to consider it, even after upholding the first and principal plea.
Arguments of the parties
The applicant maintains that, even if the appointing authority was legally entitled to substitute its own assessment of the condition relating to professional experience for that of the selection board, it nevertheless examined that condition in a manifestly erroneous way, particularly with regard to the calculation of the full-time duration of her professional experience as a freelance lawyer-linguist to the Court of Justice, the duration of her internship at the W. law firm, and the application to her professional experience as a freelance lawyer-linguist to the Court of Justice of a standard daily rate of a given number of pages of translation which, however, had not been mentioned in the competition notice.
The Commission contends that the second plea should be dismissed.
Findings of the Tribunal
In examining whether the appointing authority’s assessment of the duration of the applicant’s professional experience was manifestly erroneous, it is appropriate first of all to ascertain whether there was a relevant legal basis for the method or principles used by the appointing authority in this regard, by reference to the legal framework represented by the competition notice, such that the appointing authority was justified in using, for the purposes of assessing a mandatory condition of eligibility, a principle of calculation which was specific and legal as regards persons external to the institution.
It is apparent from the decision rejecting the complaint that the appointing authority considered that ‘the selection board probably did not take account of the fact that the [applicant’s] work for the Court [of Justice] was ... freelance work and should, accordingly, be credited not on the basis of the number of months for which the [applicant] worked with that institution, but on the basis of the work actually carried out, since the [applicant] did not receive consideration in the form of a salary, was not subject to a work schedule or hierarchy and was not required to be present at the Court [of Justice] in order to perform her duties; on that basis, a calculation based on the number of days worked in those circumstances, on the basis of the number of pages translated, was required. This was particularly so given that the translation purchase orders were in the file, and the possibility of such purchase orders being used in relation to self-employed professional activity was provided for by the guide [for applicants]’ (Tribunal’s emphasis).
According to the Commission, the guide for applicants thus constituted a sufficient legal basis for the use of the mechanisms for converting the quantity of work produced into days worked, as used by the Commission in relation to translation work carried out within that institution. It follows that, in the Commission’s view, the appointing authority ‘was entitled to verify the applicant’s working time as a freelancer for the Court of Justice’ (Tribunal’s emphasis).
In its defence, the Commission also asserts that ‘as the applicant had asked to be recruited by the Commission, it was inevitable that the appointing authority would use its own principles in calculating the full-time professional experience’ (Tribunal’s emphasis).
While it is undoubtedly true that, in the present case, it was the Commission that was, potentially, to recruit the applicant, it must nevertheless be pointed out that the Commission has nowhere identified, either when it rejected the complaint or during the course of these proceedings, the legal basis (available to the Commission as against the applicant) on which it says that the appointing authority was obliged to correct the manifest error allegedly made by the selection board in calculating the applicant’s professional experience, by reference to the number of pages translated per day and the rate used by the Commission’s translation services, namely five pages per working day, regardless of the fact that the case specifically concerned the translation of legal texts and/or the verification of the linguistic and legal consistency of legislative texts.
While such a method of calculation is referred to in the Communication from the Vice-President of the Commission SEC (2004) 638 of 25 May 2004 on translation requirements, it was not set out in that document as a mandatory criterion of selection for admission to the tests of a competition directed specifically to the recruitment of lawyer-linguists. In any event, that method of calculation was not set out in the competition notice, nor had it been published in such a way as to be accessible or necessarily known to the selection board or the candidates concerned. Furthermore, that criterion, as the Commission itself affirmed, does not correspond to those used by the translation departments of the other institutions which were able to recruit lawyer-linguists, if they saw fit, from the competition reserve list. Accordingly it is not common to the EU institutions.
Consequently, the appointing authority, taking the place of the selection board in verifying that a condition of eligibility for the tests had been met (a condition of eligibility which was required to be assessed and applied in a uniform manner in relation to all candidates) could not use a method of calculation which was exclusive to the Commission’s internal operations, and thus not interinstitutional, and which was therefore not pertinent, as the competition in fact concerned the recruitment of lawyer-linguists, and not binding on persons external to the institution.
It follows that the analysis of the applicant’s professional experience carried out by the Commission with a view to calculating, in accordance with the principles used by its translation services, the number of pages translated by the applicant during her period of activity as a freelance lawyer-linguist to the Court of Justice, as if it was the work of a Commission ‘translator’ that was in question, even supposing it to be plausible, has no basis in any relevant legal provision which can be relied upon directly against the applicant and, accordingly, constitutes a manifest error on the part of the appointing authority which can be readily detected by the Tribunal (see paragraph 70 of this judgment).
In the light of the foregoing, it is therefore appropriate to uphold the second plea, raised in the alternative though it is, without the need to examine the other arguments advanced by the applicant in this regard.
The third plea, based on infringement of the principle of good administration and the duty to have regard for the welfare of officials, as well as failure to act within a reasonable time
As this plea relates essentially to the assessment of the facts of the case, the Tribunal considers, on that basis and in the interests of administration of justice, that it is able to consider it, even after upholding the first and principal plea.
Arguments of the parties
The applicant’s first criticism of the appointing authority is that it questioned the validity of the selection board’s decision to admit her to the competition at the final stage of the recruitment procedure, almost seven years after the reserve list had been drawn up and, more specifically, after DG Human Resources had granted a derogation with a view to her being recruited as an administrator. Furthermore, the validity of the reserve list had been extended several times and the applicant had been invited to several recruitment interviews in the meantime, without her eligibility for the competition ever being checked or questioned.
Secondly, the applicant maintains that DG Human Resources staff refused to give her access to her EPSO file at the interviews she had with them in September and October 2013, access only having been granted in November of that year.
Furthermore, according to the applicant, in taking four months to adopt the contested decision, the appointing authority exceeded a reasonable time for examining the matter. Having regard, firstly, to the nature of the review that it was for the appointing authority, in the circumstances, to carry out, which was limited to manifest errors of assessment on the part of the selection board, and secondly, to the unwavering interest shown by DG Justice in the recruitment of the applicant, which had originally been expected to take place in September 2013, that period of time was excessive and, furthermore, was attributable in its entirety to DG Human Resources.
Finally, the appointing authority is said to have dealt with the matter unfairly, in that representatives of DG Human Resources gave contradictory and incoherent opinions as to the factors relevant to the calculation of professional experience, as well as the documents to be submitted in this regard, opinions which were later discarded. That conduct is also said to have delayed the recruitment procedure.
The Commission contends that the third plea should be dismissed.
Findings of the Tribunal
First, it should be pointed out that the appointing authority need only examine the legality of the selection board’s decision to include a candidate on the reserve list when the question of actual recruitment of that candidate arises, and not when the selection board sends it the reserve list (judgment of 15 September 2005 in Luxem v Commission, T‑306/04, EU:T:2005:326, paragraph 24). The time which elapsed after the drawing-up of the reserve list and the number of extensions of the validity of the list are not, therefore, relevant circumstances in assessing, in this case, whether the appointing authority infringed the principle of good administration by questioning the selection board’s decision to admit the applicant to the competition tests.
Furthermore, as to the derogation in respect of the reserve list in question (see paragraph 15 of this judgment) it should be observed that that decision was necessarily taken after the selection board’s decision to include the applicant on that list, but before the requisite verification, by the appointing authority, of her aptitude to be appointed as an official. That derogating decision, although made at the wrong point in time, that is, well before the appointing authority had been able to verify the applicant’s aptitude to be appointed to the post in question, does not mean, in law, that the appointing authority was no longer able to verify, within the limits of its competence, that those conditions of appointment, laid down in mandatory terms by the Staff Regulations, were satisfied. In other words, a derogating decision such as that at issue is not automatically to be equated with a decision that the person concerned has the aptitude to be appointed as an official. Among the conditions of appointment laid down by the Staff Regulations, is that, set out in Article 28 of those regulations, requiring the candidate to have passed a competition based on qualifications and tests which, in the circumstances, could only the competition at issue in the present case.
Secondly, as regards access to the EPSO file, it must be observed that there is no evidence to support the applicant’s allegation that DG Human Resources staff refused her verbal requests for access. Although the applicant refers to such a refusal in an email of 11 November 2013, sent to DG Human Resources, what she says is not confirmed by the recipient who, on the contrary, invited her to access her file the following day. Furthermore, the applicant, who accepts that she had access to her application form and attached documents on 12 November 2013, does not state how the earlier refusal which she alleges would constitute an infringement of the principle of good administration or the duty to have regard for the welfare of officials.
Thirdly, as to the time taken by the appointing authority to make its decision, it should be observed that no period is laid down by any provision of EU law for the taking of a decision as to the recruitment of an official in the context of a competition procedure such as that in which the applicant participated. It follows that, in accordance with settled case-law, the reasonableness of the period of time taken by the institution to adopt a measure at issue is to be appraised in the light of all of the circumstances specific to each case and, in particular, the importance of the case for the person concerned, its complexity and the conduct of the parties (see, to this effect, judgment in Review of 28 February 2013 in Arango Jaramillo and Others v EIB, C‑334/12 RX-II, EU:C:2013:134, paragraph 28 and the case-law cited therein).
In the present case, following the recruitment interview of 28 May 2013, DG Justice sent the recruitment request relating to the applicant to DG Human Resources in June 2013, and in July 2013 DG Human Resources granted the derogation which was necessary for a candidate who had been included on a reserve list of lawyer-linguists to be appointed to an administrator’s post. The EPSO file was sent to the Commission in September 2013 and the contested decision was adopted on 17 December 2013. In the meantime, at the end of August 2013, the applicant enquired of DG Human Resources, and was informed, as to the progress of the recruitment procedure.
In relation, first, to the importance of the case, while the prospect of recruitment was undeniably important to the applicant, she had no right to be appointed as an official and, in the absence of approval from DG Human Resources, she equally had no legitimate expectation in that regard, notwithstanding the unwavering interest shown by DG Justice in her recruitment (see judgment of 19 May 2015 in Brune v Commission, F‑59/14, EU:F:2015:50, paragraph 78 and the case-law cited therein). Furthermore, given that the appointing authority had taken the view, albeit wrongly, that the selection board had made a manifest error of assessment in admitting the applicant to the competition, verifying whether the applicant met the condition of eligibility relating to the professional experience required by the competition notice was a matter, in itself and within the limits stated in paragraphs 53 to 55 of this judgment, of a certain complexity. Lastly, taking the view that the information contained in the EPSO file was, in some respects, contradictory and insufficient, the appointing authority asked the applicant for further documents and explanations. No unjustified delay in the recruitment procedure can therefore be imputed to the appointing authority.
Accordingly, the period of about six months which elapsed between the recruitment request being sent by DG Justice to DG Human Resources in June 2013, and the adoption of the contested decision on 17 December of that year, cannot, in the circumstances, be considered unreasonable overall.
Fourthly, the fact that DG Human Resources staff kept the applicant informed, at various interim stages of the recruitment procedure, of the factors which they considered relevant for the purposes of calculating the duration of her professional experience, and of the evidence to be supplied in that regard, does not constitute unfair handling of her situation. On the contrary, the applicant was thus given the opportunity to adopt a position on the controversial aspects of her case, and to put forward in her favour, during the course of the recruitment procedure, all the arguments and evidence available to her. The appointing authority was, of course, free to assess the probative value of such evidence.
It follows that no finding of an infringement of the principle of good administration, an infringement of the duty to have regard to welfare, or a failure to act within a reasonable time, can be made on the basis of the matters put forward by the applicant and, accordingly, that the third plea must be dismissed.
The fourth plea, based on unlawfulness of the condition of eligibility for the competition relating to professional experience
Arguments of the parties
The applicant maintains, by means of a plea of unlawfulness, that the condition of eligibility relating to professional experience which appears in the competition notice is contrary to the principle of equal treatment, in that other competition notices relating to the recruitment of lawyer-linguists do not contain any condition of that kind.
The Commission contends that the Tribunal should dismiss the fourth plea as inadmissible or, in the alternative, as unfounded.
Findings of the Tribunal
As the first plea advanced in support of the claim for annulment, based on a lack of competence on the part of the appointing authority, has been upheld, there is no longer any need to consider the fourth plea. Furthermore, since it has been established, by reference to the provisions of the competition notice regarding the division of competences between the appointing authority and the selection board, that the appointing authority was bound by the selection board’s decision to admit the applicant to the competition on the basis that she satisfied the condition relating to professional experience, since that decision was free of manifest error, the unlawfulness of that condition, if established, would not give rise to any further harm to the applicant in respect of which she would be entitled to compensation.
3. The claim for compensation
Arguments of the parties
The applicant asserts that she would undoubtedly have been recruited in September 2013, had it not been for the unlawfulness vitiating the contested decision. Given that the applicant was unemployed between 1 September 2013 and 1 February 2014 (the date on which she states that she was employed as legal secretary to a member of the General Court of the European Union), that unlawfulness is said to have caused her material damage represented by the loss of the income which she would have received, together with other benefits associated with appointment, including the possibility of being appointed as an official under the more advantageous provisions of the Staff Regulations which were in force until 31 December 2013.
Accordingly, the applicant argues that she should be compensated by granting her ‘the full effect’ of appointment in September 2013 as an administrator in grade AD 7, step 1, posted to DG Justice, that is, ‘amongst other things’, seniority in grade as from 1 September 2013, reconstitution of her career, retrospective payment of pension scheme contributions, and payment of remuneration for the period during which she was unemployed, such remuneration being assessed, subject to additions, at EUR 26132.85, to which default interest is to be added at a rate two percentage points above the main refinancing operations rate set by the European Central Bank for the period in question.
The applicant also claims to have suffered, by reason of the contested decision, non-material damage resulting from the stress and anxiety due to the fact that, almost seven years after she was included in the reserve list, the rights that she had acquired as a successful candidate in the competition were called into question, and she found herself obliged to approach her previous employers in order to obtain the information required by DG Human Resources for the purposes of evaluating her professional experience. The applicant limits her claim in this regard to a symbolic euro.
The Commission contends that the claim for compensation should be dismissed. In relation to the material damage based on loss of chance, it is said that the claim for compensation is closely linked to the claim for annulment and should therefore be dismissed as unfounded. Furthermore, it is said that the applicant cannot rely on any serious chance of recruitment and cannot suggest that she ought to have been appointed on a particular date. In any case, as the Commission clarified at the hearing in response to a question set out in the preparatory report for the hearing, it would not have been possible in the circumstances, allowing for any notice period, for her to be recruited prior to 1 March 2014.
Furthermore, the claims that the applicant should be given the benefit of ‘the full effect’ of appointment and that her career should be reconstituted are said to be manifestly inadmissible, the first because of its imprecision and the second by reason of the fact that, in accordance with the case-law, it is not for the EU judicature to issue directions to the administration in the course of a review of lawfulness based on Article 91 of the Staff Regulations.
As to the non-material damage, the claim for compensation is said to be inadmissible due to the lack of any prior request under Article 90 of the Staff Regulations, such harm arising, according to the Commission, from conduct of the administration which was not in the nature of a decision, namely the delay in dealing with the applicant’s case.
The claim for compensation for non-material damage is said in any event to be unfounded. The allegations of stress and anxiety are said to be unrealistic in the circumstances of the case, especially since the fact that a candidate has been successful in a competition does not give him any right to be appointed as an official, and it is for each candidate to produce the material necessary for the existence and relevance of his qualifications and professional experience to be assessed.
Findings of the Tribunal
In accordance with settled case-law, the administration can be held liable for damages only if a number of conditions are satisfied: the illegality of the allegedly wrongful act committed by the institutions, actual harm suffered, and the existence of a causal link between the act and the damage alleged to have been suffered (see, amongst others, judgments of 1 June 1994 in Commission v Brazzelli Lualdi and Others, C‑136/92 P, EU:C:1994:211, paragraph 42, and 21 February 2008 in Commission v Girardot, C‑348/06 P, EU:C:2008:107, paragraph 52).
Since, as has been held in examining the first plea, the contested decision is vitiated by unlawfulness, it is necessary to consider whether the applicant has suffered any damage by reason of that decision.
As regards material damage, it is clear that, as a result of the contested decision, the applicant lost a real chance of being recruited as an official to the vacant post at DG Justice, a post in relation to which the DG had in fact shown, on several occasions, its interest in the applicant (see paragraph 18 of this judgment and, to this effect, judgment of 7 October 2013 in Thomé v Commission, F‑97/12, EU:F:2013:142, paragraph 76).
Thus, regardless of the measures which the Commission will have to adopt, in accordance with Article 266 TFEU, to implement this annulling judgment, it must be held that the applicant definitively lost the chance to be employed as an administrator in grade AD 7 in the post which was vacant at DG Justice, as to which that DG had in fact obtained, so as to be able to offer the post to the applicant, an administrative derogation relating to the competition reserve list, which had in fact been directed, in the first instance, to the recruitment of lawyer-linguists. That damage thus gives rise to a right, provided that the other legal conditions are met, to compensation (see, to this effect, judgment of 13 September 2011 in appointing authority v Commission, F‑101/09, EU:F:2011:133, paragraphs 79 to 82).
Furthermore, the applicant asserts, on the basis of the interest of the DG Justice unit to which she ought to have been posted, the fact of which the Commission does not challenge, that had it not been for the unlawfulness which vitiates the contested decision, she would have been recruited on 1 September 2013.
It should be noted in this regard, first, that the EPSO file did not reach the appointing authority until September 2013.
Secondly, while the Commission maintains that, from an administrative perspective, the earliest possible date of recruitment to the vacant post would have been 1 March 2014, the fact remains that if the appointing authority had not wrongly taken the view that the selection board had made a manifest error of assessment, the time taken to consider the matter would realistically have been shorter, not least because of the interest which DG Justice had shown, on several occasions, in filling that post.
In the circumstances of the case, it should thus be held that the chance that the applicant would have had, in the absence of the unlawful conduct of the Commission, of being recruited to the administrator’s post in question arose in her favour on 1 November 2013 at the earliest, also taking into account the fact that, as is apparent from the email of 24 May 2013 sent by DG Human Resources to the applicant (see paragraph 13 of this judgment), there would have been no need for a pre-recruitment medical examination in the event of recruitment by the Commission, as the applicant had already undergone such an examination at the Court of Justice.
Lastly, the applicant maintains that the quantum of the material damage she suffered amounts, in respect of the period from 1 September 2013 to 1 February 2014, during which she remained without employment pending the adoption of the contested decision, to EUR 26132.85, representing the income which she would have received as an official in grade AD 7, step 1. The applicant adds that the Commission should also be ordered to pay pension scheme contributions from September 2013.
It suffices however (there being no need to adopt a position as to the absolute bar contended for by the Commission in relation to the claims for the applicant to be given the benefit of ‘the full effect’ of the appointment and for reconstitution of her career) to point out that the material damage in respect of which the applicant is entitled to compensation does not relate to lost benefits, but to the loss of a chance of being employed as an official in the post to which the recruitment procedure in question related.
Accordingly, taking account of the circumstances of the case and in the exercise of the Tribunal’s power to assess damages on an equitable basis, the material damage suffered by the applicant can be fairly and fully compensated, having regard amongst other things to the monthly salary attaching to the post to be filled, the real nature of the lost chance, the earliest possible date for recruitment and the applicant’s employment situation during the reference period, by ordering the Commission to pay her a lump sum of EUR 10000.
As to the non-material damage, it should first be stated that, contrary to the Commission’s argument, the damage alleged to have been suffered does not arise from conduct of the administration which is not in the nature of a decision, namely the delay in dealing with the matter, but from the contested decision.
Nonetheless, it is appropriate to hold that the annulment of the contested decision constitutes in itself adequate and appropriate compensation for the non-material damage alleged by the applicant, who has not been able to establish that she suffered any non-material loss which can be separated from the unlawfulness forming the basis for the annulment of the contested decision.
It follows that the Commission must be ordered to pay the applicant, by way of compensation, the sum of EUR 10000.
Costs
Pursuant to Article 101 of the Rules of Procedure, subject to the other provisions of Chapter 8 of Title 2 of those Rules, the unsuccessful party is to bear his own costs and is to be ordered to pay the costs incurred by the other party if they have been applied for in the other party’s pleadings. Under Article 102(1) of those Rules, if equity so requires, the Tribunal may decide that an unsuccessful party is to bear his own costs, but is to pay only part of the costs incurred by the other party, or even that he is not to be ordered to pay any costs.
It follows from the grounds set out in the present judgment that it is essentially the Commission which has been unsuccessful. Moreover, the applicant expressly applied in her pleadings for the Commission to pay the costs. As the circumstances of the present case do not justify the application of Article 102(1) of the Rules of Procedure, the Commission must bear its own costs and be ordered to pay the costs incurred by the applicant.
On those grounds,
THE CIVIL SERVICE TRIBUNAL (First Chamber)
hereby:
1.
Annuls the decision of 17 December 2013 by which the European Commission refused to recruit FE.
2.
Orders the European Commission to pay FE the sum of EUR 10000.
3.
Dismisses the action as to the remainder.
4.
Declares that the European Commission shall bear its own costs and pay the costs incurred by FE.
Barents
Perillo
Svenningsen
Delivered in open court in Luxembourg on 6 October 2015.
W. Hakenberg
Registrar
R. Barents
President
( * ) Language of the case: French. |
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 10 September 2015 ( )
Case C‑232/14
Portmeirion Group UK Limited
v
Commissioners for Her Majesty’s Revenue and Customs(Request for a preliminary ruling
from the First-Tier Tribunal (Tax Chamber) (United Kingdom))
‛Dumping — Validity of Implementing Regulation (EU) No 412/2013 — Imports of ceramic tableware and kitchenware originating in the People’s Republic of China’
I – Introduction
1.
This request for a preliminary ruling concerns the validity of Council Implementing Regulation (EU) No 412/2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of ceramic tableware and kitchenware originating in the People’s Republic of China ( ) (‘the contested regulation’).
2.
The action for annulment of the contested regulation brought before the General Court ( ) by one of the exporters concerned by that regulation was dismissed by that Court. The appeal brought before the Court of Justice by that exporter is still pending at the time of delivery of the present Opinion. ( )
II – Legal framework
A – EU law
3.
Article 236(1) of Chapter 5, entitled ‘Repayment and remission of duty’, of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code ( ) (‘the Customs Code’), provides as follows:
‘Import duties or export duties shall be repaid in so far as it is established that when they were paid the amount of such duties was not legally owed …’
4.
The contested regulation was adopted on the basis of Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community ( ) (‘the basic regulation’). Article 1 of that regulation, entitled ‘Principles’, provides:
‘1. An anti-dumping duty may be applied to any dumped product whose release for free circulation in the Community causes injury.
2. A product is to be considered as being dumped if its export price to the Community is less than a comparable price for the like product, in the ordinary course of trade, as established for the exporting country.
3. The exporting country shall normally be the country of origin. However, it may be an intermediate country, except where, for example, the products are merely transhipped through that country, or the products concerned are not produced in that country, or there is no comparable price for them in that country.
4. For the purpose of this Regulation, “like product” means a product which is identical, that is to say, alike in all respects, to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.’
5.
According to recitals 24, 25, 51, 52, and 54 to 57 in the preamble to Commission Regulation (EU) No 1072/2012 of 14 November 2012 imposing a provisional anti-dumping duty on imports of ceramic tableware and kitchenware originating in the People’s Republic of China (‘the provisional regulation’): ( )
‘(24)
The product [under consideration] ( ) is ceramic tableware and kitchenware currently falling within CN codes 6911 10 00, ex 6912 00 10, ex 6912 00 30, ex 6912 00 50 and ex 6912 00 90 and originating in the People’s Republic of China (“the product [under consideration]”). It can be of porcelain or china, of common pottery, stoneware, earthenware or fine pottery or other materials. The main raw materials include minerals such as kaolin, feldspar and quartz and the composition of raw materials used determines the type of the final ceramic product produced.
(25)
Ceramic tableware and kitchenware items are commercialised in a large variety of forms that have been evolving over time. They are used in a wide range of places, e.g. households, hotels, restaurants or care establishments.
…
(51)
An importer claimed that the product scope of the investigation was too wide to allow for a reasonable comparison amongst product types. An importer with producing interests in China expressed a similar view. In this respect, some parties also referred to purely decorative items.
(52)
… [t]he relevant criteria applied in order to determine whether or not the product, subject of an investigation, can be considered a single product, i.e. its basic physical and technical characteristics, are set out in detail below. Purely decorative items are thus not covered. Furthermore, even though the various types of ceramic tableware and kitchenware may indeed have certain different specific characteristics, the investigation showed that, with the exception of ceramic knives, their basic characteristics remain identical. In addition, the fact that the product [under consideration] can be produced with some variations in the manufacturing process is not in itself a criterion which could result in a finding of two or more distinct products. Finally, the investigation also revealed that the various types of the product [under consideration] were generally sold via the same sales channels. While some specialised shops may focus on certain specific types, a big share of the distributors (retailers, department stores, supermarkets) sell various types of ceramic tableware and kitchenware, in order to offer a wide choice range to their customers. Claims that the product scope of the investigation was too wide are therefore provisionally rejected.
…
(54)
The investigation has shown that all types of ceramic tableware and kitchenware, despite the differences in terms of properties and style, have the same basic physical and technical characteristics, i.e. ceramic ware primarily aimed at being in contact with food, they are basically used for the same purposes, and can be regarded as different types of the same product.
(55)
In addition to the fact that they share the same basic physical and technical characteristics, all those various styles and types are in direct competition and to a very large extent interchangeable. This is clearly illustrated by the fact that there are no clear dividing lines between them, i.e. there is quite some overlapping and competition between different product types and standard buyers do not often make a distinction for instance between porcelain versus non-porcelain goods.
(56)
However, as explained in recitals (29)-(34) above, it was also deemed appropriate to narrow down the product scope definition on the basis of which the current investigation has been initiated by excluding ceramic knives. Therefore, the product [under consideration] is provisionally defined as ceramic tableware and kitchenware, excluding ceramic knives, originating in the People’s Republic of China, currently falling within CN codes ex 6911 10 00, ex 6912 00 10, ex 6912 00 30, ex 6912 00 50 and ex 6912 00 90.
(57)
In conclusion, for the purposes of this proceeding and in accordance with consistent Union practice, it is therefore considered that all types of the product described above, with the exception of ceramic knives, should be regarded as forming one single product’.
6.
Recitals 35 to 37 in the preamble to the contested regulation provide:
‘(35)
All types of ceramic tableware and kitchenware can be regarded as different types of the same product. Therefore, the claim made after provisional disclosure and again after final disclosure that the investigation covers a large range of like products and that, as a result, it would be necessary to conduct separate standing, dumping, injury, causation and Union interest analyses for each product segment, is found to be unfounded. One party that claimed that the product scope was too broad brought forward a comparison of products with different levels of decoration, but its statements as regards end-use (for the garden and children in one case, for decoration in the other case) are disputable because there is no clear-cut [demarcation] and those statements can rather be seen as a confirmation of the point made in recital (55) of the provisional Regulation. It should also be noted that an importer with production in the PRC submitted that over 99% of the ceramic tableware and kitchenware products sold in the Union were predominantly or exclusively white. Some parties contested recital (58) of the provisional Regulation on the basis that in the framework of the investigation the institutions did not carry out any test of whether certain merchandise was not suitable for free trade in the Union. However, this fact does not undermine the conclusion in recital (63) of the provisional Regulation.
(36)
In view of the above, the product scope is definitively defined as ceramic tableware and kitchenware, excluding ceramic knives, ceramic condiment or spice mills and their ceramic grinding parts, ceramic peelers, ceramic knife sharpeners and cordierite ceramic pizza-stones of a kind used for baking pizza or bread, originating in the PRC, currently falling within CN codes ex 6911 10 00, ex 6912 00 10, ex 6912 00 30, ex 6912 00 50 and ex 69 12 00 90.
(37)
In the absence of other comments regarding the product [under consideration] and the like product, all other determinations in recitals (24) to (63) of the provisional Regulation are hereby confirmed.’
B – World Trade Organisation law
7.
The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT) ( ) (‘the 1994 Anti-Dumping Agreement’) is contained in Annex 1A to the Agreement establishing the World Trade Organisation (WTO), approved by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994). ( )
8.
Article 2 of the 1994 Anti-Dumping Agreement, entitled ‘Determination of dumping’, provides as follows:
‘2.1 For the purpose of this Agreement, a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.
…
2.6 Throughout this Agreement the term “like product” (“produit similaire”) shall be interpreted to mean a product which is identical, i.e. alike in all respects to the product under consideration, or in the absence of such a product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.’
III – The dispute in the main proceedings and the questions referred for a preliminary ruling
9.
The applicant, Portmeirion Group UK Limited (‘Portmeirion’), is established in Stoke-on-Trent (United Kingdom). It is a producer of, and a market leader in, high-quality ceramic tableware which supplements its UK-produced products with imports, some 14% of which come from the People’s Republic of China.
10.
On 16 February 2012, the European Commission initiated an anti-dumping proceeding into the importation into the European Union of ceramic tableware and kitchenware originating in China.
11.
On 14 November 2012, the Commission adopted the provisional regulation imposing provisional anti-dumping duties fixed at rates ranging from 17.6% to 58.8%.
12.
On 18 December 2012, Portmeirion lodged initial observations contesting the product scope of the investigation and raising other factors which, in its view, prevented the imposition of anti-dumping duties. Following the Commission’s submission of its disclosure document of 25 February 2013, a hearing between Portmeirion and the Commission took place on 5 March 2013. At that hearing, Portmeirion stated its views as to, inter alia, the scope of the ‘product under consideration’ in the investigation.
13.
On 13 May 2013, upon the proposal of the Commission, the Council adopted the contested regulation imposing on the imports concerned a definitive anti-dumping duty ranging from 13.1% to 36.1% with effect from 16 May 2013.
14.
On 2 August 2013, Portmeirion applied, in accordance with Article 236 of the Community Customs Code, to the Commissioners for Her Majesty’s Revenue and Customs for repayment of the anti-dumping duties, claiming that those duties were not legally owed because the contested regulation was in breach of EU law.
15.
On 16 December 2013, the Commissioners for Her Majesty’s Revenue and Customs refused Portmeirion’s application.
16.
On 14 January 2014, Portmeirion appealed against that decision before the First-Tier Tribunal (Tax Chamber) in order to contest the validity of the contested regulation.
17.
The referring tribunal, taking the view that Portmeirion had arguable grounds on which to challenge the validity of the contested regulation, has stayed the proceedings and referred the following questions to the Court:
‘Is the contested regulation incompatible with EU law in so far as it:
(i)
is based on manifest errors of assessment with respect to the definition of the product concerned, thereby invalidating the conclusions of the anti-dumping investigation; and
(ii)
lacks adequate reasons as required under Article 296 TFEU?’
IV – Procedure before the Court
18.
The request for a preliminary ruling in the present case was lodged at the Court on 12 May 2014. Written observations have been submitted by the Italian Government, the Council and the Commission.
19.
On 15 July 2015, a hearing took place at which Portmeirion, the Council and the Commission presented oral argument.
V – Analysis
A – Admissibility
20.
In the view of the Italian Government, the request for a preliminary ruling is inadmissible because Portmeirion was entitled to challenge the contested regulation before the General Court of the European Union in accordance with Article 263 TFEU.
21.
In this regard, according to the case-law of the Court, ‘the general principle which is intended to ensure that every person has, or will have had, the opportunity to challenge a[n EU] measure which forms the basis of a decision adversely affecting him, does not in any way preclude a regulation from becoming definitive as against an individual with respect to whom it must be considered to be an individual decision and who could undoubtedly have sought its annulment under Article [263 EC], a fact which prevents that individual from pleading the unlawfulness of that regulation before the national court. Such a conclusion applies to regulations instituting anti-dumping duties by virtue of their dual nature as acts of a legislative nature and acts liable to be of direct and individual concern to certain traders’. ( )
22.
According to the Court, ‘[r]egulations imposing an anti-dumping duty, although by their nature and scope of a legislative nature, may be of direct and individual concern to those producers and exporters of the product in question who are charged with practising dumping on the basis of information originally from their business activities’. ( )
23.
Generally, that is the case with the following entities:
—
those exporters and producers which are able to establish that they were identified in the measures adopted by the Commission and Council or were concerned by the preliminary investigations; ( )
—
importers of the product under consideration whose resale prices were taken into account for the construction of export prices and which are consequently concerned by the findings relating to the existence of dumping; ( ) and
—
importers associated with exporters in third countries on whose products anti-dumping duties have been imposed, particularly where the export price has been calculated on the basis of those importers’ resale prices on the EU market and where the anti-dumping duty itself is calculated on the basis of those resale prices. ( )
24.
Furthermore, the recognition of the right of certain categories of traders to bring an action for the annulment of an anti-dumping regulation cannot prevent other traders from also being able to claim that they are individually concerned by such a regulation by reason of certain attributes which are peculiar to them and which differentiate them from all other persons. ( )
25.
With regard to the case in the main proceedings, the Italian Government has not established that Portmeirion must be regarded as belonging to one of the categories of traders identified above.
26.
After all, as the Commission confirmed at the hearing, Portmeirion is an importer of the product under consideration whose resale prices were not taken into account for the construction of the export prices or in the calculation of the anti-dumping duty. Nor is there any question as to its being associated with exporters. Moreover, it does not appear to exhibit attributes which are peculiar to it and which differentiate it from all other persons.
27.
It follows from the foregoing that Portmeirion was entitled to raise the plea as to the illegality of the contested regulation before the referring tribunal, which was not therefore bound by the definitive nature of the anti-dumping duty imposed by that regulation and was entitled to ask the present questions.
28.
The Court is consequently under an obligation to answer those questions.
B – Merits
1. The first question referred
29.
By its first question, the referring tribunal asks whether the contested regulation is valid in so far as it is based on manifest errors of assessment with respect to the definition of the product under consideration, thereby invalidating the conclusions of the anti-dumping investigation.
a) Arguments of the parties
30.
Portmeirion and the Commissioners for Her Majesty’s Revenue and Customs have not submitted any written observations. However, in its request for a preliminary ruling, the referring tribunal sets out in a very clear and detailed fashion the arguments put forward by Portmeirion, while the Commissioners for Her Majesty’s Revenue and Customs take the view that they are not competent to comment or decide upon the validity of a regulation which is binding on them.
31.
Portmeirion submits that the contested regulation was adopted on the basis of a manifest error of assessment in the definition of the product under consideration which vitiated the conduct of the entire anti-dumping investigation leading to the adoption of the contested regulation. There are, it argues, no grounds under EU law to support the conclusion that the distinct products covered by the investigation could be regarded as a ‘single product’, which would have justified a single investigation.
32.
According to Portmeirion, the investigation covered, and the contested regulation imposed, duties on ceramic products which are as diverse as a rolling pin, a plate, a teacup, a salt shaker, a casserole, a teapot or an oven dish and which, contrary to the assertions of the EU institutions, do not have the same basic physical and technical characteristics (such as, for example, size, weight, shape, heat resistance, etc.).
33.
In this regard, Portmeirion relies on three findings.
34.
First, the only common element between the products subject to the anti-dumping duties is that they are (partially) produced from ceramics. That by itself cannot, in its view, be sufficient to consider that all the products covered by the investigation are different types of the same product. Otherwise, a window frame and a car would be a single product just because they are (mostly) manufactured from aluminium.
35.
Second, the contention that all the products are primarily aimed at being in contact with food and aimed at retaining foodstuffs is, in its view, manifestly wrong, because products that are not primarily aimed at being in contact with food (such as beer mugs) and that are not aimed at retaining foodstuffs (such as rolling pins) are also covered by the investigation.
36.
Third, the same is true of the assertion that the products subject to the anti-dumping duties ‘are in direct competition and to a very large extent interchangeable’. After all, it asks, how can one serve tea from a rolling pin, serve a meal in a salt shaker, or use a coffee pot to serve spaghetti, for example?
37.
Portmeirion also calls into question the consistency of the Council’s assessment, in so far as:
—
some ceramic products were excluded from the scope of the investigation and of the contested regulation on the basis of their different shape, strength and design;
—
a rolling pin and a plate are treated as the same product just because they are made from ceramics, whereas two identical and directly interchangeable plates are treated as different products just because they are made from different materials (for example, glass or ceramics);
—
the investigation covered products that do not share physical, technical or chemical characteristics, and do not have a common purpose, however defined (for example, teapots and rolling pins).
38.
The Italian Government, the Council and the Commission take the view that the definition of the ‘product under consideration’ is not vitiated by a manifest error of assessment.
39.
First of all, they state that the institutions enjoy a wide discretion when defining the product under consideration in anti-dumping investigations. In this regard, the institutions may take account of a number of factors, such as the physical, technical and chemical characteristics of the products, their use, their interchangeability, the consumer’s perception of them, distribution channels, the manufacturing process, costs of production, quality, and so on.
40.
It follows from this that different products may fall within the definition of the ‘product under consideration’ and form the subject of the same investigation provided that they share the same essential characteristics. In this instance, the products all share the same basic physical and technical characteristics inasmuch as they are ceramic ware and are designed to be in contact with or to retain food.
41.
Portmeirion, the Council and the Commission also disagree on the conclusions that might be drawn from the WTO Panel reports on the interpretation of the concept of ‘product under consideration’.
b) Assessment
i) Preliminary observations
42.
The first question concerns the interpretation of the concept of ‘product under consideration’, that is to say, the product regarded ‘as being dumped’ ( ) and forming the subject of an investigation by the EU institutions.
43.
In this regard, it should be noted at the outset that, unlike the General Court, the Court of Justice has never been called upon to rule on the interpretation of that concept.
44.
Given that that concept derives from WTO law, namely Article 2 of the 1994 Anti-Dumping Agreement, which was transposed into EU law by Article 1 of the basic regulation, it is appropriate to take account of the case-law of the WTO Dispute Settlement Body, of which the WTO Panel is the authority of first instance, particularly since the referring tribunal and the parties cite the reports of that Panel.
ii) Case-law of the General Court
45.
The General Court has held that ‘[t]he basic anti-dumping regulation does not specify exactly how the product or range of products which may be subject to an anti-dumping investigation is to be defined or require an intricate classification of the product’. ( )
46.
According to its settled case-law, ‘the purpose of the definition of the product [under consideration] in an anti-dumping investigation is to aid in drawing up the list of products which will, if necessary, be subject to the imposition of anti-dumping duties. For the purposes of that process, the institutions may take account of a number of factors, such as the physical, technical and chemical characteristics of the products, their use, interchangeability, consumer perception, distribution channels, manufacturing process, costs of production and quality’. ( )
47.
According to the General Court, ‘[i]t necessarily follows that products which are not identical may be grouped together under the same definition of “the product [under consideration]” and, together, be subject to an anti-dumping investigation. On that basis, the applicants’ argument alleging that “the product [under consideration]” can only refer to a single product or to identical products must therefore be rejected’. ( )
48.
It is also settled case-law that, although, ‘in the sphere of measures to protect trade, the [EU] institutions enjoy a wide discretion by reason of the complexity of the economic, political and legal situations which they have to examine’, ( ) it is none the less incumbent on the General Court to ascertain ‘whether the applicants are in a position to show either that the institutions made an error of assessment with regard to the factors which they decided were relevant, or that the application of other, more relevant factors would have required the exclusion of a product from the definition of “the product [under consideration]”’. ( )
49.
None the less, so far as specifically concerns the concept of ‘product under consideration’, the General Court has never accepted ( ) arguments aimed at establishing that the ‘product under consideration’ forming the subject of an investigation must cover only ‘like products’ within the meaning of Article 1(4) of the basic regulation, namely ‘product[s] which [are] identical, that is to say, alike in all respects, to the product under consideration, or in the absence of such product[s], other product[s] which, although not alike in all respects, ha[ve] characteristics closely resembling those of the product under consideration’.
50.
It should also be noted that, in paragraphs 36 to 51 of its judgment in Photo USA Electronic Graphic v Council (T‑394/13, EU:T:2014:964), the General Court rejected the arguments put forward by one of the exporters covered by the contested regulation to the effect that ‘[f]irst, the institutions made a manifest error in their assessment of the factors to be taken into account in deciding that those products should be covered by [the definition of the product under consideration]: the appearance, the end-use and the existence within the European Union of producers of plain polyester coated ceramic mugs. Secondly, if other factors had been taken into account — in these circumstances, physical, technical and chemical characteristics, distribution channels, consumer perception and interchangeability — it would have been clear that such mugs should be excluded from the products concerned’ (see also paragraph 27). However, its rejection of those arguments is being challenged on appeal by the exporter at issue in the pending case of Photo USA Electronic Graphic v Council (C‑31/15 P).
iii) Case-law of the WTO Dispute Settlement Body
51.
According to the case-law of the Court of Justice, ‘having regard to their nature and structure, the WTO Agreement and the agreements and understandings annexed to it are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the [EU] institutions, pursuant to the first paragraph of Article [263 TFEU]’. ( )
52.
However, as the Court of Justice held in paragraph 40 of its judgment in Commission v Rusal Armenal (C‑21/14 P, EU:C:2015:494), ‘in two exceptional situations, which are the result of the EU legislature’s own intention to limit its discretion in the application of the WTO rules, … it is for the Courts of the European Union, if necessary, to review the legality of an EU measure and of the measures adopted for its application in the light of the WTO agreements’.
53.
According to the Court, ‘[t]he first such situation is where the European Union intends to implement a particular obligation assumed in the context of those WTO agreements and the second where the EU act at issue refers explicitly to specific provisions of those agreements’. ( )
54.
In the present case, the exchange of argument and evidence between Portmeirion and the institutions centres on the concept of ‘product under consideration’ that serves to determine the ‘dumped product’ as referred to in Article 1(1) of the basic regulation.
55.
The basic regulation transposes the terms of the 1994 Anti-Dumping Agreement into EU law. As recital 3 in the preamble to that regulation states, ‘[that agreement] contains detailed rules, relating in particular to the calculation of dumping, procedures for initiating and pursuing an investigation, including the establishment and treatment of the facts, the imposition of provisional measures, the imposition and collection of anti-dumping duties, the duration and review of anti-dumping measures and the public disclosure of information relating to anti-dumping investigations. In order to ensure a proper and transparent application of those rules, the language of the agreement should be brought into [EU] legislation as far as possible’.
56.
According to recital 4 in the preamble to the same regulation, ‘[i]n applying the rules it is essential, in order to maintain the balance of rights and obligations which the GATT establishes, that the [European Union] take account of how they are interpreted by the [European Union’s] major trading partners’.
57.
As the Court has already held in connection with a previous version of the basic regulation, namely Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community, ( ) as amended by Council Regulation (EC) No 2331/96 of 2 December 1996, ( )‘[i]t is therefore established that the [European Union] adopted the basic regulation in order to satisfy its obligations arising from the 1994 Anti-dumping [Agreement]’ ( ) and that, by means of Article 1 of that regulation, it intended to implement the particular obligations laid down by Article 2 of that agreement.
58.
To that extent, as is clear from the case-law cited in point 52 of the present Opinion, it is for the Court to review the legality of the contested regulation in the light of Article 2 of the aforementioned agreement.
59.
In this regard, it should be noted that, unlike the Court of Justice, the WTO Panel has often had occasion to consider arguments similar to those put forward by Portemeirion in the present case, which seek to show that the product under consideration must consist of ‘like products’, on the basis of Articles 2.1 and 2.6 of the 1994 Anti-Dumping Agreement. ( )
60.
Indeed, Canada, the Kingdom of Norway and the People’s Republic of China have argued before the Panel that the ‘product under consideration’ covered by the anti-dumping investigation could not consist of a broad range of products not constituting one and the same homogeneous product but had to consist of products similar to each other. ( )
61.
The WTO Panel has never endorsed that argument. It has based its analysis on the finding that the 1994 Anti-Dumping Agreement did not contain any definition of the ‘product under consideration’ ( ) and that the wording of Articles 2.1 and 2.6 of that agreement did not enable it to read into those articles a condition to the effect that the ‘product under consideration’ must consist of ‘like products’. ( )
62.
After all, according to the WTO Panel, ‘[w]hile there might be room for discussion as to whether such an approach [namely that advocated by Canada, the Kingdom of Norway and the People’s Republic of China] might be an appropriate one from a policy perspective, whether to require such an approach is a matter for the Members to address through negotiations. It is not our role as a panel to create obligations which cannot clearly be found in the AD Agreement itself’. ( )
63.
On the basis of that finding, the WTO Panel considers that, ‘while Article 2.1 establishes that a dumping determination is to be made for a single product under consideration, there is no guidance for determining the parameters of that product, and certainly no requirement of internal homogeneity of that product, in that Article’. ( )
64.
In the view of that Panel, ‘even assuming Article 2.6 requires an assessment of likeness with respect to the product under consideration “as a whole” in determining like product, … this would not mean that an assessment of “likeness” between categories of goods comprising the product under consideration is required to delineate the scope of the product under consideration. Merely to say that the product under consideration must be treated “as a whole” in addressing the question of like product does not entail the conclusion that the product under consideration must itself be an internally homogenous product’. ( )
65.
Moreover, the WTO Panel rejected the argument put forward by the Kingdom of Norway to the effect that ‘the absence of limits on the scope of the product under consideration might result in erroneous dumping determinations by investigating authorities’. ( )
66.
In that context, the Kingdom of Norway argued that, ‘if products that are not ‘like’ are treated as the product under consideration in a single investigation, a dumping determination cannot reveal whether some or all of those products are dumped. Norway g[ave], as an example, an investigation in which cars and bicycles are treated as one product under investigation’. ( )
67.
Unpersuaded by that argument, the WTO Panel held that ‘[a]ny grouping of products into a single product under consideration will have repercussions throughout the investigation, and the broader such a grouping is, the more serious those repercussions might be, complicating the investigating authority’s task of collecting and evaluating relevant information and making determinations consistent with the [1994] AD Agreement. Thus, it seem[ed] to [it] that the possibility of an erroneous determination of dumping based on an overly broad product under consideration is remote. That possibility [was] certainly not enough to persuade [it] to read obligations into the [1994] AD Agreement for which [it] can find no basis in the text of the Agreement’. ( )
iv) Application to the present case
68.
In my view, the juxtaposition of the General Court’s case-law and WTO law concerning the concept of ‘product under consideration’ shows there to be a significant difference between the two, inasmuch as, unlike the General Court, the WTO Panel has no power of review over the definition of the ‘product under consideration’ used by the authority responsible for the anti-dumping investigation. That difference exists only in principle, however, since the power of review which the General Court reserves for itself has not yet prompted it, in a specific case, to call into question a definition by the EU institutions of the ‘product under consideration’.
69.
After all, as I indicated in point 48 of this Opinion, while it recognises that the Commission enjoys a wide discretion, the General Court considers itself bound to ascertain ‘whether the applicants are in a position to show either that the institutions made an error of assessment with regard to the factors which they decided were relevant, or that the application of other, more relevant factors would have required the exclusion of a product from the definition of ‘the product [under consideration]’. ( )
70.
The WTO Panel, on the other hand, has never agreed to exercise such a power of review. Unlike the General Court, the WTO Panel considers that the authorities responsible for the anti-dumping investigation have full discretion when it comes to defining the ‘product under consideration’, even in the case of hypothetical examples, described as ‘extreme’, ( ) where those authorities group together cars and bicycles ( ) or apples and tomatoes ( ) within the definition of the ‘product under consideration’.
71.
The WTO Panel considers that the possibility of an erroneous determination of dumping arising as a result of there being no limits on the scope of the ‘product under consideration’ is ‘remote’, ( ) because a ‘mix’ of completely heterogeneous products in the definition of the ‘product under consideration’ would make the work of the investigating authority excessively difficult. The authority therefore takes great care to avoid such a mix.
72.
After all, ‘[a]ny grouping of products into a single product under consideration will have repercussions throughout the investigation, and the broader such a grouping is, the more serious those repercussions might be, complicating the investigating authority’s task of collecting and evaluating relevant information and making determinations consistent with the [1994] AD Agreement’. ( ) For example, ‘this would clearly be of concern with respect to the determination of injury to the domestic industry producing the like product’. ( )
73.
As I see it, where, as in this instance, the European Union has adopted provisions such as Article 1 of the basic regulation in order to discharge a particular obligation assumed within the framework of the WTO, such as Article 2 of the 1994 Anti-Dumping Agreement, the Court must, when reviewing the legality of the EU measure, give to those provisions the meaning that they have in WTO law. The same is true where, as in this instance, the EU measure, namely Article 1 of the basic regulation, uses the same terms as the agreements and memoranda contained in the annexes to the WTO Agreement, such as the 1994 Anti-Dumping Agreement.
74.
Indeed, it would make no sense to impose on the institutions a burden greater than that imposed on the competent authorities under the WTO Agreement, in particular where the wording of the provision at issue, in this instance Article 1 of the basic regulation, contains no indication that the EU legislature intended to depart from the wording of that agreement.
75.
As the Council stated at the hearing, there are no constraints when it comes to defining the ‘product under consideration’ in WTO law or, therefore, in EU law.
76.
Consequently, it is for the investigating authority to define the ‘product under consideration’, the EU courts having no jurisdiction to review whether the institutions made an erroneous assessment of the factors which they deemed relevant when including certain products in the ‘product under consideration’ or whether the application of other, more relevant factors would have required the exclusion of certain products from the definition of the ‘product under consideration’.
77.
Given that, as regards the definition of the ‘product under consideration’ set out in recital 36 in the preamble to the contested regulation, ( ) Portmeirion simply puts forward arguments of the same type as those that were advanced by Canada, the Kingdom of Norway and the People’s Republic of China in the course of the disputes mentioned above and rejected by the Panel, those arguments should be dismissed in their entirety.
78.
I therefore propose that the Court’s answer to the first question should be that the definition of the ‘product under consideration’ used in recital 36 in the preamble to the contested regulation does not adversely affect the validity of that regulation.
2. The second question
79.
By its second question, the referring tribunal seeks to ascertain whether the contested regulation is invalid because it does not contain an adequate statement of reasons as required by Article 296 TFEU.
a) Arguments of the parties
80.
It is clear from the order for reference that, according to Portmeirion, the institutions did not identify or define sufficiently precisely the factors which they considered relevant to the definition of the ‘product under consideration’. This, it claims, constitutes an infringement of Article 296 TFEU.
81.
Portmeirion further submits that the information given in the contested regulation is neither clear nor unambiguous in so far as it does not provide a means of systematically ascertaining whether a given product should or could have been included in the light of the criteria which the institutions considered relevant.
82.
That approach, in so far as it does not enable the interested parties to challenge the institutions’ assessment of the factors which they deem relevant or to argue that other relevant factors could have been taken into account, constitutes, in its view, a failure to fulfil the obligation to state reasons laid down in Article 296 TFEU.
83.
The Council and the Commission take the contrary view that the contested regulation satisfies the requirements of Article 296 TFEU by enabling the persons concerned to ascertain the grounds for the measure adopted and defend their rights and enabling the Courts to exercise their powers of review. After all, the underlying reasons for the definition of the product under consideration were provided both in the provisional regulation and in the contested regulation. In particular, recitals 24, 25, 54 and 55 in the preamble to the provisional regulation and recital 35 in the preamble to the contested regulation clearly illustrate the relevant factors.
84.
According to the Italian Government, there is no doubt that the contested regulation states the reasons on which it is based. The institutions make it clear in that regulation that the various items must be grouped into a single product defined as ‘ceramic tableware and kitchenware’ because of the technical affinity that exists between those items, because they are requested by consumers and distributed by retailers as a whole and because they are all primarily aimed at being in contact with food.
85.
The Commissioners for Her Majesty’s Revenue and Customs consider, as in relation to the first question, that they cannot comment or decide upon the validity of a particular EU regulation as they are not competent to do so and are obliged to apply the contested regulation since it is binding on them.
b) Assessment
86.
In my view, Portmeirion’s arguments alleging infringement of the obligation to state reasons contained in Article 296 TFEU can easily be dismissed inasmuch as those arguments again seek to call into question the definition of the ‘product under consideration’.
87.
Although, according to the case-law of the WTO Dispute Settlement Body analysed in points 51 to 67 of this Opinion, Article 2.1 and Article 2.6 of the 1994 Anti-Dumping Agreement do not impose any particular constraints with respect to the definition of the ‘product under consideration’ inasmuch as the investigating authority is not required to include only similar or homogeneous products in that definition, the institutions are under no obligation to state particular reasons for the factors which they considered relevant to the definition of the ‘product under consideration’. The fact that they have defined the product under consideration in such a way as to make it possible to identify the articles that make up that product and that they have stated the reason why those articles were grouped together should be sufficient to satisfy the conditions laid down in Article 296 TFEU.
88.
In any event, according to settled case-law, ‘[t]he statement of reasons required by Article [296 TFEU] must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent … Court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article [296 TFEU] must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question’. ( )
89.
In the present case, the contested regulation, read in the light of the provisional regulation, does indeed appear to contain a sufficient statement of reasons, in the light of the criteria recalled in the previous point.
90.
After all, as the Commission states in recital 54 in the preamble to the provisional regulation, ‘all types of ceramic tableware and kitchenware, despite the differences in terms of properties and style, have the same basic physical and technical characteristics, i.e. ceramic ware primarily aimed at being in contact with food, they are basically used for the same purposes, and can be regarded as different types of the same product’. ( )
91.
In recital 55 in the preamble to that regulation, the Commission goes on to say that, ‘[i]n addition to the fact that they share the same basic physical and technical characteristics, all those various styles and types are in direct competition and to a very large extent interchangeable. This is clearly illustrated by the fact that there are no clear dividing lines between them, i.e. there is quite some overlapping and competition between different product types and standard buyers do not often make a distinction for instance between porcelain versus non-porcelain goods’.
92.
The substance of that statement of reasons is reiterated in recital 35 in the preamble to the contested regulation, according to which ‘[a]ll types of ceramic tableware and kitchenware can be regarded as different types of the same product. Therefore, the claim made after provisional disclosure and again after final disclosure that the investigation covers a large range of like products and that, as a result, it would be necessary to conduct separate standing, dumping, injury, causation and Union interest analyses for each product segment, is found to be unfounded. One party that claimed that the product scope was too broad brought forward a comparison of products with different levels of decoration, but its statements as regards end-use (for the garden and children in one case, for decoration in the other case) are disputable because there is no clear-cut [demarcation] and those statements can rather be seen as a confirmation of the point made in recital (55) of the provisional Regulation’. ( )
93.
I consequently propose that the Court’s answer to the second question should be that the statement of reasons contained in the contested regulation satisfies the conditions laid down in Article 296 TFEU.
VI – Conclusion
94.
I therefore propose that the Court’s answer to the First-Tier Tribunal (Tax Chamber) should be that the examination of the questions which it has raised has disclosed no factor such as to affect adversely the validity of Council Implementing Regulation (EU) No 412/2013 of 13 May 2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of ceramic tableware and kitchenware originating in the People’s Republic of China.
( ) Original language: French.
( ) OJ 2013 L 131, p. 1.
( ) See the judgment in Photo USA Electronic Graphic v Council (T‑394/13, EU:T:2014:964).
( ) See Photo USA Electronic Graphic v Council (C‑31/15 P).
( ) OJ 1992 L 302, p. 1.
( ) OJ 2009 L 343, p. 51.
( ) OJ 2012 L 318, p. 28. See also the corrigendum to that regulation (OJ 2013 L 36, p. 11).
( ) The relevant EU acts use the [French] terms ‘produit considéré’ (product under consideration) and ‘produit concerné’ (product concerned) interchangeably. The English-language versions of those acts use only the term ‘product concerned’. In the law of the World Trade Organisation (WTO), the term used is ‘product under consideration’. For the sake of consistency and uniformity, I shall use only the term ‘product under consideration’ in the present Opinion.
( ) OJ 1994 L 336, p. 103.
( ) OJ 1994 L 336, p. 1.
( ) Judgment in TMK Europe (C‑143/14, EU:C:2015:236, paragraph 18). See also, to this effect, the judgment in Nachi Europe (C‑239/99, EU:C:2001:101, paragraph 37 and the case-law cited).
( ) Judgment in TMK Europe (C‑143/14, EU:C:2015:236, paragraph 19).
( ) See the judgments in Allied Corporation and Others v Commission (239/82 and 275/82, EU:C:1984:68, paragraphs 11 and 12); Nachi Europe (C‑239/99, EU:C:2001:101, paragraph 21); Valimar (C‑374/12, EU:C:2014:2231, paragraph 30); and TMK Europe (C‑143/14, EU:C:2015:236, paragraph 19).
( ) See the judgments in Nashua Corporationand Others v Commission and Council (C‑133/87 and C‑150/87, EU:C:1990:115, paragraph 15); Gestetner Holdings v Council and Commission (C‑156/87, EU:C:1990:116, paragraph 18); Valimar (C‑374/12, EU:C:2014:2231, paragraph 31); and TMK Europe (C‑143/14, EU:C:2015:236, paragraph 20).
( ) See the judgments in Neotype Techmashexport v Commission and Council (C‑305/86 and C‑160/87, EU:C:1990:295, paragraphs 19 and 20); Valimar (C‑374/12, EU:C:2014:2231, paragraph 32); and TMK Europe (C‑143/14, EU:C:2015:236, paragraph 21).
( ) See the judgments in Extramet Industrie v Council (C‑358/89, EU:C:1991:214, paragraph 16); Valimar (C‑374/12, EU:C:2014:2231, paragraph 33); and TMK Europe (C‑143/14, EU:C:2015:236, paragraph 22).
( ) See Article 1(2) of the basic regulation.
( ) Judgment in Shanghai Bicycle v Council (T‑170/94, EU:T:1997:134, paragraph 61). See also, to this effect, the judgment in Photo USA Electronic Graphic v Council (T‑394/13, EU:T:2014:964, paragraph 28).
( ) Judgment in Gem-Year andJinn-Well Auto-Parts (Zhejiang) v Council (T‑172/09, EU:T:2012:532, paragraph 59). See also, to this effect, the judgments in Brosmann Footwear (HK) and Others v Council (T‑401/06, EU:T:2010:67, paragraph 131); Whirlpool Europe v Council (T‑314/06, EU:T:2010:390, paragraph 138); EWRIA and Others v Commission (T‑369/08, EU:T:2010:549, paragraph 82); and Photo USA Electronic Graphic v Council (T‑394/13, EU:T:2014:964, paragraph 29).
( ) Judgment in Gem-Year andJinn-Well Auto-Parts (Zhejiang) v Council (T‑172/09, EU:T:2012:532, paragraph 60). See also, to this effect, the judgment in Photo USA Electronic Graphic v Council (T‑394/13, EU:T:2014:964, paragraph 30).
( ) Judgment in Gem-Year andJinn-Well Auto-Parts (Zhejiang) v Council (T‑172/09, EU:T:2012:532, paragraph 62).
( ) Ibidem (paragraph 61). See also, to this effect, the judgments in Brosmann Footwear (HK) and Others v Council (T‑401/06, EU:T:2010:67, paragraph 132); and EWRIAand Others v Commission (T‑369/08, EU:T:2010:549, paragraph 83).
( ) See the judgment in Brosmann Footwear (HK) and Others v Council (T‑401/06, EU:T:2010:67, paragraph 133). See also, to this effect, the judgment in Gem-Year andJinn-Well Auto-Parts (Zhejiang) v Council (T‑172/09, EU:T:2012:532, paragraphs 66 and 67).
( ) Judgment in Petrotub and Republica v Council (C‑76/00 P, EU:C:2003:4, paragraph 53). See also, to this effect, the judgments in Portugal v Council (C‑149/96, EU:C:1999:574, paragraph 47); Van Parys (C‑377/02, EU:C:2005:121, paragraph 39); LVP (C‑306/13, EU:C:2014:2465, paragraph 44); and Commission v Rusal Armenal (C‑21/14 P, EU:C:2015:494, paragraph 38), as well as the order in OGT Fruchthandelsgesellschaft (C‑307/99, EU:C:2001:228, paragraph 24).
( ) Judgment in Commission v Rusal Armenal (C‑21/14 P, EU:C:2015:494, paragraph 41). See also, to this effect, the judgments in Fediol v Commission (70/87, EU:C:1989:254, paragraph 19); Nakajima v Council (C‑69/89, EU:C:1991:186, paragraph 31); Portugal v Council (C‑149/96, EU:C:1999:574, paragraph 49); and Petrotub and Republica v Council (C‑76/00 P, EU:C:2003:4, paragraph 54).
( ) OJ 1996 L 56, p. 1.
( ) OJ 1996 L 317, p. 1.
( ) Judgment in Petrotub and Republica v Council (C‑76/00 P, EU:C:2003:4, paragraph 56).
( ) See disputes DS264 ‘United States — Final Dumping Determination on Softwood Lumber from Canada’, DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’, and DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’. The WTO Panel reports in these disputes are available on the WTO website at https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm.
( ) See the WTO Panel report of 13 April 2004 in dispute DS264 ‘United States — Final Dumping Determination on Softwood Lumber from Canada’ (paragraph 7.155). This report was only partially reversed by the WTO Appellate Body and, in any event, not on this point (see paragraphs 99 and 183 of the Appellate Body Report of 11 August 2004, available on the WTO website at https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds264_e.htm). See also, to this effect, the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’, paragraph 7.44, and the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraphs 7.246 and 7.247). This report was only partially reversed by the WTO Appellate Body and, in any event, not on this point (see paragraph 624 of the Appellate Body Report of 11 July 2011, available on the WTO website at https://www.wto.org/english/tratop_e/dispu_e/ cases_e/ds397_e.htm).
( ) See the WTO Panel report of 13 April 2004 in dispute DS264 ‘United States — Final Dumping Determination on Softwood Lumber from Canada’ (paragraph 7.156); the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’ (paragraph 7.43); and the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.271).
( ) See the WTO Panel report of 13 April 2004 in dispute DS264 ‘United States — Final Dumping Determination on Softwood Lumber from Canada’ (paragraph 7.157); the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’ (paragraph 7.48); the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.271).
( ) See the WTO Panel report of 13 April 2004 in dispute DS264 ‘United States — Final Dumping Determination on Softwood Lumber from Canada’ (paragraph 7.157).
( ) See the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’ (paragraph 7.49).
( ) Ibidem (paragraph 7.53).
( ) Ibidem (paragraph 7.58).
( ) Idem.
( ) Ibidem (paragraph 7.58). See also, to this effect, the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.271).
( ) Judgment in Gem-Year and Jinn-Well Auto-Parts (Zhejiang) v Council (T‑172/09, EU:T:2012:532, paragraph 61). See also, to this effect, the judgments in Brosmann Footwear (HK) and Others v Council (T‑401/06, EU:T:2010:67, paragraph 132), and EWRIA and Others v Commission (T‑369/08, EU:T:2010:549, paragraph 83).
( ) See the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’ (paragraph 7.58).
( ) Idem.
( ) See the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.269).
( ) See the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’ (paragraph 7.58), and the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.270).
( ) See the WTO Panel report of 16 November 2007 in dispute DS337 ‘European Communities — Anti-Dumping Measure on Farmed Salmon from Norway’ (paragraph 7.58). See also to this effect the WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.270).
( ) WTO Panel report of 3 December 2010 in dispute DS397 ‘European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China’ (paragraph 7.270).
( )
( ) Judgment in Nuova Agricast (C‑390/06, EU:C:2008:224, paragraph 79). See also, to this effect, the judgments in Commission v Sytraval and Brink’s France (C‑367/95 P, EU:C:1998:154, paragraph 63); Atzeni and Others (C‑346/03 and C‑529/03, EU:C:2006:130, paragraph 73); Sison v Council (C‑266/05 P, EU:C:2007:75, paragraph 80); and Banco Privado Português and Massa Insolvente do Banco Privado Português (C‑667/13, EU:C:2015:151, paragraph 44).
( ) Emphasis added.
( ) Emphasis added. |
OPINION OF ADVOCATE GENERAL
SZPUNAR
delivered on 10 February 2015 ( )
Case C‑76/14
Mihai Manea
v
Instituția Prefectului — județul Brașov — Serviciul public comunitar regim permise de conducere și înmatriculare a vehiculelor
(Request for a preliminary ruling from the Curtea de Apel Braşov (Romania))
‛Free movement of goods — Tax on pollutant emissions levied on motor vehicles on their first registration or the first transfer of the right of ownership — Exemption for motor vehicles subject to taxes previously in force — Prohibition of discriminatory internal taxation within the meaning of Article 110 TFEU — Non-discrimination against second-hand motor vehicles imported from other Member States in favour of similar national vehicles’
Introduction — history and legal framework
1.
The issue of the taxation of motor vehicles, including, in particular, second-hand vehicles, is ever present in the case-law of the Court. ( ) In recent years the Romanian scheme of a single-payment registration tax has occupied an important place in the case-law concerning this matter. The present case concerns the provisions which — following a number of judgments declaring this scheme incompatible with EU law — are intended finally to remove that incompatibility.
2.
The Republic of Romania acceded to the European Union on 1 January 2007. A special tax on passenger cars and motor vehicles, established by Legea nr. 343/2006 din 17 iulie 2006 pentru modificarea şi completarea Legii nr. 571/2003 privind Codul fiscal (Law No 343/2006 of 17 July 2006 amending and complementing Law No 571/2003 on the Tax Code; ‘Law No 343/2006’) entered into force on the same date. ( ) From 1 July 2008 that tax was replaced by the tax on pollution by motor vehicles established by Ordonanţa de urgenţă a Guvernului nr. 50/2008 din 21 aprilie 2008 pentru instituirea taxei pe poluare pentru autovehicule (Government Emergency Order No 50/2008 of 21 April 2008 introducing a tax on pollution by motor vehicles; ‘OUG 50/2008’). ( ) The tax liability under both those acts arose when a vehicle was first registered on the territory of Romania.
3.
As a result of a Court judgment, ( ) the tax established by OUG 50/2008 was declared contrary to Article 110 TFEU. The Court ruled that the tax levied solely on first registration of a motor vehicle on national territory, and therefore — in relation to second-hand vehicles — solely on vehicles imported from abroad, discourages the purchase of second-hand vehicles from other Member States, without discouraging the purchase of second-hand vehicles of the same age and condition on the domestic market. ( ) Subsequently, the Court repeatedly upheld that view in relation to the provisions of OUG 50/2008, in its original version or after cosmetic amendments. ( )
4.
On 13 January 2012 OUG 50/2008 was replaced by Legea nr. 9/2012 din 6 ianuarie 2012 privind taxa pentru emisiile poluante provenite de la autovehicule (Law No 9/2012 of 6 January 2012 on the tax on pollutant emissions from motor vehicles; ‘Law No 9/2012’). The tax established by that law was also linked to the first registration of a motor vehicle on the territory of Romania. However, the law contained, in addition, an Article 4(2), under which:
‘Liability to pay the tax shall also arise upon the first transfer in Romania of the ownership of a second-hand motor vehicle, in respect of which neither the special tax on passenger vehicles and motor vehicles provided for in Law No 571/2003, as subsequently amended and supplemented [including by Law No 343/2006], nor the tax on pollutant emissions from motor vehicles [that is to say, the tax laid down by OUG 50/2008] has been paid, and which does not fall within the category of vehicles excluded or exempted from the payment of those taxes, under the law in force at the time of its registration.’
5.
In accordance with Ordonanţa de urgenţă a Guvernului nr. 1/2012 din 30 ianuarie 2012 pentru suspendarea aplicării unor dispoziţii ale Legii nr. 9/2012 privind taxa pentru emisiile poluante provenite de la autovehicule, precum şi pentru restituirea taxei achitate în conformitate cu prevederile articolului 4 alineatul (2) din lege (Government Emergency Order No 1/2012 of 30 January 2012 on suspending the application of certain provisions of Law No 9/2012 and refunding tax paid in accordance with Article 4(2) of that law), ( ) application of Article 4(2) of Law No 9/2012 was suspended from 31 January 2012 until 1 January 2013, and amounts of tax already paid under that provision were refundable. Therefore, up until 1 January 2013 tax levied under Law No 9/2012 remained contrary to Article 110 TFEU, as confirmed by the subsequent case-law of the Court. ( )
6.
Law No 9/2012 was in turn replaced on 15 March 2013 by Ordonanţa de urgenţă a Guvernului nr. 9/2013 din 19 februarie 2013 privind timbrul de mediu pentru autovehicule (Government Emergency Order No 9/2013 of 19 February 2013 establishing an environmental duty on motor vehicles; ‘OUG 9/2013’). ( ) Article 4(2) of Law No 9/2012 was thus applied only from 1 January to 14 March 2013. The facts under consideration in the main proceedings also occurred within that period. Therefore, the legal position under Law No 9/2012, having regard to Article 4(2), is the subject of the analysis in the present case.
Facts and procedure
7.
Mihai Manea, the applicant in the main proceedings, asked the Instituția Prefectului — județul Brașov — Serviciul public comunitar regim permise de conducere și înmatriculare a vehiculelor (the competent authority as regards the registration of vehicles in Brașov (Romania)), the defendant in the main proceedings, to register a second-hand motor vehicle which he had purchased in Spain. By letter of 5 March 2013 that authority demanded payment of the tax provided for in Law No 9/2012. Mihai Manea brought an action before the Tribunalul Brașov (Court of First Instance, Brașov), seeking registration of the vehicle without an obligation to pay the abovementioned tax which, in his opinion, is contrary to EU law. After the action had been dismissed, the applicant lodged an appeal with the Curtea de Apel Brașov (Court of Appeal, Brașov), which decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Having regard to the provisions of Law No 9/2012 and to the subject of the tax provided for under that law, must Article 110 TFEU be interpreted as precluding a Member State of the European Union from establishing a tax on pollutant emissions applicable to all foreign motor vehicles on their registration in that Member State, but to national motor-vehicles on the transfer of ownership of such vehicles, except where such a tax or a similar tax has already been paid?
(2)
Having regard to the provisions of Law No 9/2012 and to the subject of the tax provided for under that law, must Article 110 TFEU be interpreted as precluding a Member State of the European Union from establishing a tax on pollutant emissions which is applicable, in the case of all foreign motor vehicles, on their registration in that Member State, but which, in the case of national motor vehicles, is due only on the transfer of ownership of such vehicles, the result being that a foreign vehicle cannot be used unless the tax is paid, but a national vehicle can be used for an unlimited time without the tax being paid, until the ownership of that vehicle is transferred, if such a transfer takes place?’
Analysis
8.
By those questions, which should be examined together, the referring court asks in essence whether Article 110 TFEU precludes a Member State from establishing a single-payment tax on motor vehicles, levied on the first registration of a vehicle on the territory of that State and on the first transfer of ownership of an already registered vehicle, counting from the date on which that tax is established, with an exemption for vehicles on which a similar tax has already been paid in the past, where vehicles already registered on the territory of that State are not subject to the new tax, provided that ownership of those vehicles is not transferred.
9.
To answer that question, it is necessary to clarify the following matters: first, the possibility of establishing a tax such as the Romanian tax under consideration in the main proceedings, including the question of the absence of taxation of motor vehicles for which there is no change of ownership; secondly, the possibility of exempting from it vehicles on which a similar tax previously in force has already been paid; and, thirdly, the possibility of applying such an exemption in the case of the Romanian taxes previously in force which have been declared incompatible with EU law.
Possibility of establishing a single-payment registration tax on motor vehicles
10.
Setting aside the issue of the exemption of vehicles on which a similar tax has already been paid in the past, the design of the tax established in Romania by Law No 9/2012, in the version applicable in the main proceedings, is quite simple: the tax is due as a single payment when the name of the vehicle owner is entered in the registration document for the first time after the tax enters into force. ( ) In that respect it is irrelevant whether or not the vehicle was already registered previously or whether that registration took place in Romania or another State.
11.
In establishing the tax thus designed, Romania intended to remove the incompatibility with Article 110 TFEU of the tax in force under OUG 50/2008. That incompatibility was due to the fact that the tax was levied solely on the first registration of a motor vehicle in Romania since, in the case of second-hand vehicles, it was imposed on vehicles imported from other Member States but not on vehicles already on the domestic market. ( ) However, the tax established by Law No 9/2012 is imposed as a single payment on every motor vehicle which, following its purchase, is registered in the name of a new owner.
12.
Such a design of tax does not appear to me to give rise to uncertainty from the point of view of Article 110 TFEU. According to settled case-law, Article 110 TFEU does not prevent a Member State from introducing new taxes or from changing the rate or basis of assessment of existing taxes where they are based on objective criteria and do not result in discrimination against goods from other Member States. ( ) In the case of a tax imposed solely on vehicles imported from abroad, the discrimination arises from the fact that the purchaser of such a vehicle must pay the tax in addition to the price, whereas if he buys the same national vehicle, he pays only its price. Applying that tax also to national vehicles eliminates that discriminatory effect.
13.
In the Court’s case-law a doctrine supplementing the principle of fiscal non-discrimination against goods from other Member States has been developed in relation to second-hand motor vehicles. According to that doctrine, a tax imposed on second-hand vehicles imported from other Member States is not contrary to Article 110 TFEU, provided that its amount does not exceed the residual amount of a similar tax incorporated into the value of second-hand vehicles already present on the national market. ( )
14.
The Court has not laid down, in a mandatory manner, the method for calculating the tax on motor vehicles. However, that method must take account of the drop in the value of the vehicle together with its age and condition in such a way that the amount of the tax levied on second-hand vehicles imported from other Member States does not exceed the abovementioned residual amount of the tax incorporated into the market value of national motor vehicles. ( )
15.
As regards the tax established by OUG 50/2008, the Court carried out a careful examination of it and found that it satisfied the above criterion. ( ) Since the rules for calculating the tax established by Law No 9/2012, laid down in Articles 6 and 9, appear to be close to those in force under OUG 50/2008, there is a high probability that they will also satisfy that condition. However, that is ultimately for the referring court to determine.
16.
The issue, raised in the second question referred, of the existence of motor vehicles registered in Romania which are not subject to that tax where there is no change of owner does not appear to me to change that conclusion. First, as the Commission rightly observes in its observations, it is not a tax on use of the motor vehicle but on registration and indirectly on purchase. Secondly, according to settled case-law, within the system of the Treaty Article 110 TFEU supplements the provisions on the abolition of customs duties and charges having equivalent effect. Its aim is to ensure free movement of goods between the Member States in normal conditions of competition by the elimination of all forms of protection which may result from the application of internal taxation that discriminate against products from other Member States ( ). A second-hand vehicle constitutes goods only if it is offered for sale. Therefore, the lack of taxation of motor vehicles which are not traded cannot give rise to discrimination contrary to Article 110 TFEU.
17.
Finally, it should be recalled that the Court recently gave a judgment which may suggest that the analysis of the rate, basis of taxation and method of calculation of the tax may prove to be insufficient in certain situations. ( ) It may be necessary to try and find on the national market a motor vehicle with characteristics closest to those of the motor vehicle subject to proceedings and compare the amount of tax payable on that second vehicle with the residual amount of tax incorporated into the value of the first. However, that judgment concerned the specific situation of a Netherlands tax where the basis of taxation is calculated on the basis of the list price, reduced in accordance with the level of depreciation of the motor vehicle in relation to second-hand vehicles. ( ) I do not consider that the findings made in that judgment can be applied more generally, in particular in relation to taxes with a different design from the Netherlands tax under consideration in that case. Finally, the Court in any event declared the Netherlands tax contrary to Article 110 TFEU on account of the change made to the method of calculating it — in that case an element based on CO2 emissions was added to the element based on the value of the vehicle, with the result that the tax levied on vehicles imported from other Member States after that change inevitably exceeded the residual amount of tax incorporated into the value of similar vehicles registered in the Netherlands before the change. ( ) Therefore, that judgment relates to a situation where the Member State increases a tax already in force, giving rise to discrimination against second-hand vehicles imported from other Member States.
18.
I am consequently of the view that in principle a single-payment tax on motor vehicles, levied on their first registration on the territory of the Member State establishing that tax or on the first transfer of ownership of a vehicle already registered, counting from the date on which that tax is established, is not contrary to Article 110 TFEU, provided that it satisfies the criterion referred to at point 14 of this Opinion.
Possibility of exempting from the tax motor vehicles on which a similar tax in force in the past has already been paid
19.
In establishing the new tax levied on the registration of motor vehicles, Article 4(2) of Law No 9/2012 at the same time exempts from that tax motor vehicles on which a tax previously in force has already been paid, in other words in accordance with Law No 343/2006 and OUG 50/2008. According to the Romanian Government’s clarifications contained in the observations submitted in this case, the exemption is intended to prevent double taxation of the same goods. The question is whether or not that exemption gives rise to further incompatibility of the Romanian tax with Article 110 TFEU.
20.
That exemption means that not all second-hand motor vehicles sold on the national market are covered by the new tax, but in principle all motor vehicles imported from other Member States will be subject to it. However, the residual amount of the tax previously in force will be incorporated into the value of the motor vehicles exempted from the new tax. Therefore, the condition for permitting such an exemption is analogous to that referred to in point 14 — the amount of the new tax on motor vehicles imported from other Member States cannot exceed that residual amount of the earlier tax incorporated into the value of similar national vehicles.
21.
Therefore, when establishing the tax referred to in point 18 of this Opinion, the Member State may exempt from it motor vehicles on which a tax previously in force has already been paid, provided that the amount of the new tax levied on second-hand motor vehicles imported from other Member States does not exceed the residual amount of the earlier tax incorporated into the market value of motor vehicles.
22.
Since, as I have pointed out, the method of calculating the tax established by Law No 9/2012 is very close to the method of calculating the tax in force under OUG 50/2008, and also the earlier tax stemming from Law No 343/2006, and takes due account of the depreciation of the motor vehicle together with its age and condition, that condition would appear to be satisfied in this instance.
Possibility of applying the exemption in the case of Romanian tax on motor vehicles
23.
It is also necessary to consider whether and to what extent the rule referred to in point 21 of this Opinion can be applied in the specific case of the Romanian tax on motor vehicles.
24.
As I stated in the introduction, the provisions of Law No 9/2012 establishing the tax at issue in the present case provide for an exemption from that tax for motor vehicles on which the tax in force under Law No 343/2006 or OUG 50/2008 has already been paid.
25.
As a result of the Tatu judgment, which was confirmed by subsequent judgments, ( ) the tax established by OUG 50/2008 was regarded as contrary to Article 110 TFEU in that it discriminated against second-hand motor vehicles imported from other Member States in favour of similar national vehicles.
26.
The tax established by Law No 343/2006 has not formed the subject-matter of any reference for a preliminary ruling. However, it should be borne in mind that in a preliminary ruling procedure the Court does not assess the consistency with EU law of specific provisions of the national law of the Member States, but merely provides an interpretation of EU law which the national court can then use as a basis in ruling on its consistency or otherwise. It would appear that the tax established by Law No 343/2006 had the same discriminatory character as was found in relation to the tax established by OUG 50/2008. In that case the Romanian courts should also declare it contrary to Article 110 TFEU on the basis of the Tatu judgment and previous case-law.
27.
It is settled case-law that charges levied in breach of rules of EU law must be refunded with interest. That obligation is the consequence and complement of the rights conferred on individuals by the provisions of EU law prohibiting such taxes, as interpreted by the Court. ( )
28.
Exempting a motor vehicle from a new tax on the basis that a tax previously in force and subsequently declared incompatible with EU law has already been paid on that vehicle does not constitute a correct means of fulfilling that obligation. Those liable for those two taxes are two different persons. The exemption is enjoyed by the purchaser of the motor vehicle who is exempted from the obligation to pay the tax on registering the vehicle in his name, but the person entitled to refund of the previous tax incompatible with EU law is the person who paid it, that is to say, the current seller of the vehicle or one of the previous owners, where the vehicle has already been traded between the date on which the earlier tax was paid and the date on which the new tax entered into force. Therefore, even if the gain to the national treasury from a tax incompatible with EU law were equalised in that way, the benefit would not fall to the person entitled to obtain a refund of that tax but rather to a third person. The person entitled recovers at most, in the sale price, the residual amount incorporated into the value of the motor vehicle, which, however, will rarely be equal to the amount of that tax which is actually paid, and that amount will certainly not include the interest owed.
29.
Consequently, that mechanism for reimbursing tax levied in breach of EU law, by means of an exemption from the new tax, also does not ensure the neutrality of the new tax, as required by Article 110 TFEU. Since the obligation to refund the tax has not been satisfied, the taxable person remains entitled to obtain that refund, and on selling the motor vehicle can thus ask for a lower price which does not take account of the tax paid previously. Therefore, it cannot be held that any residual amount of that tax is incorporated into the value of the vehicle. Vehicles imported from abroad on which the new tax is always levied, since by definition they are not covered by the exemption, are thus automatically at a competitive disadvantage in comparison with national vehicles on which the earlier tax incompatible with EU law has been paid.
30.
Therefore, I consider that, while the Member States do in principle have the right to apply the kind of exemption referred to in point 21 of this Opinion, such an exemption cannot be conferred by virtue of payment of a tax previously in force which was subsequently declared incompatible with EU law.
31.
In my view that means, in the specific Romanian case under consideration in the main proceedings, that Article 110 TFEU precludes the exemption, provided for in Article 4(2) of Law No 9/2012, from the tax laid down in that provision of motor vehicles on which the tax in force previously under Law No 343/2006 and OUG 50/2008 has already been paid. ( )
32.
That finding is not altered by the fact that in Tatu the Court held that the tax in force under OUG 50/2008 does not give rise to discrimination between second-hand vehicles imported from other Member States and vehicles already present on the Romanian market after previous importation and payment of that tax. ( ) That finding was made before the Court went on in the same judgment to compare the situation of vehicles imported from other Member States with that of vehicles on which that tax had never been paid (vehicles registered in Romanian before it was established) and found that it discriminated against second-hand vehicles in general. ( )
33.
However, it should be borne in mind that the case-law of the Court, as a result of which OUG 50/2008 has been found to be incompatible with EU law and which, — as I stated at point 26 — also applies to the tax established in Law No 343/2006, precisely concerned second-hand vehicles. In that case-law the Court ruled that Article 110 TFEU must be interpreted as precluding a Member State from introducing a tax levied on motor vehicles on their first registration in that Member State if that tax is arranged in such a way that it discourages the placing in circulation in that Member State of second-hand vehicles purchased in other Member States without discouraging the purchase of second-hand vehicles of the same age and condition on the domestic market. ( ) From that point of view, the situation of new vehicles is different since a new vehicle is by definition always registered for the first time, ( ) regardless of whether it was manufactured in the State in which that registration takes place or was imported from abroad. A tax levied on first registration in a specific State thus does not have the same discriminatory character in relation to new vehicles as it has in relation to second-hand vehicles.
34.
Consequently, I do not see why the taxes levied pursuant to Law No 343/2006 or OUG 50/2008 on the registration of new motor vehicles should be regarded as incompatible with EU law. Therefore, the exemption provided for in Article 4(2) of Law No 9/2012 is not contrary to Article 110 TFEU in so far as it concerns vehicles registered in Romania as new, naturally subject to the condition referred to at the end of point 21.
Conclusion
35.
In the light of the foregoing considerations, I propose that the Court should answer the questions referred by the Curtea de Apel Braşov as follows:
(1)
Article 110 TFEU must be interpreted as not precluding a Member State from establishing a single-payment tax on motor vehicles levied on the first registration of a vehicle on the territory of the Member State establishing that tax and on the first transfer of ownership of a vehicle already registered in that State, counting from the date on which that tax was established. That tax must be designed in such a way that the amount of the tax levied on second-hand vehicles imported from other Member States does not exceed the residual amount of the tax incorporated into the market value of national vehicles.
(2)
Nor does Article 110 TFEU preclude a Member State, when establishing such a tax, from exempting from it motor vehicles on which a tax previously in force has already been paid, provided that the amount of the new tax levied on second-hand vehicles imported from other Member States does not exceed the residual amount of the earlier tax incorporated into the market value of national vehicles.
(3)
That exemption cannot be conferred by virtue of payment of a tax previously in force which was not compatible with EU law.
( ) Original language: Polish.
( ) I recall just some of the judgments associated with the issues under consideration in the present case: judgments in Commission v Denmark (C‑47/88, EU:C:1990:449); Nunes Tadeu (C‑345/93, EU:C:1995:66); De Danske Bilimportører (C‑383/01, EU:C:2003:352); Nádasdi and Németh (C‑290/05 and C‑333/05, EU:C:2006:652); Brzeziński (C‑313/05, EU:C:2007:33); and, recently, X (C‑437/12, EU:C:2013:857).
( ) Monitorul Oficial al României, Partea I, nr. 662.
( ) Monitorul Oficial al României, Partea I, nr. 327.
( ) Judgment in Tatu (C‑402/09, EU:C:2011:219).
( ) Ibid., operative part.
( ) Judgment in Nisipeanu (C‑263/10, EU:C:2011:466) and a number of subsequent decisions.
( ) Monitorul Oficial al României, Partea I, nr. 97.
( ) Order in Câmpean v Administraţia Finanţelor Publice a Municipiului Alexandria (C‑97/13 and C‑214/13, EU:C:2014:229).
( ) Monitorul Oficial al României, Partea I, nr. 119.
( ) In that regard the Romanian legislature draws a distinction between ‘registration’ in relation to motor vehicles never registered in Romania and ‘transfer of ownership’ in relation to motor vehicles already registered in that State (see Article 2(h) and (i) of Law No 9/2012).
( ) Judgment in Tatu (C‑402/09, EU:C:2011:219, paragraphs 48 to 61).
( ) See, in particular, judgments in Nunes Tadeu (C‑345/93, EU:C:1995:66, paragraph 11) and Nádasdi and Németh (C‑290/05 and C‑333/05, EU:C:2006:652, paragraphs 49 and 51).
( ) See, in particular, judgments in Commission v Denmark (C‑47/88, EU:C:1990:449, paragraph 20); Brzeziński (C‑313/05, EU:C:2007:33, paragraph 2 of the operative part); and Tatu (C‑402/09, EU:C:2011:219, paragraph 39).
( ) See, in particular, judgment in Tatu (C‑402/09, EU:C:2011:219, paragraphs 40 to 42 and the case-law cited).
( ) Ibid., paragraphs 43 to 47.
( ) Judgment in Nádasdi and Németh (C‑290/05 and C‑333/05, EU:C:2006:652, paragraph 45 and the case-law cited).
( ) Judgment in X (C‑437/12, EU:C:2013:857).
( ) Ibid., paragraphs 3 to 10 and paragraph 1 of the operative part.
( ) Ibid., paragraphs 39 to 41.
( ) See point 3 of this Opinion.
( ) See, in particular, judgments in Littlewoods Retail and Others (C‑591/10, EU:C:2012:478, paragraphs 24 to 26) and, in relation to the tax established by OUG 50/2008, Nicula (C‑331/13, EU:C:2014:2285, paragraphs 27 to 29).
( ) A distinction must be drawn between these rules and those under consideration in the judgment in Nicula (C‑331/13, EU:C:2014:2285). That judgment concerned the mechanism for refunding a tax incompatible with EU law to a person who had paid that tax provided for in a later legal act, namely OUG 9/2013 (see point 6 of this Opinion). However, as I explained above, the present case concerns the exemption of the new owner of a motor vehicle on the basis of a tax paid on that vehicle by the previous owner.
( ) Judgment in Tatu (C‑402/09, EU:C:2011:219, paragraphs 43 to 47). The Court held that the mechanism for calculating the tax took sufficient account of the motor vehicle’s depreciation, so that its amount did not exceed the residual amount of that tax incorporated into the value of similar vehicles on which that tax had been paid previously. See point 15 of this Opinion.
( ) Judgment in Tatu (C‑402/09, EU:C:2011:219, paragraphs 52 to 61).
( ) Ibid., operative part (emphasis added).
( ) A vehicle which has not yet been registered is regarded as new. |
OPINION OF ADVOCATE GENERAL
CRUZ VILLALÓN
delivered on 6 October 2015 ( )
Case C‑308/14
European Commissionv
United Kingdom of Great Britain and Northern Ireland
(Action for failure to fulfil obligations brought by the Commission against the United Kingdom of Great Britain and Northern Ireland)
‛Failure of a Member State to fulfil obligations — Coordination of social security systems — Regulation (EC) No 883/2004 — Article 4 — Equal treatment with regard to access to social security benefits — Family allowances — Right of residence — Directive 2004/38/EC — National legislation denying child benefit and child tax credit to persons not having a right of residence in the Member State in question’
1.
The Commission claims that the United Kingdom has failed to fulfil its obligations under Regulation No 883/2004 on the coordination of social security systems, ( ) by imposing a ‘right of residence test’ on persons claiming certain social benefits, on the grounds that that test is both inconsistent with the meaning of the abovementioned regulation and discriminatory.
2.
The Court is thus faced once again, as it was in the recent cases of Brey, ( )Dano ( ) and Alimanovic, ( ) with the question of the relationship between Regulation No 883/2004 and Directive 2004/38. ( ) Like its predecessors, this case, too, raises the question whether it is legitimate to take into account the lawfulness of residence in the abovementioned context of investigating claims for social benefits, albeit with significant differences. So, whereas the previous requests for a preliminary ruling were concerned with the interpretation of Directive 2004/38 and touched to some extent on Regulation No 883/2004, the issue here is compliance with that regulation and, in particular, whether the application of the directive has any relevance at all in the circumstances of the present case.
3.
The — ultimately predominant — allegation of discriminatory treatment directed against the United Kingdom will, in essence, call for a basic distinction to be drawn between two questions: on the one hand, the question of principle as to whether or not the application of the aforementioned regulation should place ‘in abeyance’ the provisions of Directive 2004/38 that set out the framework for determining the lawfulness of a Union citizen’s residence in a Member State other than his own; on the other hand, the intrinsically different question of the circumstances and conditions in which any checking of the situation of lawful residence is compatible with the prohibition of discrimination laid down in Article 4 of Regulation No 883/2004.
I – Legal context
A – EU law
1. Regulation No 883/2004
4.
According to Article 1(j) and (z) of Regulation No 883/2004:
‘For the purposes of this Regulation:
…
(j)
“residence” means the place where a person habitually resides;
…
(z)
“family benefit” means all benefits in kind or in cash intended to meet family expenses, excluding advances of maintenance payments and special childbirth and adoption allowance mentioned in Annex I.’
5.
According to Article 3(1)(j) of that regulation:
‘1. This Regulation shall apply to all legislation concerning the following branches of social security:
…
(j)
family benefits.’
6.
Article 4 of that regulation, entitled ‘Equality of treatment’, provides that:
‘Unless otherwise provided for by this Regulation, persons to whom this Regulation applies shall enjoy the same benefits and be subject to the same obligations under the legislation of any Member State as the nationals thereof.’
7.
Article 11(1) and (3)(e) of that regulation provides as follows:
‘1. Persons to whom this Regulation applies shall be subject to the legislation of a single Member State only. Such legislation shall be determined in accordance with this Title.
…
3. Subject to Articles 12 to 16:
…
(e)
any other person to whom subparagraphs (a) to (d) do not apply shall be subject to the legislation of the Member State of residence, without prejudice to other provisions of this Regulation guaranteeing him benefits under the legislation of one or more other Member States.’
8.
Article 67 of that same Regulation provides as follows:
‘A person shall be entitled to family benefits in accordance with the legislation of the competent Member State, including for his family members residing in another Member State, as if they were residing in the former Member State …’
2. Directive 2004/38
9.
Article 7 of Directive 2004/38 is worded as follows:
‘1. All Union citizens shall have the right of residence on the territory of another Member State for a period of longer than three months if they:
(a)
are workers or self-employed persons in the host Member State; or
(b)
have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State,
(c)
—
are enrolled at a private or public establishment, accredited or financed by the host Member State on the basis of its legislation or administrative practice, for the principal purpose of following a course of study, including vocational training; and
—
have comprehensive sickness insurance cover in the host Member State and assure the relevant national authority, by means of a declaration or by such equivalent means as they may choose, that they have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence; or
(d)
are family members accompanying or joining a Union citizen who satisfies the conditions referred to in points (a), (b) or (c).
…
3. For the purposes of paragraph 1(a), a Union citizen who is no longer a worker or self-employed person shall retain the status of worker or self-employed person in the following circumstances:
(a)
he/she is temporarily unable to work as the result of an illness or accident;
(b)
he/she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job-seeker with the relevant employment office;
(c)
he/she is in duly recorded involuntary unemployment after completing a fixed-term employment contract of less than a year or after having become involuntarily unemployed during the first 12 months and has registered as a job-seeker with the relevant employment office. In this case, the status of worker shall be retained for no less than 6 months;
(d)
he/she embarks on vocational training. Unless he/she is involuntarily unemployed, the retention of the status of worker shall require the training to be related to the previous employment.’
10.
According to Article 14 of that directive,
‘1. Union citizens and their family members shall have the right of residence provided for in Article 6, as long as they do not become an unreasonable burden on the social assistance system of the host Member State.
2. Union citizens and their family members shall have the right of residence provided for in Articles 7, 12 and 13 as long as they meet the conditions set out therein.
In specific cases where there is a reasonable doubt as to whether a Union citizen or his/her family members satisfies the conditions set out in Articles 7, 12 and 13, Member States may verify if these conditions are fulfilled. This verification shall not be carried out systematically.
3. An expulsion measure shall not be the automatic consequence of a Union citizen’s or his or her family member’s recourse to the social assistance system of the host Member State.
…’
11.
According to Article 15(1), ‘the procedures provided for by Articles 30 and 31 shall apply by analogy to all decisions restricting free movement of Union citizens and their family members on grounds other than public policy, public security or public health’.
12.
Article 24 of that directive, entitled ‘Equal treatment’, provides that:
‘1. Subject to such specific provisions as are expressly provided for in the Treaty and secondary law, all Union citizens residing on the basis of this Directive in the territory of the host Member State shall enjoy equal treatment with the nationals of that Member State within the scope of the Treaty. The benefit of this right shall be extended to family members who are not nationals of a Member State and who have the right of residence or permanent residence.
2. By way of derogation from paragraph 1, the host Member State shall not be obliged to confer entitlement to social assistance during the first three months of residence or, where appropriate, the longer period provided for in Article 14(4)(b), nor shall it be obliged, prior to acquisition of the right of permanent residence, to grant maintenance aid for studies, including vocational training, consisting in student grants or student loans to persons other than workers, self-employed persons, persons who retain such status and members of their families.’
B – National law
13.
The relevant UK legislation will be presented during the course of this Opinion.
II – Pre-litigation procedure
14.
During 2008, the Commission received numerous complaints from citizens of other Member States resident in the United Kingdom that the competent UK authorities had refused to grant them certain social benefits on the grounds that they did not have a right of residence in that State.
15.
The Commission sent a request for clarification to the United Kingdom, which, by two letters dated 1 October 2008 and 20 January 2009, stated in reply that, under UK legislation, while the right to reside in the United Kingdom is conferred on all UK nationals, nationals of other Member States are not, in certain circumstances, considered to have a right of residence. According to the UK Government, that restriction is based on the concept of the right of residence as defined in Directive 2004/38 and on the limitations which that directive attaches to that right, in particular the requirement that an economically inactive person must have sufficient resources not to become a burden on the social assistance system of the host Member State.
16.
On 4 July 2010, the Commission sent the United Kingdom a letter of formal notice identifying the provisions of its legislation under which, if they were to be eligible for certain benefits, claimants had to have a right of residence in that State in order to be considered habitually resident in the United Kingdom.
17.
On 30 July 2010, the UK Government answered the letter of formal notice, arguing that its national system was not discriminatory and that the condition of a right of residence was justified as a proportionate measure for ensuring that benefits were paid to persons sufficiently integrated in the United Kingdom.
18.
On 29 September 2011, the Commission issued a reasoned opinion, to which the United Kingdom replied by letter of 29 November 2011.
19.
Dissatisfied with that reply, the Commission brought the present action for failure to fulfil obligations. In the light of the ruling given by the Court in the judgment in Brey, ( ) delivered in September 2013, the Commission decided to confine its action to the family allowances referred to above, that is to say, child benefit and child tax credit, to the exclusion of the ‘special non-contributory cash benefits’ that had also been the subject of the reasoned opinion and which, in accordance with the judgment in Brey, could be classified as ‘social assistance’ for the purposes of Article 7(1)(b) of Directive 2004/38.
III – Procedure before the Court
A – The Commission’s action
1. Principal head of claim
20.
The principal head of claim raised by the Commission against the United Kingdom is that, by requiring a person claiming child benefit or child tax credit to have a right of residence in the United Kingdom as a condition of being treated as habitually resident ( ) there, the United Kingdom has added a condition that does not appear in Regulation No 883/2004 and deprives persons who do not meet it of the cover under the social security legislation of one of the Member States which that regulation is intended to ensure.
21.
According to the Commission, the definition of ‘residence’ in Article 1(j) of Regulation No 883/2004 states that, for the purposes of that regulation, ‘residence’ means ‘the place where a person habitually resides’. ( ) In the Commission’s view, that place is determined by reference to purely factual considerations, specifically, to where that person has his centre of interests, and its interpretation cannot be influenced by the provisions of Article 7 of Directive 2004/38. It goes on to say that Article 11(3)(e) of Regulation No 883/2004 establishes a system of conflict of laws rules for determining the Member State to whose legislation the persons governed by Regulation No 883/2004 are subject. However, the Commission further contends, the condition of a ‘right of residence’ test established by the United Kingdom ‘disapplies’ the rules of that regulation which determine the applicable legislation, with the result that no Member State will be obliged to pay certain family allowances to the persons concerned, despite the fact that the latter live in a Member State and have dependent children.
2. Alternative head of claim
22.
In the alternative, the Commission claims that, by imposing a condition for entitlement to certain social security benefits which UK nationals automatically meet, the United Kingdom has created a situation involving direct discrimination against nationals of other Member States, thus infringing Article 4 of Regulation No 883/2004.
23.
The Commission submits that, in the course of the pre-litigation procedure, the United Kingdom moved from the view that the ‘right of residence’ criterion was one more component of the habitual residence test, ( ) to the view that it is an independent condition which, though discriminatory, is justified. The Commission, relying on Advocate General Sharpston’s Opinion in Bressol and Others, ( ) considers that the right of residence condition constitutes direct discrimination on grounds of nationality. That condition applies only to foreign nationals, because UK nationals resident in the United Kingdom automatically fulfil it, which, in the Commission’s view, infringes the principle of equal treatment under Article 4 of Regulation No 883/2004. The Commission states that, this being direct discrimination, no justification whatsoever is possible.
24.
The Commission submits that, even if that condition were to be considered to be indirect discrimination, as the United Kingdom contends, the latter has not put forward any argument that permits the inference that the unequal treatment in question is appropriate and proportionate to the aim of ensuring that there is a genuine link between the person claiming the benefit and the host Member State.
25.
The United Kingdom, on the other hand, maintains that economically inactive persons ought not to become a burden on the welfare system of the host Member State, unless they have a minimum degree of connection with that State. The Commission accepts that a Member State may wish to ensure that there is a genuine link between the person claiming the benefit and the competent Member State. In the case of social security benefits, however, it is Regulation No 883/2004 itself which establishes the means of testing whether such a genuine link exists (in this particular case, by applying the habitual residence criterion), and the Member States may make no changes to its provisions and add no supplementary conditions. The Commission argues that the United Kingdom has not even attempted to show how the right of residence criterion is apt for determining whether a person has a link with the United Kingdom sufficient for him to be granted social security benefits under that regulation.
B – Defence
26.
In its defence, the United Kingdom disputes the Commission’s principal head of claim by relying, in essence, on the judgment in Brey, ( ) in which the Court, rejecting on that occasion the same arguments that the Commission is also putting forward in the present case, held that ‘there is nothing to prevent, in principle, the granting of social security benefits to Union citizens who are not economically active being made conditional upon those citizens meeting the requirements for obtaining a legal right of residence in the host Member State’ (paragraph 44). It also held that the purpose of Article 70(4) of Regulation No 883/2004, which, like Article 11, establishes a ‘conflict of laws rule’ the aim of which is to prevent the concurrent application of several national legislative systems and to ensure that persons covered by the Regulation are not left without social security cover because there is no legislation applicable to them, is not to lay down the basic conditions governing entitlement to the benefits at issue in that case (special non-contributory cash benefits); rather, ‘it is for the legislation of each Member State to lay down those conditions’ (paragraph 41). The United Kingdom considers that the same reasoning applies to the conflict of laws rule in Article 11 of Regulation No 883/2004, which performs the same function as Article 70(4) (the latter provision being specific to special non-contributory cash benefits) when it comes to determining the national legislation to which the claimant is subject.
27.
As regards the alternative head of claim put forward by the Commission, the United Kingdom maintains that the allegation of direct discrimination appears for the first time in the application and was not made in the reasoned opinion addressed to it by the Commission during the pre-litigation procedure. It takes the view that the Court has already held in various judgments that it is lawful to require economically inactive EU nationals to demonstrate that they have a right of residence as a condition of qualifying for social security benefits, and, moreover, that Directive 2004/38 expressly recognises this as a legitimate means of ensuring that such citizens do not become an unreasonable burden on the social security system of the host Member State. The principle of equal treatment under Article 4 of Regulation No 883/2004 must be interpreted in the light of that principle.
28.
The United Kingdom submits that the right of residence condition is only one of the three cumulative conditions that a claimant must satisfy in order to demonstrate that he is in the United Kingdom. Whether or not the two others (presence and ordinary residence) are satisfied does not depend on the claimant’s nationality, so that a UK national does not automatically satisfy the condition of ‘being in the United Kingdom’ that entitles him to the benefits at issue. The United Kingdom none the less recognises ( ) that those conditions are more easily satisfied by its nationals than by the nationals of other Member States and that the measure at issue is indirectly discriminatory. ( ) In its contention, however, the measure is objectively justified (as paragraph 44 of the judgment in Brey, ( ) concerning a similar case, confirms), in particular by the objective of protecting public finances, given that the two benefits in question are not funded from beneficiaries’ contributions but from taxation. Moreover, there is nothing to indicate that it is disproportionate from the point of view of attaining the objective pursued, in accordance with the judgment in Brey. ( )
C – Reply
29.
As regards the principal head of claim, the Commission states in its reply that the judgment in Brey ( ) was concerned only with the application of Directive 2004/38 to special non-contributory cash benefits, which have features characteristic of both social security and social assistance, whereas the present action relates to two family benefits within the meaning of Article 3(1)(j) of Regulation No 883/2004, that is to say pure social security benefits, to which Directive 2004/38 does not apply. In that connection, the Commission refers to an issue with the translation of the judgment in Brey, inasmuch as paragraph 44 of the English-language version refers to ‘social security benefits’, while the German-language version (the authoritative version, since the case was Austrian) refers to ‘Sozialleistungen’ (social benefits). ( )
30.
The Commission draws attention to the fact that the UK legislation, instead of encouraging the free movement of Union citizens, which is the underlying purpose of the EU legislation on the coordination of social security systems, discourages it by introducing a barrier to that freedom in the form of discrimination on grounds of nationality, with the result that a person may not be entitled to the family benefits at issue either in his Member State of origin, in which he is no longer habitually resident, or in the host Member State if he has no right of residence there.
31.
With respect to the alternative head of claim, in its reply, the Commission complains that the United Kingdom interprets the conflict of laws rule in Article 11 of Regulation No 883/2004 to the effect that it permits a Member State to introduce a discriminatory condition for entitlement to a social security benefit. The reference to the fact that Member States may impose legitimate restrictions in order to prevent a Union citizen becoming an unreasonable burden on the social assistance system of the host Member State applies only to social assistance, not to social security benefits. Precisely because the mechanism for the coordination of social security systems attributes responsibility for paying family benefits to the Member State where the person with dependent children is habitually resident, the objective put forward by the United Kingdom of protecting public finances is not a legitimate purpose. At all events, the criterion introduced by the United Kingdom is not a proportionate means of attaining that objective (for example, a person who has paid taxes in the United Kingdom for many years but who is unemployed for a period of time may have lost his right of residence in that Member State and, consequently, his entitlement to the benefit in question) and does not ensure that the circumstances of each individual case are assessed, as required by the judgment in Brey. ( )
D – Rejoinder
32.
In its rejoinder, the United Kingdom emphasises that its national legislation may be applicable in accordance with the conflict of laws rules in Regulation No 883/2004 and that a person habitually resident in that State may none the less not be entitled to the specific social benefits in question.
33.
The United Kingdom considers that the term ‘social benefits’ is broader than ‘social security benefits’ and that, even if the judgment in Brey ( ) does use the first term instead of the second in the German- and French-language versions, this only serves to broaden the scope of the principle laid down in paragraph 44 so as also to include social security benefits. Nowhere does the judgment in Brey state that the Court’s findings in that judgment are confined exclusively to special non-contributory cash benefits. The same is true of the judgment in Dano. ( )
34.
Furthermore, the United Kingdom submits that it does not understand why, if Member States are not required to pay special non-contributory cash benefits which provide a basic, minimum level of income to Union citizens with no right of residence, they should be required to pay them benefits such as those at issue in the present case, which are additional to that basic, minimum level and which, since they are funded from taxation, have the potential to impose an unreasonable burden on public finances within the meaning of the judgment in Brey. ( ) The United Kingdom adds that, at all events, the two benefits at issue in the present case have some characteristics of social assistance, even though this is not a condition that must of necessity be satisfied in order for the principle established by the judgment in Brey (which refers, generally, to ‘social benefits’) to apply also to the benefits forming the subject of the present action for failure to fulfil obligations. In the United Kingdom’s view, the Court confirmed in its judgment in Dano ( ) that only economically inactive Union citizens whose residence satisfies the conditions in Article 7(1)(b) of Directive 2004/38 may claim equal treatment with nationals so far as entitlement to social benefits is concerned.
35.
As regards the Commission’s submission that the UK legislation does not ensure that the individual circumstances of each case are assessed, as required by the judgment in Brey, ( ) the United Kingdom maintains that, because the latter argument appears for the first time in the Commission’s reply and was not mentioned during the pre-litigation procedure, it is inadmissible in accordance with Article 127 of the Rules of Procedure of the Court of Justice.
36.
In any case, the United Kingdom explains ( ) how the two benefits at issue are awarded in practice. The department responsible for administering those two benefits, Her Majesty’s Revenue and Customs, takes account of, inter alia, the information provided by the Department for Work and Pensions to check whether a person has claimed social assistance. This enables it to ascertain whether that person has a right of residence in the United Kingdom and is therefore entitled to the two benefits at issue. In cases in which there is doubt as to whether the claimant has a right of residence, an individual assessment of the claimant’s personal circumstances is carried out. This includes an examination of his contribution history, whether he is actively seeking employment and whether he has a genuine chance of being engaged.
37.
A hearing was held on 4 June 2015. At that hearing, the two parties essentially reiterated the arguments set out above and answered the questions put by the Court.
IV – Assessment
A – Introduction
38.
As already mentioned, by this action the Commission is seeking a declaration by the Court that, by requiring claimants to pass the checking — or testing — of lawful residence in that Member State as a condition for the grant of child benefit and child tax credit, the United Kingdom has failed to fulfil its obligations under Article 4 of Regulation No 883/2004.
39.
The Commission has set out its action in the form of a principal head of claim and an alternative head of claim. By its principal head of claim, the Commission argues that the United Kingdom decided to introduce a lawful residence test as part of the habitual residence test provided for in Article 11(3)(e) of Regulation No 883/2004, thereby creating an additional requirement which does not appear in that provision. However, in the alternative, the Commission argues that that Member State is introducing a requirement that is applicable solely to non-nationals (since UK nationals as a matter of principle have the right of residence in that Member State), which thus constitutes discrimination prohibited by Article 4 of that regulation.
40.
Consequently, as the case is presented by the Commission, it would in principle seem that the two arguments should be analysed in the order of priority indicated: first, the unlawfulness of incorporating a lawful residence test into what, under Article 11(3)(e) of Regulation No 883/2004, is a test of habitual residence and, secondly, the discrimination resulting from imposing on non-UK Union citizens a test of lawful residence not applied to UK nationals. For reasons that I shall explain below, I shall not answer those arguments in quite that way.
41.
In fact, the Commission’s argument has been, as it were, weakening over the course of this dispute. It should be remembered that, from the time it answered the reasoned opinion sent it by the Commission, the United Kingdom has repeatedly denied that it was seeking, by means of the legislation at issue, to justify a test of lawfulness as part of the test of habitual residence. In fact, since that time, the United Kingdom has maintained that the lawful residence test which it applies in circumstances such as those at issue in this case is independent of the test of habitual residence. ( ) Thus, the crux of the dispute has gradually shifted towards the second head of claim, namely, that of discrimination prohibited by Article 4 of Regulation No 883/2004.
42.
Consequently, I shall deal only briefly with the argument submitted by the Commission in its principal head of claim, after which I shall focus on the argument initially submitted in the alternative head of claim. However, the circumstances of the case call first of all for some clarification of the nature of the social benefits with which this case is concerned.
B – The social benefits to which the action relates
43.
This action for failure to fulfil obligations is concerned with child benefit and child tax credit, both being cash benefits funded from general taxation and not from the beneficiaries’ contributions, and the purpose of which is to assist with covering family expenses. The United Kingdom did not include either of them in Annex X of Regulation No 883/2004, nor has it been disputed during these proceedings that they are not special non-contributory cash benefits for the purposes of Article 70 thereof.
44.
Under Section 141 of the Social Security Contributions and Benefits Act 1992, ‘a person who is responsible for one or more children in any week shall be entitled, subject to the provisions of this Part of this Act, to a benefit (to be known as “child benefit”) for that week in respect of the child or each of the children for whom he is responsible’. ( ) Child benefit is a family benefit essentially intended to meet some of the cost of caring for those children for persons who have one or more dependent children. It is in principle a universal benefit, although higher-income claimants have to repay a sum up to the maximum received as child benefit when they settle their tax obligations. ( )
45.
For its part, child tax credit, which is governed by Sections 8 and 9 of the Tax Credits Act 2002, ( ) is also a cash benefit which is granted to persons with dependent children, the amount paid varying depending on family income, the number of dependent children and other circumstances, such as whether a member of the family is disabled. ( ) Child tax credit replaced a series of supplementary benefits that were granted to those claiming various maintenance allowances (which were income-linked) for dependent children, with the general aim of reducing child poverty. ( )
46.
Regarding the nature of these benefits, I agree with the Commission that they are social security benefits for the purposes of Regulation No 883/2004. Specifically, they are family benefits within the meaning of Article 3(1)(j), in conjunction with Article 1(z) of that regulation, inasmuch as, according to the characteristics set out in the case-law of the Court, they are benefits automatically granted to persons fulfilling certain objective criteria, without any individual or discretionary assessment of personal needs, and are intended to meet family expenses. ( )
47.
Furthermore, I also agree with the Commission that the fact that the grant of the disputed benefits is not subject to any contribution requirement does not affect their classification as a social security benefit. The method by which a benefit is financed is immaterial for the purpose of its classification as a social security benefit, as is clear from the fact that under Article 3(2) of Regulation No 883/2004, non-contributory benefits are not excluded from the scope of that regulation. ( )
C – Whether the test of lawful residence as a supplementary requirement incorporated into the examination of habitual residence is compatible with the Regulation
48.
The Commission’s principal head of claim is based on the fact that the United Kingdom has incorporated a test of lawful residence into the examination of habitual residence provided for in Article 11(3)(e) of Regulation No 883/2004, thereby creating a supplementary requirement which does not appear in that provision. According to subparagraph (e) of that article, ‘any other person to whom subparagraphs (a) to (d) [of Article 11(3)] do not apply shall be subject to the legislation of the Member State of residence’. Some further clarification is required in order to respond to that claim.
49.
It should be remembered that the purpose of Regulation No 883/2004 is to coordinate Member States’ social security systems in order to guarantee that the right to free movement of persons may be exercised effectively. To that end, Regulation No 883/2004 lays down a series of common principles which the social security legislation of all the Member States must observe and which, together with the system of conflict of laws rules it contains, ensure that persons exercising their right to free movement and residence within the Union will not be adversely treated by the various national systems because they have exercised that right. ( ) One of those common principles is the principle of equal treatment under Article 4 of Regulation No 883/2004 which, for the specific area of social security, embodies the prohibition of discrimination on grounds of nationality which is applicable to all EU law under Article 18 TFEU. ( )
50.
The purpose of Article 11(3)(e) of Regulation No 883/2004 as a conflict of laws rule, ( ) is to determine the national legislation applicable to the grant of the social security benefits listed in Article 3(1) thereof (including family benefits) in the case of persons to whom the provisions of subparagraph (a) to (d) of Article 11(3) are not applicable, that is to say, essentially persons who are economically inactive. The purpose of the rule contained in Article 11(3)(e) of Regulation No 883/2004 is both to prevent the concurrent application of a number of national legislative systems to a given situation and the complications which might ensue, and also to ensure that persons covered by that regulation are not left without social security cover for want of any legislation applicable to them. ( )
51.
Under Article 11(3), persons to whom subparagraph (e) applies will be subject to the legislation of the Member State of residence, without prejudice to other provisions of Regulation No 883/2004 which guarantee that they will receive benefits under the legislation of one or more of the other Member States which, as defined in Article 1(j) of that regulation, is ‘the place where a person habitually resides’. ( )
52.
Consequently, when determining where a person falling within the scope of Regulation No 883/2004 has his ‘habitual’ residence for the purposes of Article 11(3)(e), regard must be had to purely factual circumstances. In fact, the case-law of the Court ( ) has developed a non-exhaustive list of elements (all of a factual nature) which must be taken into account in order to determine a person’s habitual place of residence, a list that is currently embodied in Article 11(1) of Regulation No 987/2009, ( ) in order to establish which Member State’s legislation will apply to a given situation within the framework of Regulation No 883/2004. Both parties appear in the end to agree that the concept of ‘habitual residence’ is a factual element.
53.
That having been said, there is every indication that the problem arises from the terms used in the UK legislation which, in stating that persons who are not lawfully resident in the United Kingdom in accordance with EU law ‘are not in’ the territory of the United Kingdom, ( ) creates a sort of legal fiction. In doing so, the national legislation is unnecessarily intertwining two concepts, those of ‘lawful residence’ and of ‘habitual residence’ which, as the Commission correctly states, are not to be confused. Furthermore, a strictly literal reading of that legislation could even lead us to accept the Commission’s argument to the effect that the United Kingdom has incorporated into the habitual residence test an additional element, that of lawful residence, which is entirely distinct from it and which to a certain extent ‘distorts’ it, and to argue that, for that reason alone, the United Kingdom has failed to comply with Regulation No 883/2004.
54.
However, that line of reasoning would be excessively simplistic and, to my mind, in the final analysis, wrong. It is evident that, regardless of the wording or terminology, which admittedly is ambiguous, what the national legislature is doing in this case is not ‘distorting’ the test of habitual residence by examining the lawfulness of residence as a means of assessing whether a person is habitually resident in its territory. ( ) In fact, as stated above, from the time of its reply to the Commission’s reasoned opinion, the United Kingdom has distanced itself from a defence of the test of lawful residence which links it to the test of habitual residence under Article 11(3)(e) of Regulation No 883/2004. What the United Kingdom claims to be doing, independently of Article 11(3)(e) of Regulation No 883/2004 and indeed of the Regulation as a whole, is examining the lawfulness of residence under EU law (and in particular Directive 2004/38) in connection with the grant of specific social benefits.
55.
This line of argument put forward by the United Kingdom has been taken into account by the Commission itself in its alternative head of claim to the effect that, if a test of lawful residence is not incorporated into the examination of habitual residence but the lawfulness of residence is assessed separately, this would inevitably result in discrimination prohibited by Article 4 of the aforementioned Regulation. It could be said that the Commission has been aware from the outset that the crux of the problem lies in Article 4 of Regulation No 883/2004. In fact, although it focussed all its arguments in its principal head of claim on the test of (habitual) residence as the criterion for establishing connection used in the conflict of laws rule in Article 11(3)(e) of that regulation, in reality it was claiming only that the United Kingdom had failed to comply with Article 4 of that regulation.
56.
In the light of all of the foregoing, the Commission’s principal head of claim must be dismissed, in so far as the test of lawful residence introduced by the UK legislation does not in itself affect the provisions of Article 11(3)(e) of Regulation No 883/2004.
D – Act of discrimination contrary to Article 4 of Regulation No 883/2004 which the United Kingdom may have committed by carrying out checks on the lawfulness of a claimant’s residence when processing claims for specific social benefits
1. Preliminary considerations
57.
In the Commission’s view, even if it should be accepted that the test of lawful residence could be independent of the habitual residence test under Article 11(3)(e) of Regulation No 883/2004, the United Kingdom has at all events infringed that regulation. In the Commission’s opinion, examining the lawfulness of residence when processing claims for social security benefits is discriminatory and contrary to Article 4 of Regulation No 883/2004, in that it establishes a requirement applicable solely to non-nationals, for UK nationals have a right of residence in that Member State as a matter of principle. Article 4 in fact requires equal treatment in respect of the benefits and obligations provided for in national social security legislation. This argument requires a slightly more complex response, in contrast to how it was presented by the Commission.
58.
In the first place, it is necessary to consider the question of principle of whether a Member State is obliged to grant social benefits, such as those at issue in this case, that it grants to its own nationals and to Union citizens who reside lawfully in that Member State, to a Union citizen whose residence within its territory is not lawful (that is to say, he does not fulfil the requirements laid down, in particular, in Directive 2004/38). How this question is answered will determine whether it is in itself discriminatory within the meaning of Article 4 of Regulation No 883/2004 for a Member State to agree to grant specific social benefits only to persons who reside legally within its territory.
59.
In the second place, if the abovementioned problem may be considered to have been resolved, it will be necessary to address the more specific matter, also a matter of principle, of whether a Member State from which a person claims a specific social benefit, such as those at issue in this case, may legitimately check whether the claimant is lawfully resident at the same time as it checks whether he is habitually resident.
60.
Lastly, should the second difficulty also be resolved, it would still be necessary to address the question whether that right of the Member State is, as it were, absolute, or whether, on the contrary, it is lawful only in certain circumstances. As will be seen, this aspect of the problem emerged only at the last moment and very briefly, specifically in the Commission’s reply, which is why the United Kingdom considers that argument inadmissible because out of time. If necessary, the potential inadmissibility of that argument will have to be considered, regardless of any reasons of expediency that might lead me to propose a reply.
2. Relevance of the case-law in the judgments in Brey and Dano
61.
However, before proceeding in the order indicated, it is first of all necessary to refer to the possible relevance to this case of the case-law in the judgments in Brey ( ) and Dano, ( ) to which the parties have referred repeatedly throughout these proceedings. ( )
62.
To start with, there can be no doubt that the case-law in the judgments in Brey ( ) and Dano ( ) is relevant to this case, in so far as those judgments address the question whether it is legitimate for a Member State to take account of the lawfulness of residence in its procedures for the grant of social benefits to Union citizens resident within its territory.
63.
However, whilst in Brey and Dano, in the context of a reference for a preliminary ruling in both cases, the Court had been asked to give a ruling on the correct interpretation of Article 7 of Directive 2004/38, the relevance of which was not disputed, in the present case the matter at issue, which has been raised in an action for failure to fulfil obligations, is whether it is relevant to apply that directive, in particular Article 7 thereof, when applying Regulation No 883/2004. ( )
64.
Secondly, unlike in the case at issue here, those judgments, like the judgment in Alimanovic, ( ) were concerned with special non-contributory cash benefits governed by Article 70 of Regulation No 883/2004 and considered to be social assistance benefits for the purposes of Directive 2004/38. ( ) In that regard, whilst Directive 2004/38 takes account of the need to have recourse to social assistance benefits in the context of the lawfulness of residence, ( ) it is silent regarding social security benefits such as those at issue in this case.
65.
That said, I shall be making the relevant references to this case-law in the course of my arguments.
3. A Member State’s obligation to grant social benefits, in connection with the lawfulness of residence, and its consequences as regards the claim of discriminatory treatment
66.
The first question that must be addressed, as a matter of principle, is whether a Member State is obliged to grant a Union citizen resident within its territory the social benefits which it grants to its own nationals only when that person’s residence fulfils the requirements laid down, in particular, in Directive 2004/38. As I have stated, the conclusion reached on this matter will have consequences as regards the question whether it is discriminatory, within the meaning of Article 4 of Regulation No 883/2004, for a Member State to refuse to grant social benefits, such as those at issue in this case, to persons not lawfully resident within its territory.
67.
In order to answer this question, in line with the observations made by the Court in Dano, ( ) it is necessary to start from the premise that Article 20(1) TFEU confers on any person holding the nationality of a Member State the status of citizen of the Union. As the Court has held on many occasions, Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy within the scope ratione materiae of the FEU Treaty the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for. ( )
68.
Every Union citizen may therefore rely on the prohibition of discrimination on grounds of nationality laid down in Article 18 TFEU in all situations falling within the scope of EU law. These situations include those relating to the exercise ratione materiae of the right to move and reside within the territory of the Member States conferred by point (a) of the first subparagraph of Article 20(2) TFEU and Article 21 TFEU. ( )
69.
However, in this connection, according to the Court’s findings in Dano, ( ) it is to be noted that Article 18(1) TFEU prohibits any discrimination on grounds of nationality ‘[w]ithin the scope of application of the Treaties and without prejudice to any special provisions contained therein’. The second subparagraph of Article 20(2) TFEU expressly states that the rights conferred on Union citizens by that article are to be exercised ‘in accordance with the conditions and limits defined by the Treaties and by the measures adopted thereunder’. Furthermore, under Article 21(1) TFEU too the right of Union citizens to move and reside freely within the territory of the Member States is subject to the ‘limitations and conditions laid down in the Treaties and by the measures adopted to give them effect’. ( ) That reference to the limited nature of that freedom is also referred to in the Explanation on Article 45 of the Charter of Fundamental Rights of the European Union, which affirms the right to free movement and residence, when it states that ‘[t]he right guaranteed by paragraph 1 is the right guaranteed by Article 20(2)(a) [TFEU] … In accordance with Article 52(2) of the Charter, those rights are to be applied under the conditions and within the limits defined by the Treaties’. ( )
70.
In that regard, it must be recalled that the purpose of Regulation No 883/2004 is very closely connected with the fundamental right to free movement enjoyed by Union citizens, since it was adopted to facilitate and guarantee the effective exercise of that right through the coordination of Member States’ national social security systems. ( ) In fact, as noted earlier, the purpose of Regulation No 883/2004 is to coordinate Member States’ national social security systems with the aim, as may be seen from its preamble, of ‘guaranteeing that the right to free movement of persons can be exercised effectively’ (recital 45) and thus ‘contributing towards improving the standard of living and conditions of employment’ of persons moving within the Union (recital 1). Consequently, the rights granted by Regulation No 883/2004 are intended to guarantee freedom of movement and residence for Union citizens, subject to the legal conditions on which that freedom is granted. ( )
71.
Some of the conditions and limitations which Articles 20 TFEU and 21 TFEU impose on the right to free movement and residence within the European Union, as a freedom that is not absolute ( ) but rather ‘regulated’, are laid down in Directive 2004/38. ( ) That directive, whose compatibility with the Treaties the Court did not call into question in its judgments in Brey, ( )Dano ( ) or Alimanovic, ( ) and which has not been disputed during these proceedings, according to recital 4 thereof, was adopted with a view to remedying this sector-by-sector, piecemeal approach to the right of free movement and residence and facilitating the exercise of this right.
72.
It is therefore necessary to start from the premise that the provisions of Directive 2004/38 governing Union citizens’ freedom of movement and residence also remain fully effective within the framework of a regulation such as that at issue, intended to give practical effect to the right of free movement and residence within the Union, and that they cannot be considered ineffective within that context. In that regard, I cannot agree with the Commission’s assertion ( ) that ‘the concept of residence in Regulation No 883/2004 … is not subject to any legal preconditions’. ( )
73.
It does not appear to me excessive to recall, in that regard, that the EU legal order could hardly consist of a multiplicity of entirely separate compartments. This is particularly true in the case of two rules of EU law as closely linked as those at issue in this case. ( ) If, as I have just indicated, EU law subjects the exercise of freedom of movement and residence to certain limitations and conditions, embodied in particular in Directive 2004/38, it seems clear that the provisions of Regulation No 883/2004 cannot be interpreted in such a way as to neutralise the conditions and limitations accompanying the grant and proclamation of that freedom. ( ) In a word, an interpretation has to be sought that will, to the greatest possible extent, promote Union citizenship and Union citizens’ freedom of movement and residence, while at the same time having regard to the objectives pursued by both those two legal acts and the provisions thereof.
74.
Furthermore, to my mind, the above position is confirmed by the case-law of the Court, which has traditionally associated entitlement to social benefits on an equal basis with nationals of the host Member State with the requirement that the claimant must be ‘legally’ resident in the territory of that State. ( ) Moreover, the Court recently confirmed this in its judgement in Brey, in which it held that ‘there is nothing to prevent, in principle, the granting of social security benefits to Union citizens who are not economically active being made conditional upon those citizens meeting the necessary requirements for obtaining a legal right of residence in the host Member State’, ( ) and in its judgment in Dano, in which it held that ‘so far as concerns access to social benefits … a Union citizen can claim equal treatment with nationals of the host Member State only if his residence in the territory of the host Member State complies with the conditions of Directive 2004/38’. ( ) In my view, there is nothing in those judgments to indicate that such findings apply exclusively to the social assistance benefits or the special non-contributory cash benefits with which those cases were concerned and not to other social benefits. ( )
75.
That being said, it cannot be denied that the premise that the residence of a person claiming a social benefit such as those at issue in this case should not be unlawful could also be viewed as a difference in treatment between UK nationals and nationals of other Member States. However, one way of looking at it is that this difference in treatment as regards the right of residence is inherent in the system and, to a certain extent, inevitable: ( ) by definition, a national of a Member State cannot be denied a right of residence in that State.
76.
In other words, the difference in treatment between UK nationals and nationals of other Member States stems from the very nature of the system, inasmuch as, as EU law currently stands, being a national of a particular Member State is not irrelevant when it comes to exercising freedom of movement and residence.
77.
In short, in the light of all the foregoing considerations, I consider that Regulation No 883/2004 requires a Member State to grant social benefits such as those at issue in the case only to a Union citizen who is exercising his right to free movement and residence in its territory lawfully, that is to say, in particular, in compliance with the requirements of Directive 2004/38. In that regard, any difference in treatment between UK nationals and nationals of other Member States occurs at a stage before that of the practical application of Article 4 of Regulation No 883/2004, and does not therefore affect its applicability in principle.
4. Ascertaining whether the claimant’s residence is lawful when processing claims for specific social benefits
78.
The previous question of principle having been resolved, it is now necessary to address a second aspect which, to my mind, is more directly relevant to the Commission’s arguments: whether, on the basis of the foregoing, a Member State may, without infringing the prohibition of discrimination in Article 4 of Regulation No 883/2004, take steps to ascertain whether a Union citizen, who is a national of another Member State, is lawfully resident, precisely at the time when it is processing a claim for a social benefit such as those at issue in this case.
79.
Expressed in those terms, the question would then essentially focus on whether the Member State is introducing an inequality in the ‘obligations’ under Article 4 of Regulation No 883/2004, owing to the fact, which cannot easily be denied, that it is non-UK citizens rather than UK nationals who will be more likely to suffer the inconvenience of undergoing and, as the case may be, passing the checks carried out by the UK authorities on their legal right of residence when processing claims for a benefit such as child benefit or child tax credit. It is apparent from the explanations given by the United Kingdom during the hearing that the extent of the checks carried out will in any case depend on the claimant’s particular circumstances, with economically inactive Union citizens being, as might be foreseen, more likely to suffer that inconvenience.
80.
In that regard, it might be expected that that additional complexity in processing the aforementioned claims could in practice be avoided, in so far as Directive 2004/38 provides for mechanisms (specifically in Article 8 thereof) ( ) enabling a Union citizen who is not a national of the host Member State to prove that he is lawfully resident by means of a certificate which the competent authorities will issue once they have checked that he satisfies, in particular, the requirements of Article 7 of that directive. When a claimant has that certificate, any inconvenience that he might suffer during the processing of a claim for a social benefit will be minimal or even non-existent: if so requested, the claimant will simply have to produce the document attesting that the Member State considers his residence in its territory to be lawful.
81.
The United Kingdom explained, however, at the hearing that, although Union citizens have the option of requesting the UK authorities to issue a document attesting to their right of residence in that Member State (which obviously would make it easier to prove that fact), it is not obligatory to have such a document. In fact, in the majority of cases, claimants do not usually have a certificate attesting to the lawfulness of their residence in the United Kingdom.
82.
However, the possibility that a Member State could make the issue of such certificates compulsory does not preclude the viability of a system such as that in the United Kingdom which, failing in most cases any prior recognition as described above, applies a legal residence test when processing social benefit claims.
83.
Consequently, it must be acknowledged that this is a case of difference in treatment which would have to be described as indirect discrimination in so far as it is non-UK Union citizens (especially those who are economically inactive) who will be most affected by the inconvenience and problems that that process entails.
84.
In that connection, the question arising is whether that indirect discrimination is justifiable, which the Commission says it is not. In that regard and without any need to pursue the argument further, I consider that the necessity of protecting the host Member State’s public finances, ( ) an argument relied on by the United Kingdom, ( ) is in principle sufficient justification for a Member State to check the lawfulness of residence at that point. In short, this verification process is the means whereby the host Member State is able to ensure that it is not granting social benefits, such as those at issue in this case, to persons to whom, for the reasons set out in the previous section, it is not obliged to grant them.
85.
In conclusion, I consider that, expressing it in terms of principle, the host Member State is entitled, where appropriate, to ensure that a Union citizen is not unlawfully present in its territory, that is to say, essentially, whether he satisfies the requirements of Directive 2004/38, at the time when it is processing claims for social benefits, such as those at issue in this case, without the difference in treatment between UK nationals and other Union citizens which that entails giving rise to any discrimination prohibited by Article 4 of Regulation No 883/2004, inasmuch as it is justified in the terms set out above.
5. The requirements involved in the verification of the lawfulness of residence in the host Member State
86.
I consider that the arguments set out above are sufficient to refute the Commission’s arguments centred on the unlawfulness, expressed in terms of principle, of the lawful residence test provided for in the UK legislation. However, it should be borne in mind that this conclusion does not imply the acceptance of any means whatsoever that may be used to verify the lawfulness of residence. On the contrary, I consider that, in order to be compatible with EU law, that verification process must satisfy a series of requirements, procedurally and even substantively, as I shall set out below.
87.
In fact, it must not be forgotten that the verification process in question, in so far as it may affect the freedom of movement and residence conferred by Union citizenship, must be interpreted in conformity with that fundamental right and be conducted as unintrusively as possible.
88.
However, I would once again observe that the purpose of the Commission’s action was not to challenge how the United Kingdom carries out that verification. It is true that the Commission has claimed that, when verifying compliance with the requirements of Article 7 of Directive 2004/38, the United Kingdom does not ensure that the particular circumstances of every case are assessed, as required by the judgment in Brey. ( ) However, that argument appears for the first time in the Commission’s reply and was not mentioned either during the pre-litigation procedure or in the application itself. The Commission stated during the hearing that that aspect was not a new ground, but simply an additional element that should be taken into account when assessing whether the test of lawful residence, as a discriminatory measure, is proportionate to the objective pursued. However, I agree with the United Kingdom that this is a new ground raised at a stage in the proceedings at which it was not admissible under Article 127 of the Rules of Procedure.
89.
The focus of the Commission’s action is that, when examining claims for social benefits, such as those at issue in this case, a Member State is not permitted to require that persons claiming such benefits should not be unlawfully present in its territory and to verify that this is the case, and it is not concerned with the means whereby the UK authorities, both procedurally and substantively, assess whether or not a Union citizen fulfils the requirements of Directive 2004/38.
90.
Notwithstanding the foregoing, if the Court should consider that the merits of that argument must be examined and given that the United Kingdom gave some elements of a reply to that argument in its rejoinder and during the hearing, I shall discuss some aspects of it below, although not exhaustively.
91.
From the procedural point of view, the difference in treatment afforded to nationals of the Member State in question resulting from the national authorities’ right to carry out the verification referred to above would be compatible with Union citizenship and the principle of equal treatment only in so far as that verification was carried out in strict observance of the principle of proportionality, that is to say, that the checks should be appropriate to the objective pursued, as unintrusive as possible and carried out to the extent strictly necessary in order to achieve the abovementioned objective.
92.
Furthermore, verification by the national authorities, in connection with the grant of the social benefits in question, that the claimant is not unlawfully present in their territory must be assessed as a situation involving checks on the lawfulness of the residence of Union citizens under Directive 2004/38, as referred to in the second paragraph of Article 14(2) of that directive, and should therefore comply with the requirements set out therein. ( )
93.
It is apparent from the statements made by the United Kingdom during the hearing that checks on whether claimants satisfy the conditions laid down in Directive 2004/38 to be granted the right of residence are not carried out in every single case, something which, in my view, is prohibited by Article 14(2) of that directive: ( ) although all persons claiming the social benefits at issue ( ) must provide, in the appropriate form, information which may be used to determine whether they have a right of residence in that Member State, it is only in cases of doubt, as the United Kingdom stated in paragraph 21 of its rejoinder and which it confirmed during the hearing, that the UK authorities will carry out the necessary checks to ascertain whether or not the claimant fulfils the requirements of Directive 2004/38 (in particular Article 7 thereof), that is to say, whether he has a right of residence under that directive.
94.
Nor, in my opinion, can it be inferred from the statements made by the United Kingdom that that Member State presumes that a person claiming the benefits at issue in this case is unlawfully present in its territory, which would be contrary to Article 20(2) TFEU and Article 21 TFEU, which confer on Union citizens the right to move and reside freely in the territory of the Member States. In fact, European citizenship and, in particular, the affirmation of the principle that a Union citizen is entitled to establish his place of residence in any Member State on the conditions laid down by EU law, precludes national legislation from adopting any approach that might be tantamount to presuming that, after the first three months of residence and before he has acquired a permanent right of residence, such citizen is unlawfully present in that territory, so that it would systematically be for the person in question to prove that this is not the case. As a matter of principle, the opposite presumption should, in fact, be made.
95.
Furthermore, because legitimate checks on whether a claimant is lawfully present in the United Kingdom fall within the scope of the second paragraph of Article 14(2) of Directive 2004/38, any finding by the national authorities that that Union citizen does not have a right of residence under that directive because he does not fulfil the requirements set out therein, regardless of whether this would carry an expulsion measure and despite the fact that it is merely declaratory, ( ) is ‘a decision [restricting] free movement of Union citizens’ within the meaning of Article 15(1) of that directive, ( ) which, as laid down in that provision, has the effect of activating the guarantees provided for in Articles 30 and 31 thereof.
96.
In my view, this means that, in such circumstances, the competent authorities may not confine themselves simply to refusing to grant the benefit claimed, but must, in addition, under Article 30 of Directive 2004/38, specifically when they find that there is no right of residence under Directive 2004/38, inform the persons concerned ‘precisely and in full’ and ‘in such a way that they are able to comprehend its content and the implications for them’ of the reasons on which that finding is based, also specifying the court or administrative authority with which the person concerned may lodge an appeal and the time-limit for that appeal. At the same time, the procedural safeguards under Article 31 of Directive 2004/38 are activated, enabling the person concerned to seek an administrative or judicial review of the lawfulness of the authorities’ assessment.
97.
Lastly, from the substantive point of view, it should essentially be borne in mind that in the particular case of economically inactive citizens, under Article 7(1)(b) of Directive 2004/38, the national authorities must examine whether those persons have ‘sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State’ during their period of residence and also have health insurance. I would mention at this point that the mere fact that a Union citizen has recourse to social assistance in the host Member State is not sufficient for him to be denied the right of residence, ( ) but rather that, in order for this to occur, he must have become an excessive burden on the social assistance system of that State. When assessing whether this is the case, the national authorities must follow the guidelines established in the case-law of the Court, in particular the requirement of taking account of the circumstances of the particular case, referred to in the judgment in Brey ( ) and, where appropriate, inform the claimant of any negative decision in the terms laid down in Article 30 of that directive.
98.
That being said, and if it should be considered necessary to examine the lawfulness of the contested provisions of national law from that perspective, I consider that the Commission has not demonstrated that the United Kingdom is failing to comply with the conditions as to substance and form I have described above, so that from this point of view too this action for failure to fulfil obligations should be dismissed.
6. Summary
99.
In conclusion, I consider that it does not constitute discrimination prohibited by Article 4 of Regulation No 883/2004 if national legislation provides that, when examining claims for social benefits such as child benefit or child tax credit, the Member State’s authorities may carry out the checks necessary to ensure that nationals of other Member States claiming those benefits are lawfully resident in its territory. However, for that purpose, the authorities responsible for carrying out those checks will, in any case, from the procedural point of view, have to observe the principles described above, in particular the principle of proportionality, as well as the provisions of the second paragraph of Article 14(2), Article 15(1) and Articles 30 and 31 of Directive 2004/38.
V – Costs
100.
Since I propose that the action should be dismissed, in accordance with Article 138(1) of the Rules of Procedure of the Court of Justice, the Commission must be ordered to pay the costs.
VI – Conclusion
101.
In the light of the foregoing, I therefore propose that the Court should:
(1)
dismiss the action;
(2)
order the European Commission to pay the costs.
( ) Original language: Spanish.
( ) Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 (OJ 2004 L 166, p. 1).
( ) C‑140/12, EU:C:2013:565.
( ) C‑333/13, EU:C:2014:2358.
( ) C‑67/14, EU:C:2015:597. See also the Opinion of Advocate General Wathelet in García Nieto and Others, C‑299/14, EU:C:2015:366.
( ) Directive of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (OJ 2004 L 158, p. 77).
( ) C‑140/12, EU:C:2013:565.
( ) In reality, as the United Kingdom points out, the habitual residence test (to which the other social benefits referred to in the reasoned opinion are indeed subject but do not form part of the subject-matter of the action for failure to fulfil obligations), is not applicable to the benefits at issue in this case, where the requirement is that the claimant ‘must be in the United Kingdom’. One of the conditions that a claimant must meet in order to be regarded as being ‘in the United Kingdom’, besides being physically present and ordinarily resident there, is to have a right of residence there.
( ) As opposed to ‘stay’, which, according to Article 1(k) of Regulation No 883/2004, means ‘temporary residence’.
( ) In reality, the test to determine whether the claimant is in the United Kingdom. See footnote 8.
( ) C‑73/08, EU:C:2009:396. The Advocate General’s reasoning was not endorsed in the judgment in Bressol and Others (C‑73/08, EU:C:2020:181), where the Court held that the difference in treatment in question constituted indirect discrimination (paragraph 47).
( ) C‑140/12, EU:C:2013:565. In that judgment, the Court concluded that ‘the Austrian compensatory supplement to the old-age pension’ with which that case was concerned was to be considered both a ‘special non-contributory cash benefit’ for the purposes of Regulation No 883/2004 and a ‘social assistance benefit’ for the purposes of Directive 2004/38. For that reason, it held to be consistent in principle with EU law the fact that, in the case of Union citizens, entitlement to that compensatory supplement was conditional upon their demonstrating that they had a ‘legal right to reside in Austria’, so as to ensure that paying that benefit to economically inactive Union citizens did not impose an unreasonable burden on Austria’s finances. That said, it is in any event necessary to examine the particular circumstances of the case in question in order to determine whether the grant of the benefit at issue to a person in Mr Brey’s situation might represent an unreasonable burden on the national social assistance system.
( ) Paragraph 35 of the defence.
( ) Paragraph 36 of the defence.
( ) C‑140/12, EU:C:2013:565.
( ) C‑140/12, EU:C:2013:565, paragraphs 71 to 78.
( ) C‑140/12, EU:C:2013:565.
( ) In French, ‘prestations sociales’, which is the same as ‘social benefits’.
( ) C‑140/12, EU:C:2013:565, paragraphs 63 to 80.
( ) C‑140/12, EU:C:2013:565, paragraph 44.
( ) C‑333/13, EU:C:2014:2358.
( ) C‑140/12, EU:C:2013:565.
( ) C‑333/13, EU:C:2014:2358, paragraph 73.
( ) C‑140/12, EU:C:2013:565, paragraphs 63 to 80.
( ) Paragraph 21 of the rejoinder.
( ) See, in particular, page 3 of the United Kingdom’s reply to the reasoned opinion.
( ) Regarding child benefit, see, for Great Britain, Section 146 of the Social Security Contributions and Benefits Act 1992 and Section 23 of the Child Benefit (General) Regulations 2006 [as amended by the Child Benefit (General) and the Tax Credits (Residence) (Amendment) Regulations 2014] and, for Northern Ireland, Section 142 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 and Section 27 of the aforementioned Child Benefit (General) Regulations (as amended).
( ) See details on https://gov.uk/child-benefit, the UK Government website which explains how this benefit works. According to the information on that website, child benefit is currently GBP 20.72 per week for the first child and GBP 13.70 per week for each subsequent child. See also https://www.citizensadvice.org.uk/benefits/children-and-young-people/benefits-for-families-and-children/#h-child-benefit, which gives practical details of how to claim and obtain this benefit.
( ) Regarding the residence requirement for child tax credit, see Section 3 of the Tax Credits (Residence) Regulations 2003 (as amended by the Child Benefit (General) and the Tax Credits (Residence) (Amendment) Regulations 2014).
( ) Despite its name, child tax credit is a regular payment made by the competent authorities into the beneficiary’s bank account and which apparently requires the beneficiary to be a taxpayer. The website https://www.gov.uk/child-tax-credit/what-youll-get does not give a specific sum, because the amount received will depend on the particular personal and family circumstances. More details on how this tax credit works can be found on https://www.citizensadvice.org.uk/benefits/children-and-young-people/benefits-for-families-and-children/#-child-benefit.
( ) Paragraph 6 of the United Kingdom’s defence.
( ) Judgment in Hoever and Zachow (C‑245/94 and C‑312/94, EU:C:1996:379), paragraph 27. See also the judgment in Hughes (C‑78/91, EU:C:1992:331), paragraph 22. It is true that the amount of child tax credit depends on family income and the number of children, and ceases to be paid when that income exceeds a given level, but the Court has already held in the judgment in Hughes (C‑78/91, EU:C:1992:331), paragraph 17, that it does not follow that the grant of the benefit is dependent on an individual assessment of the claimant’s personal needs, which is a characteristic feature of social assistance, since the criteria applied are objective, legally defined criteria, which, if met, confer entitlement to the benefit, the competent authority having no power to take account of other personal circumstances.
( ) See the judgment in Hughes (C‑78/91, EU:C:1992:331), paragraph 21.
( ) See, in that regard, Lenaerts, K., and van Nuffel, P., European Union Law, 3rd edition, London: Sweet and Maxwell, 2011, p. 269, and Eichenhofer, E., Sozialrecht der Europäischen Union, 3rd edition, Berlin: Erich Schmidt, pp. 49 and 50 and p. 68 et seq.
( ) Regarding the content of the principle of equal treatment and the prohibition of discrimination on grounds of nationality in the specific area of EU law on social security, see Husmann, M., ‘Diskriminierungsverbot und Gleichbehandlungsgebot des Art. 3 VO 1408/71 und der Artt. 4 and 5 VO 883/2004’, Zeitschrift für europäisches Sozial- und Arbeitsrecht, No 3, 2010, p. 97 et seq., and Bokeloh, A., ‘Die Gleichbehandlung der Staatsangehörigen in der Europäischen Sozialrechtskoordinierung’, Zeitschrift für europäisches Sozial- und Arbeitsrecht, No 10, 2013, p. 398 et seq., and also Eichenhofer, E., op. cit., p. 82 et seq. and the bibliography and case-law cited therein.
( ) A feature of the system of conflict rules contained in Regulation No 883/2004 is that it has the effect of divesting the legislature of each Member State of the power to determine the ambit and the conditions for the application of its national legislation, so far as the persons who are subject thereto and the territory within which the provisions of national law take effect are concerned (judgment in Ten Holder, 302/84, EU:C:1986:242, paragraph 21).
( ) See, by analogy, the judgment in Brey (C‑140/12, EU:C:2013:565), paragraph 38 et seq.
( ) The Court has already held that the term ‘residence’ for those purposes means ‘habitual residence’, that is, the place in which the persons concerned habitually reside and in which the habitual centre of their interests is to be found, and thus constitutes an autonomous concept particular to EU law (judgments in B., C‑394/13, EU:C:2014:2199, paragraph 26, and Swaddling, C‑90/97, EU:C:1999:96, paragraphs 28 and 29).
( ) See, in particular, the judgments in Swaddling (C‑90/97, EU:C:1999:96), paragraph 29, and Wencel (C‑589/10, EU:C:2013:303), paragraph 45 et seq.
( ) Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems (OJ 2009 L 284, p. 1).
( ) Both in the case of child benefit and that of child tax credit, in order to be entitled to those benefits, the relevant national legislation requires the claimant ‘to be in the United Kingdom’ (literally ‘is in Great Britain’ or in Northern Ireland). It subsequently states that that requirement is fulfilled only if the claimant (a) is physically in the United Kingdom, (b) has his habitual residence in the United Kingdom and (c) has a right of residence in the United Kingdom. Thus, those benefits will not be granted if the claimant does not have a right of residence in the United Kingdom because, in that case, under Section 23(4) of the Child Benefit (Residence) Regulations 2006 and Section 3(5) of the Tax Credits (Residence) Regulations 2003, in conjunction with Section 146 of the Social Security Contributions and Benefits Act 1992, that person is considered ‘not to be in’ the United Kingdom.
( ) The United Kingdom expressly recognises this in paragraph 32 of its defence and paragraph 7 of its rejoinder.
( ) C‑140/12, EU:C:2013:565.
( ) C‑333/13, EU:C:2014:2358.
( ) See also the recent judgment in Alimanovic (C‑67/14, EU:C:2015:597), to which the parties have not made reference because it was delivered after the hearing in the present case.
( ) C‑140/12, EU:C:2013:565.
( ) C‑333/13, EU:C:2014:2358.
( ) It should be borne in mind that, in the case of economically inactive citizens, it is Directive 2004/38, in particular Article 7(1)(b) thereof, which sets out the circumstances which the host Member State must verify in order to determine whether a person claiming the social benefits at issue in this case (which fall within the material scope of Regulation No 883/2004) is legally resident within its territory.
( ) C‑67/14, EU:C:2015:597, paragraph 43.
( ) See, in particular, the judgment in Brey (C‑140/12, EU:C:2013:565), paragraph 58 et seq.
( ) Thus, as Advocate General Wathelet stated in point 96 of his Opinion in Dano (C‑333/13, EU:C:2014:341), inevitably introducing ‘potential unequal treatment in the granting of social assistance benefits between nationals of the host Member State and other Union citizens’.
( ) C‑333/13, EU:C:2014:2358, paragraph 57.
( ) Judgments in Grzelczyk (C‑184/99, EU:C:2001:458), paragraph 31; D’Hoop (C‑224/98, EU:C:2002:432), paragraph 28; and N. (C‑46/12, EU:C:2013:97), paragraph 27.
( ) Judgments in Dano (C‑333/13, EU:C:2014:2358), paragraph 59; and N. (C‑46/12, EU:C:2013:97), paragraph 28, inter alia.
( ) C‑333/13, EU:C:2014:2358, paragraph 60.
( ) See, inter alia, the judgments in Baumbastand R (C‑413/99, EU:C:2002:493), paragraph 84 et seq.; Trojani (C‑456/02, EU:C:2004:488), paragraph 31 et seq.; and Brey (C‑140/12, EU:C:2013:565), paragraphs 46 and 47.
( ) Explanations relating to the Charter of Fundamental Rights, OJ 2007 C 303, p. 17.
( ) See, in that regard, the judgment in Wencel (C‑598/10, EU:C:2013:303): those principles, which underlie the provisions for the coordination of national social security legislation, are closely connected with freedom of movement for persons, the most important principle of which is that the activities of the European Union are to include, in particular, the abolition, as between Member States, of obstacles to freedom of movement for persons (paragraph 39).
( ) Regulation No 883/2004 does not harmonise Member States’ social security legislation, so that it is still for the Member States to decide what benefits they will grant to whom and subject to what conditions and how their social security systems are to be funded. That Regulation is in principle without prejudice to the substantive conditions that each Member State may establish for the purpose of granting the social security benefits coordinated by the Regulation, provided that they observe the common principles laid down therein (see, to that effect, the judgment in Brey, C‑140/12, EU:C:2013:565, paragraph 41 and the case-law cited).
( ) As the Commission itself recognised at the hearing.
( ) See also the Opinion of Advocate General Wathelet delivered in Dano (C‑333/13, EU:C:2014:341), point 90.
( ) C‑140/12, EU:C:2013:565, paragraphs 46 and 47.
( ) C‑333/13, EU:C:2014:2358, paragraph 60 et seq.
( ) C‑67/14, EU:C:2015:597.
( ) See paragraph 33 of its application.
( ) Paragraph 32 of the application.
( ) The Court has on many occasions addressed the relationship between the free movement of Union citizens who are economically inactive or seeking employment and their entitlement to various kinds of social benefits. See, in particular, inter alia, the judgments in Martínez Sala, C‑85/96, EU:C:1998:217; Grzelczyk, C‑184/99, EU:C:2001:458; D’Hoop, C‑224/98, EU:C:2002:432; Collins, C‑138/02, EU:C:2004:172; Trojani, C‑456/02, EU:C:2004:488; Bidar, C‑209/03, EU:C:2005:169; Vatsouras and Koupatantze, C‑22/08 and C‑23/08, EU:C:2009:344; and the judgments in Brey, C‑140/12, EU:C:2013:565; Dano, C‑333/13, EU:C:2014:2358; and Alimanovic, C‑67/14, EU:C:2015:597.
( ) In that regard, I cannot agree with the Commission’s assertion in paragraph 18 of its reply that, with regard to social security benefits such as those at issue in this case, the test of lawful residence introduces a barrier to movement that would not occur if solely a test of habitual residence were applied.
( ) See, in particular, the judgment in Martínez Sala (C‑85/96, EU:C:1998:217), paragraph 63 [‘a citizen of the European Union, lawfully resident in the territory of the host Member State can rely on Article 6 of the Treaty in all situations which fall within the scope ratione materiae of Community law’ (emphasis added)], a finding that is repeated verbatim in the judgments in Grzelczyk, C‑184/99, EU:C:2001:458, paragraph 32, and Bidar, C‑209/03, EU:C:2005:169, paragraph 32, paragraph 46 of which states that ‘Article 3 of Directive 93/96 does not preclude a national of a Member State who, by virtue of Article 18 EC and Directive 90/364, is lawfully resident in the territory of another Member State where he intends to start or pursue higher education from relying during that residence on the fundamental principle of equal treatment enshrined in the first paragraph of Article 12 EC’ (emphasis added). See also the judgment in Trojani (C‑456/02, EU:C:2004:488), in which, before going on to examine the effects of the principle of equal treatment in Mr Trojani’s case, points out that he ‘is lawfully resident in Belgium’ (paragraph 37).
( ) C‑140/12, EU:C:2013:565, paragraph 44, which has been the subject of intensive discussion between the parties during these proceedings.
( ) C‑333/13, EU:C:2014:2358, paragraph 69.
( ) Irrespective of the fact that, since the judgment in Alimanovic (C‑67/14, EU:C:2015:597) quotes paragraph 69 of the judgment in Dano (C‑333/13, EU:C:2014:2358), the language it uses is more precise in that it refers to ‘access to social assistance, such as that at issue in the main proceedings’ (paragraph 49).
( ) See, in that regard, the judgment in Dano (C‑333/13, EU:C:2014:2358): ‘any unequal treatment between Union citizens who have made use of their freedom of movement and residence and nationals of the host Member State with regard to the grant of social benefits is an inevitable consequence of Directive 2004/38’ (paragraph 77), which cites the Opinion of Advocate General Wathelet delivered in that case (C‑333/13, EU:C:2014:341), points 93 and 96.
( ) Regarding permanent residence, see also Article 19 of Directive 2004/38.
( ) A purpose which the Court has deemed lawful since the judgment in Grzelczyk (C‑184/99, EU:C:2001:458), paragraph 44. It should be borne in mind that the aim of protecting public finances is not strictly economic, but rather that the Court associates it with the indirect objective of protecting the overall level of assistance that the State in question is able to offer (judgments in Bidar, C‑209/03, EU:C:2005:169, paragraph 56, Brey, C‑140/12, EU:C:2013:565, paragraph 61 and Dano, C‑333/13, EU:C:2014:2358, paragraph 63).
( ) Paragraph 37 of the defence.
( ) C‑140/12, EU:C:2013:565, especially paragraph 69.
( ) It should be recalled that, under Article 14(2) of Directive 2004/38, ‘Union citizens and their family members shall have the right of residence provided for in Articles 7, 12 and 13 as long as they meet the conditions set out therein. In specific cases where there is a reasonable doubt as to whether a Union citizen or his/her family members satisfies the conditions set out in Articles 7, 12 and 13, Member States may verify if these conditions are fulfilled. This verification shall not be carried out systematically’.
( ) According to the statements made by the United Kingdom, these checks are carried out as follows: the claimant has to complete the claim form with information which may be used to determine whether he has a right of residence in the United Kingdom; once they receive the form, the authorities responsible for deciding whether to grant the benefits then carry out the relevant checks; in specific cases, the authorities require claimants to produce evidence to show whether they actually have the right of residence as shown by the information provided in the form.
( ) It should be borne in mind that this procedure applies not only to Union citizens, but also to third-country nationals, who may be entitled to the family benefits in question if they have a right of residence in the United Kingdom and fulfil the requirements of being present in and having their habitual residence in that State.
( ) Loss of the right of residence in the host Member State under Directive 2004/38 is an automatic consequence of failure to fulfil the requirements set out therein.
( ) Article 15(1) of Directive 2004/38 provides that ‘[t]he procedures provided for by Articles 30 and 31 shall apply by analogy to all decisions restricting free movement of Union citizens and their family members on grounds other than public policy, public security or public health’. As Advocate General Wahl points out in his Opinion delivered in Brey (C‑140/12, EU:C:2013:337), ‘Union citizens undoubtedly enjoy the procedural guarantees referred to in Article 15 of the Directive, which cannot be circumvented through proceedings which deal not only with that person’s entitlement to a benefit, but also with his right of residence altogether’ (point 93).
( ) Despite what the German-language version of Article 7(1)(b) of that directive appears to indicate; see, in that regard, the Opinion of Advocate General Wahl delivered in Brey (C‑140/12, EU:C:2013:337), point 74 et seq.
( ) C‑140/12, EU:C:2013:565, paragraph 64 et seq. I also agree with the argument put forward by Advocate General Wathelet in his Opinions delivered in Alimanovic (C‑67/14, EU:C:2015:210), point 107 et seq., and García Nieto (C‑299/14, EU:C:2015:366), point 85 et seq., to the effect that the national authorities should also take account for that purpose of other representative elements that demonstrate a real link between the Union citizen and the host Member State (ultimately, whether he is socially and economically integrated into that State which, in the final analysis, is what the United Kingdom asserts that it wishes to ensure), such as the fact of having worked in the past, a previous contribution history, dependent children in education (see the findings by the Court in the judgment in Ibrahim, C‑310/08, EU:C:2010:89) or the existence of close ties of a personal nature with the Member State in question (see, in that regard, the judgments in Prete, C‑367/11, EU:C:2012:668, paragraph 50, and Stewart, C‑503/09, EU:C:2011:500, paragraph 100). |
JUDGMENT OF THE COURT (Fifth Chamber)
26 November 2015 ( * )
‛Reference for a preliminary ruling — Public procurement — Directive 89/665/EEC — Principles of effectiveness and equivalence — Review procedures concerning the award of public contracts — Period allowed for commencing proceedings — National legislation making an action for damages subject to a precondition that the procedure be declared unlawful — Limitation period which starts to run irrespective of the applicant’s knowledge of the unlawfulness’
In Case C‑166/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Verwaltungsgerichtshof (Administrative Court, Austria), made by decision of 25 March 2014, received at the Court on 7 April 2014, in the proceedings
MedEval — Qualitäts-, Leistungs- und Struktur-Evaluierung im Gesundheitswesen GmbH,
intervening parties:
Bundesminister für Wissenschaft, Forschung und Wirtschaft,
Hauptverband der österreichischen Sozialversicherungsträger,
Pharmazeutische Gehaltskasse für Österreich,
THE COURT (Fifth Chamber),
composed of T. von Danwitz, President of the Fourth Chamber, acting as President of the Fifth Chamber, D. Šváby, A. Rosas, E. Juhász (Rapporteur) and C. Vajda, Judges,
Advocate General: J. Kokott,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 22 April 2015,
after considering the observations submitted on behalf of:
—
MedEval — Qualitäts-, Leistungs- und Struktur-Evaluierung im Gesundheitswesen GmbH, by M. Oder and A. Hiersche, Rechtsanwälte,
—
the Hauptverband der österreichischen Sozialversicherungsträger, by G. Streit, Rechtsanwalt,
—
the Austrian Government, by M. Fruhmann, acting as Agent,
—
the Italian Government, by G. Palmieri, acting as Agent, and by A. De Stefano, avvocato dello Stato,
—
the European Commission, by B.-R. Killmann and A. Tokár, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 21 May 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ 1989 L 395, p. 33), as amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 (OJ 2007 L 335, p. 31; ‘Directive 89/665’), and the principles of effectiveness and equivalence.
The reference has been made in proceedings brought by MedEval — Qualitäts-, Leistungs- und Struktur-Evaluierung im Gesundheitswesen GmbH (‘MedEval’) against a decision of the Bundesvergabeamt (Federal Procurement Office; ‘the FPO’), by which the latter rejected MedEval’s application for a declaration of the unlawfulness of the public procurement procedure held by the Hauptverband der österreichischen Sozialversicherungsträger (Central Association of Austrian Social Security Institutions) (‘the Hauptverband’) and concerning the implementation of an electronic medical prescription management system, which public contract was awarded to the Pharmazeutische Gehaltskasse für Österreich (General Salary Fund of Austrian pharmacists; ‘the GSF’).
Legal context
EU law
Recitals 2, 13, 14, 25 and 27 in the preamble to Directive 2007/66 state:
‘(2)
[Directive 89/665] … therefore [applies] only to contracts falling within the scope of [Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 351, p. 11)] … as interpreted by the Court of Justice of the [European Union], whatever competitive procedure or means of calling for competition is used, including design contests, qualification systems and dynamic purchasing systems. According to the case-law of the Court of Justice, the Member States should ensure that effective and rapid remedies are available against decisions taken by contracting authorities and contracting entities as to whether a particular contract falls within the personal and material scope of [Directive 2004/18] …
…
(13)
In order to combat the unlawful direct award of contracts, which the Court of Justice … has called the most serious breach of [EU] law in the field of public procurement on the part of a contracting authority or contracting entity, there should be provision for effective, proportionate and dissuasive sanctions. Therefore a contract resulting from an unlawful direct award should in principle be considered ineffective. The ineffectiveness should not be automatic but should be ascertained by or should be the result of a decision of an independent review body.
(14)
Ineffectiveness is the most effective way to restore competition and to create new business opportunities for those economic operators which have been deprived unlawfully of their opportunity to compete. …
…
(25)
Furthermore, the need to ensure over time the legal certainty of decisions taken by contracting authorities and contracting entities requires the establishment of a reasonable minimum period of limitation on reviews seeking to establish that the contract is ineffective.
…
(27)
As this Directive strengthens national review procedures, especially in cases of an unlawful direct award, economic operators should be encouraged to make use of these new mechanisms. For reasons of legal certainty the enforceability of the ineffectiveness of a contract is limited to a certain period. The effectiveness of these time-limits should be respected.’
Article 1 of Directive 89/665 provides:
‘1. This Directive applies to contracts referred to in [Directive 2004/18], unless such contracts are excluded in accordance with Articles 10 to 18 of that Directive.
…
Member States shall take the measures necessary to ensure that, as regards contracts falling within the scope of [Directive 2004/18], decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in Articles 2 to 2f of this Directive, on the grounds that such decisions have infringed Community law in the field of public procurement or national rules transposing that law.
…
3. Member States shall ensure that review procedures are available, under detailed rules which Member States may establish, at least to any person having or having had an interest in obtaining a particular contract who has been or risks being harmed by an alleged infringement.
…’
Article 2 of Directive 89/665, entitled ‘Requirements for review procedures’, states:
‘1. Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for powers to:
…
(b)
either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure;
(c)
award damages to persons harmed by an infringement.
…
6. Member States may provide that where damages are claimed on the grounds that a decision was taken unlawfully, the contested decision must first be set aside by a body having the necessary powers.
7. Except where provided for in Articles 2d to 2f, the effects of the exercise of the powers referred to in paragraph 1 of this Article on a contract concluded subsequent to its award shall be determined by national law.
Furthermore, except where a decision must be set aside prior to the award of damages, a Member State may provide that, after the conclusion of a contract in accordance with Article 1(5), paragraph 3 of this Article or Articles 2a to 2f, the powers of the body responsible for review procedures shall be limited to awarding damages to any person harmed by an infringement.
…’
Article 2c of that directive, entitled ‘Time-limits for applying for review’, is worded as follows:
‘Where a Member State provides that any application for review of a contracting authority’s decision taken in the context of, or in relation to, a contract award procedure falling within the scope of [Directive 2004/18] must be made before the expiry of a specified period, this period shall be at least 10 calendar days with effect from the day following the date on which the contracting authority’s decision is sent to the tenderer or candidate if fax or electronic means are used or, if other means of communication are used, this period shall be either at least 15 calendar days with effect from the day following the date on which the contracting authority’s decision is sent to the tenderer or candidate or at least 10 calendar days with effect from the day following the date of the receipt of the contracting authority’s decision. The communication of the contracting authority’s decision to each tenderer or candidate shall be accompanied by a summary of the relevant reasons. In the case of an application for a review concerning decisions referred to in Article 2(1)(b) of this Directive that are not subject to a specific notification, the time period shall be at least 10 calendar days from the date of the publication of the decision concerned.’
Under the heading ‘Ineffectiveness’, Article 2d(1) of that directive provides:
‘Member States shall ensure that a contract is considered ineffective by a review body independent of the contracting authority or that its ineffectiveness is the result of a decision of such a review body in any of the following cases:
(a)
if the contracting authority has awarded a contract without prior publication of a contract notice in the Official Journal of the European Union without this being permissible in accordance with [Directive 2004/18];
…’
Under Article 2f of Directive 89/665, headed ‘Time-limits’:
‘1. Member States may provide that the application for review in accordance with Article 2d(1) must be made:
…
(b)
and in any case before the expiry of a period of at least six months with effect from the day following the date of the conclusion of the contract.
2. In all other cases, including applications for a review in accordance with Article 2e(1), the time-limits for the application for a review shall be determined by national law, subject to the provisions of Article 2c.’
Austrian law
The provisions transposing Directive 89/665 are found, in essence, in Chapter II of the fourth section of the Federal Law of 2006 on Procurement (Bundesvergabegesetz 2006; ‘BVergG 2006’), which has been amended on a number of occasions.
In the version in force on 1 March 2011, the date on which MedEval complained to the FPO, Paragraph 312(3)(3) of the BVergG 2006 provided that that office had the power to declare a public procurement procedure unlawful, in particular on the ground that that procedure was implemented without prior notice or without prior call for competition.
Under Paragraph 331 of the BVergG 2006:
‘(1) Where an undertaking had an interest in the conclusion of a contract within the scope of application of this Federal Law, it may, in so far as it has suffered harm in consequence of the alleged infringement, apply for a declaration that:
…
2.
the implementation of a public procurement procedure without prior notice or without prior call for competition was unlawful on the grounds of an infringement of this Federal Law, the regulations issued on the basis of this law, or directly applicable Community law, …
…’
Paragraph 332(3) of the BVergG 2006, entitled ‘Content and admissibility of the application for a declaration’ was worded as follows:
‘Applications pursuant to Paragraph 331(1)(2) to (4), must be lodged within six months of the day following the date of the award of the contract. …’
Paragraph 334(2) of the BVergG 2006 provided that, following the declaration that a procurement procedure was unlawfully conducted without the prior issue of a contract notice, the FPO must, in principle, declare the contract null and void.
Under the heading ‘Competence and proceedings’, Paragraph 341(2) of the BVergG 2006 provided:
‘A claim for damages is admissible only if there has been a prior declaration by the competent procurement supervisory authority that
…
2.
the implementation of a public procurement procedure without prior notice or without prior call for competition was unlawful on the grounds of an infringement of this Federal Law, the regulations issued on the basis of this law, or directly applicable Community law, …
…’
The main proceedings and the question referred
On 10 August 2010, the Hauptverband concluded an agreement with the GSF concerning ‘the implementation of a pilot project for the electronic medical prescription management (“e-Medikation”) project in three pilot regions, including the requisite set-up and operation services’. It is apparent from the order for reference that the date of conclusion of the agreement was the same date as the award of the contract.
On 1 March 2011, MedEval applied to the FPO for a declaration that the public procurement procedure was unlawful since it infringed the BVergG 2006, on the ground that the notice of the contract in question was not published in advanced and there was no prior call for competition.
On 13 May 2011, on the basis of Paragraph 332(3) of the BVergG 2006, the FPO declared MedEval’s action inadmissible. The FPO took the view that the starting point of the six-month limitation period provided for in that article within which to bring an action for a declaration of unlawfulness was the day following the award of the contract, irrespective of whether or not MedEval was aware, at that time, of the unlawfulness of the procedure at issue which, in the view of the FPO, was authorised by Article 2f(1)(b) of Directive 89/665.
MedEval brought an appeal before the Verwaltungsgerichtshof (Administrative Court) against that decision.
The referring court notes that, under Paragraph 312(3) of the BVergG 2006, the FPO is competent to make certain declarations following the award of the contract, including a declaration of the unlawfulness of a public procurement procedure without prior notice or prior call for competition. In that regard, that court points out that an action for a declaration of unlawfulness must be brought within six months of the day following the date of the award of the contract, in accordance with Paragraph 332(3) of the BVergG 2006.
It notes that, under Paragraph 341(2) of the BVergG 2006, a claim for damages connected with the unlawful award of a public contract is admissible only if the FPO has first declared that the public procurement procedure, carried out without prior publication of a contract notice or a call for competition, was unlawful. In that regard, that court points out that actions for a declaration of unlawfulness must be brought within six months of the day following the date of award of the contract in accordance with Paragraph 332(3) of the BVergG 2006.
The referring court states that that particular aspect of its national law follows from the fact that, if the FPO finds that the public procurement procedure is unlawful due to the lack of publication of a prior contract notice, the FPO must, in principle, declare that the contract is null and void. That specificity is thus such as to create a close link between the actions for damages and those seeking to terminate the agreement concluded in the award of a contract.
The referring court is doubtful as to whether making the admissibility of an action for damages in respect of infringement of the public procurement rules subject to a prescriptive six-month limitation period which starts running on the day following the date of award of the contract, irrespective of whether or not the applicant was aware of that award, complies with Directive 89/665 and with the principles of equivalence and effectiveness.
To support its query, that court relies in particular on the judgment in Uniplex (UK) (C‑406/08, EU:C:2010:45), according to which the period for bringing proceedings to obtain damages should start to run from the date on which the claimant knew, or ought to have known, of that alleged infringement.
Finally, that court points out the fact that that judgment was delivered by the Court before the adoption of Directive 2007/66, during which time Directive 89/665 did not lay down any specific provision concerning the limitation periods as regards the bringing of proceedings in public procurement disputes.
In those circumstances, the Verwaltungsgerichtshof (Administrative Court) decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:
Consideration of the question referred
By its question, the referring court asks, in essence, whether EU law, in particular the principles of effectiveness and equivalence, precludes national legislation which makes bringing an action for damages in respect of the infringement of a rule of public procurement law subject to a prior finding that the public procurement procedure for the contract in question was unlawful because of the lack of prior publication of a contract notice, where the action for a declaration of unlawfulness is subject to a six-month limitation period which starts to run on the day after the date of the award of the public contract in question, irrespective of whether or not the applicant in that action was in a position to know of the unlawfulness affecting the decision of the awarding authority.
As a preliminary point, it must be borne in mind that, in accordance with the first and second subparagraphs of Article 1(1) of Directive 89/665, read in the light of recital 2 in the preamble to Directive 2007/66, Directive 89/665 applies, in a context such as that in the main proceedings, only to contracts falling within the scope of Directive 2004/18, unless, however, such contracts are excluded in accordance with Articles 10 to 18 of that directive. The following considerations are therefore based on the premiss that Directive 2004/18 is applicable to the contract at issue in the main proceedings and, therefore, that Directive 89/665 is also applicable to the procedure in the main proceedings, which it is for the referring court to ascertain.
It is appropriate to recall that Article 1(1) and (3) of Directive 89/655 requires the Member States to take the measures necessary to ensure that decisions taken by the contracting authorities which are incompatible with EU law may be reviewed effectively and, in particular, as rapidly as possible and ensure wide availability of reviews with respect to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement (judgment in Orizzonte Salute, C‑61/14, EU:C:2015:655, paragraph 43).
To that effect, Directive 89/665 provides, in Article 2(1), that the Member States are to provide in their national laws for three types of action enabling persons harmed in a public procurement procedure to apply to the competent authority for, firstly, ‘interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of [the] public contract or the implementation of any decision taken by the contracting authority’, secondly, the setting aside of decisions taken unlawfully and, thirdly, the award of damages.
With regard to the limitation periods for bringing actions, Article 2f(1) of Directive 89/665, inserted by Directive 2007/66, states that the Member States may provide for limitation periods for applications under Article 2d to have a contract declared ineffective and, in any case, a limitation period of at least six months with effect from the day following the date of the conclusion of the contract.
In that regard, recitals 25 and 27 in the preamble to Directive 2007/66 state that the period of limitation on reviews seeking to establish that the contract is ineffective is justified by ‘the need to ensure over time the legal certainty of decisions taken by contracting authorities and contracting entities’, which requires that ‘the effectiveness of these time-limits … be respected’.
As regards all the other legal actions concerning public contracts, including actions for damages, Article 2f(2) of Directive 89/665 states that, subject to the provisions of Article 2c of that directive, not relevant to the question referred, ‘the time-limits for the application for a review shall be determined by national law’. Accordingly, it is for each Member State to define those procedural time-limits.
The fact that the EU legislature decided, firstly, expressly to regulate the time-limits concerning actions for a declaration that a contract is ineffective and, secondly, to leave the time-limits concerning actions of a different kind to be decided under the Member States’ national laws shows that the legislature accorded a particular importance to the first category of actions, in the light of the efficiency of the system of actions concerning public procurement.
Thus, Article 2f(1)(b) of Directive 89/665 does not preclude provisions of national law such as those at issue in the main proceedings which provide that an action seeking to have declared ineffective a public contract concluded without prior publication of a contract notice or prior call for competition must be brought within a period of six months with effect from the day following the date of award of that contract, in so far as the date of award of the contract corresponds to the date of conclusion of the contract. Such provisions also correspond to the aim pursued by Article 2f(1)(b) of Directive 89/665 set out in particular in recital 27 in the preamble to Directive 2007/66, according to which the limitation on the enforceability of the ineffectiveness of a contract should be respected.
As regards actions for damages, it must be noted that Directive 89/665 provides, in Article 2(6), that Member States may provide that where damages are claimed, the contested decision must first be set aside ‘by a body having the necessary powers’ without, however, laying down a rule as regards the time-limits for bringing actions or other conditions for the admissibility of such actions.
In the present case it appears, in principle, that Article 2(6) of Directive 89/665 does not preclude a provision of national law such as Paragraph 341(2) of the BVergG 2006 under which a claim for damages is admissible only if there has been a prior finding of an infringement of procurement law. However, the combined application of Paragraph 341(2) of the BVergG 2006 and Paragraph 332(3) of the same law has the effect that an action for damages is inadmissible in the absence of a prior decision finding that the public procurement procedure for the contract in question was unlawful, where the action for a declaration of unlawfulness is subject to a six-month limitation period which starts to run on the day after the date of the award of the public contract in question, irrespective of whether or not the applicant was in a position to know of the unlawfulness affecting that award decision.
Having regard to the considerations in paragraphs 32 and 35 of the present judgment, it is for the Member States to lay down the detailed procedural rules governing actions for damages. Those detailed procedural rules must, however, be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render practically impossible or excessively difficult the exercise of rights conferred by EU law (principle of effectiveness) (see, to that effect, judgments in eVigilo, C‑538/13, EU:C:2015:166, paragraph 39, and Orizzonte Salute, C‑61/14, EU:C:2015:655, paragraph 46).
In consequence, it is necessary to examine whether the principles of effectiveness and equivalence preclude a national rule such as that set out in paragraph 36 of the present judgment.
As regards the principle of effectiveness, it is appropriate to point out that the degree of necessity for legal certainty concerning the conditions for the admissibility of actions is not identical for actions for damages and actions seeking to have a contract declared ineffective.
Rendering a contract concluded following a public procurement procedure ineffective puts an end to the existence and possibly the performance of that contract, which constitutes a significant intervention by the administrative or judicial authority in the contractual relations between individuals and State bodies. Such a decision can thus cause considerable upset and financial losses not only to the successful tenderer for the public contract in question, but also to the awarding authority and, consequently, to the public, the end beneficiary of the supply of work or services under the public contract in question. As is apparent from recitals 25 and 27 in the preamble to Directive 2007/66, the EU legislature placed greater importance on the requirement for legal certainty as regards actions for a declaration that a contract is ineffective than as regards actions for damages.
Making the admissibility of actions for damages subject to a prior finding that the public procurement procedure for the contract in question was unlawful because of the lack of prior publication of a contract notice, where the action for a declaration of unlawfulness is subject to a six-month limitation period, irrespective of whether or not the person harmed knew that there had been an infringement of a rule of law, is likely to render impossible in practice or excessively difficult the exercise of the right to bring an action for damages.
Where there has been no prior publication of a contract notice, such a limitation period of six months is likely not to enable a person harmed to gather the necessary information with a view to a possible action, thus preventing that action from being brought.
Awarding damages to persons harmed by an infringement of the public procurement rules constitutes one of the remedies guaranteed under EU law. Thus, in circumstances such as those at issue in the main proceedings, the person harmed is deprived not only of the possibility of having the awarding authority’s decision annulled, but also of all the remedies provided for in Article 2(1) of Directive 89/665.
Consequently, the principle of effectiveness precludes a system such as that at issue in the main proceedings.
In those circumstances, there is no need to examine whether the principle of equivalence precludes a national rule such as that at issue in the main proceedings.
Having regard to the foregoing considerations, the answer to the question referred is that EU law and in particular the principle of effectiveness preclude national legislation which makes bringing an action for damages in respect of the infringement of a rule of public procurement law subject to a prior finding that the public procurement procedure for the contract in question was unlawful because of the lack of prior publication of a contract notice, where the action for a declaration of unlawfulness is subject to a six-month limitation period which starts to run on the day after the date of the award of the public contract in question, irrespective of whether or not the applicant in that action was in a position to know of the unlawfulness affecting the decision of the awarding authority.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
European Union law, in particular the principle of effectiveness, precludes national legislation which makes bringing an action for damages in respect of the infringement of a rule of public procurement law subject to a prior finding that the public procurement procedure for the contract in question was unlawful because of the lack of prior publication of a contract notice, where the action for a declaration of unlawfulness is subject to a six-month limitation period which starts to run on the day after the date of the award of the public contract in question, irrespective of whether or not the applicant in that action was in a position to know of the unlawfulness affecting the decision of the awarding authority.
[Signatures]
( * ) Language of the case: German. |
Provisional text JUDGMENT OF THE GENERAL COURT (Fifth Chamber) 28 February 2017 (*) (Subsidies — Imports of crystalline silicon photovoltaic modules and key components (cells) originating in or consigned from China — Definitive countervailing duty — Undertakings — Action for annulment — Interest in bringing proceedings — Admissibility — Scope of the investigation — Sampling — Definition of the product concerned) In Joined Cases T‑158/14, T‑161/14 and T‑163/14,
JingAo Solar Co. Ltd, established in Ningjin (China), and the other applicants whose names appear in the annex, represented initially by A. Willems, S. De Knop and J. Charles, and subsequently by A. Willems and S. De Knop, lawyers, applicants, v
Council of the European Union, represented by B. Driessen, acting as Agent, B. O’Connor, Solicitor, and S. Gubel, lawyer, defendant, supported by
European Commission, represented initially by J.-F. Brakeland, T. Maxian Rusche, and A. Stobiecka-Kuik, and subsequently by J.-F. Brakeland, T. Maxian Rusche, and A. Demeneix, acting as Agents, intervener, APPLICATION under Article 263 TFEU for the annulment of Council Implementing Regulation (EU) No 1239/2013 of 2 December 2013 imposing a definitive countervailing duty on imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People’s Republic of China (OJ 2013 L 325, p. 66), in so far as it applies to the applicants, THE GENERAL COURT (Fifth Chamber), composed of A. Dittrich, President, J. Schwarcz (Rapporteur) and V. Tomljenović, Judges, Registrar: C. Heeren, Administrator, having regard to the written part of the procedure and further to the hearing on 9 June 2016, gives the following
Judgment
Background to the dispute
1 The applicants, JingAo Solar Co. Ltd and the other applicants whose names appear in the annex, are companies belonging to the JA Solar, Yingli Green Energy Holding Ltd and Canadian Solar groups respectively. JingAo Solar, Shanghai JA Solar Technology Co. Ltd, Yangzhou JA Solar Technology Co. Ltd, Hefei JA Solar Technology Co. Ltd, Shanghai JA Solar PV Technology Co. Ltd, Yingli Energy (China) Co. Ltd, Baoding Tianwei Yingli New Energy Resources Co. Ltd, Hainan Yingli New Energy Resources Co. Ltd, Hengshui Yingli New Energy Resources Co. Ltd, Tianjin Yingli New Energy Resources Co. Ltd, Lixian Yingli New Energy Resources Co. Ltd, Baoding Jiasheng Photovoltaic Technology Co. Ltd, Beijing Tianneng Yingli New Energy Resources Technology Co. Ltd, Yingli Energy (Beijing) Co. Ltd, Canadian Solar Manufacturing (Changshu), Inc., Canadian Solar Manufacturing (Luoyang), Inc., Csi Cells Co. Ltd and Csi Solar Power (China), Inc. are exporting producers of crystalline silicon photovoltaic cells and modules (‘cells’ and ‘modules’ respectively). JA Solar, Yingli Green Energy Europe, Yingli Green Energy South East Europe GmbH, Yingli Green Energy France SAS, Yingli Green Energy Spain, SL, Yingli Green Energy Italia Srl, Yingli Green Energy International AG and Canadian Solar Emea GmbH are presented as their associated importers established in the European Union.
2 On 6 September 2012, the European Commission published in the Official Journal of the European Union a notice of initiation of an anti-dumping proceeding concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in the People’s Republic of China (OJ 2012 C 269, p. 5).
3 Alongside this, on 8 November 2012, the Commission published in the Official Journal of the European Union a notice of initiation of an anti-subsidy proceeding concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in the People’s Republic of China (OJ 2012 C 340, p. 13).
4 The JA Solar, Yingli Green Energy Holding Limited, and Canadian Solar groups cooperated in that proceeding.
5 On 23 November 2012, the applicants, which are exporting producers, asked to be included in the sample under Article 27 of Council Regulation (EC) No 597/2009 of 11 June 2009 on protection against subsidised imports from countries not members of the European Community (OJ 2009 L 188, p. 93, ‘the basic regulation’).
6 The sample selected by the Commission consisted initially of seven groups of companies, including the three cooperating exporters with the largest volume of exports of modules, the two cooperating exporters with the largest volume of exports of cells and the two cooperating exporters with the largest volume of exports of wafers. The number of exporting producers making up the sample was eventually fixed at eight, since two groups of companies, namely Jinko Solar and Renesola Jiangsu Ltd, were not definitively considered to be related. The exporting producers in the JA Solar and Yingli Green Energy Holding groups were selected as one of the exporting producers with the largest volume of exports of cells and of modules respectively. The exporting producers in the Canadian Solar group were not selected for that sample.
7 On 28 January 2013, the applicants in Cases T‑158/14 and T‑161/14 submitted their replies to the anti-subsidy questionnaire.
8 On 1 March 2013, the Commission adopted Regulation (EU) No 182/2013 making imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in or consigned from the People’s Republic of China subject to registration (OJ 2013 L 61, p. 2).
9 On 4 June 2013, the Commission adopted Regulation (EU) No 513/2013 imposing a provisional anti-dumping duty on imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in or consigned from the People’s Republic of China and amending Regulation (EU) No 182/2013 (OJ 2013 L 152, p. 5).
10 On 2 August 2013, the Commission adopted Decision 2013/423/EU accepting an undertaking offered in connection with the anti-dumping proceeding concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in or consigned from the People’s Republic of China (OJ 2013 L 209, p. 26). That undertaking was offered by a group of Chinese cooperating exporting producers listed in annex to that decision, together with the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME).
11 On the same day, the Commission adopted Regulation (EU) No 748/2013 amending Regulation No 513/2013 (OJ 2013 L 209, p. 1) in order to take account of Decision 2013/423. In essence, subject to the fulfilment of certain conditions, Article 6 of that regulation, as amended, provides, inter alia, that imports declared for release into free circulation for products currently falling within CN code ex 3818 00 10 (TARIC codes 3818 00 10 11 and 3818 00 10 19) and CN code ex 8541 40 90 (TARIC codes 8541 40 90 21, 8541 40 90 29, 8541 40 90 31 and 8541 40 90 39) which are invoiced by companies from which undertakings have been accepted by the Commission and whose names are listed in the annex to Decision 2013/423, are to be exempt from the provisional anti-dumping duty imposed by Article 1 of the regulation.
12 On 27 August 2013, the Commission disclosed the essential facts and considerations on the basis of which it intended to propose the imposition of countervailing duties on imports of modules and key components (cells) originating in or consigned from China.
13 According to recital 4 of Commission Implementing Decision 2013/707/EU of 4 December 2013 confirming the acceptance of an undertaking offered in connection with the anti-dumping and anti-subsidy proceedings concerning imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People’s Republic of China for the period of application of definitive measures (OJ 2013 L 325, p. 214), following the adoption of the provisional anti-dumping measures (see paragraph 9 above), the Commission continued the investigation of dumping, injury and EU interest, as well as the parallel anti-subsidy proceeding. Wafers were excluded from the scope of both investigations and hence from the scope of the definitive measures.
14 According to recitals 7 to 10 and Article 1 of that decision, following the definitive disclosure of the anti-dumping and anti-subsidy findings, the exporting producers together with the CCCME submitted a notification to amend their initial undertaking offer (see paragraph 10 above). The Commission accepted the terms of the undertaking with a view also to eliminating any injurious effects of the subsidised imports. In addition, an additional number of exporting producers asked to participate in that undertaking. Furthermore, the CCCME and the exporting producers asked to revise the undertaking to take account of the exclusion of wafers from the scope of the investigation.
15 By virtue of Article 1 of Implementing Decision 2013/707, read in the light of recital 26 thereof, the amended undertaking was accepted by the Commission.
16 The definitive findings of the investigation are set out in Council Implementing Regulation (EU) No 1239/2013 of 2 December 2013 imposing a definitive countervailing duty on imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People’s Republic of China (OJ 2013 L 325, p. 66, ‘the contested regulation’). Article 1 imposes (i) a definitive countervailing duty of 5% on JingAo Solar, Shanghai JA Solar Technology, Yangzhou JA Solar Technology, Hefei JA Solar Technology, Shanghai JA Solar PV Technology, (ii) a definitive countervailing duty of 6.3% on Yingli Energy (China), Baoding Tianwei Yingli New Energy Resources, Hainan Yingli New Energy Resources, Hengshui Yingli New Energy Resources, Tianjin Yingli New Energy Resources, Lixian Yingli New Energy Resources, Baoding Jiasheng Photovoltaic Technology, Beijing Tianneng Yingli New Energy Resources Technology, and Yingli Energy (Beijing) and (iii) a definitive countervailing duty of 6.4% on the cooperating non-sampled Chinese companies listed in the annex to the contested regulation. This is the case for the exporting producers in the Canadian Solar group. The definitive duty equates to the weighted average of the sampled companies’ rates. Subject to the fulfilment of certain conditions, Article 2 of that regulation provides, in essence, that imports declared for release into free circulation for the products currently falling within CN code ex 8541 40 90 (TARIC codes 8541 40 90 21, 8541 40 90 29, 8541 40 90 31 and 8541 40 90 39) which are invoiced by companies from which undertakings have been accepted by the Commission, and whose names are listed in the annex to Decision 2013/707, are to be exempt from the anti-subsidy duty imposed by Article 1 of the regulation.
17 On 2 December 2013, the Council of the European Union also adopted Implementing Regulation (EU) No 1238/2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People’s Republic of China (OJ 2013 L 325, p. 1).
18 After the application was lodged, the Commission adopted Implementing Regulation (EU) No 2015/866 of 4 June 2016 withdrawing the acceptance of the undertaking for three exporting producers under Implementing Decision 2013/707 (OJ 2015 L 139, p. 30). Pursuant to Article 1 of this regulation, acceptance of the undertaking, concerning notably Canadian Solar Manufacturing (Changshu), Canadian Solar Manufacturing (Luoyang), Csi Cells, and Csi Solar Power (China), jointly covered by the additional TARIC code B805, is withdrawn. That regulation entered into force the day after its publication in the Official Journal of the European Union, that is to say, 6 June 2015.
19 On 15 November 2016, the Commission adopted Implementing Regulation (EU) No 2016/1998 withdrawing the acceptance of the undertaking for five exporting producers under Implementing Decision 2013/707 (OJ 2016 L 308, p. 8). Pursuant to Article 1(d) of that regulation, acceptance of the undertaking, as regards the companies JingAo Solar, Shanghai JA Solar Technology, JA Solar Technology Yangzhou, Hefei JA Solar Technology et Shanghai JA Solar PV Technology, and their associated company in the European Union, jointly covered by the additional TARIC code: B794, is withdrawn. That regulation entered into force the day after its publication in the Official Journal of the European Union, that is to say, 17 November 2016. Procedure and forms of order sought
20 By applications lodged at the Court Registry on 28 February 2014, the applicants brought the present action.
21 By document lodged at the Court Registry on 19 May 2014, the Commission applied for leave to intervene in the present proceedings in support of the form of order sought by the Council.
22 By document lodged at the Court Registry on 20 May 2014, the Council requested that the present cases be joined with JingAo Solar and Others v Council (T‑157/14), Yingli Energy (China) and Others v Council (T‑160/14) and Canadian Solar Emea and Others v Council (T‑162/14) concerning actions for annulment of Regulation No 1238/2014.
23 By decision of 10 July 2014, the President of the Fifth Chamber of the Court refused the request to join the present cases with JingAo Solar and Others v Council (T‑157/14) and Yingli Energy (China) and Others v Council (T‑160/14), Canadian Solar Emea and Others v Council (T‑162/14).
24 By order of 14 July 2014, the President of the Fifth Chamber of the Court granted the Commission leave to intervene.
25 By decision of the President of the Fifth Chamber of the General Court of 16 July 2014, the present cases were joined for the purposes of the written and oral parts of the procedure and the final ruling.
26 On a proposal from the Judge-Rapporteur, the Court decided to open the oral part of the procedure. The parties presented oral argument and their replies to the questions put by the Court at the hearing on 9 June 2016.
27 The applicants claim that the Court should: – declare the action admissible; – annul the contested regulation as far as it applies to them; – order the Council to pay the costs.
28 The Council contends that the Court should: – dismiss the action as inadmissible; – in the alternative, dismiss the action as unfounded; – in the alternative, annul Article 1 of the contested regulation, in the event that the first or second plea in law is upheld, in so far as it imposes a definitive countervailing duty on imports of modules and cells consigned from China and exported by the applicants; – order the applicants to pay the costs.
29 The Commission contends that the Court should: – dismiss the action as inadmissible; – in the alternative, dismiss the action as unfounded; – order the applicants to pay the costs, including those of the intervener. Law
The objections of inadmissibility raised by the institutions
30 In the first place, the Council and the Commission (together ‘the institutions’) claim, in essence, that the imposition of definitive countervailing duties by Article 1 of the contested regulation, on the one hand, and the undertaking offered by certain Chinese exporting producers and accepted by the Commission in Decision 2013/707, which is reflected in the exemption of imports of certain products imported by those producers from the countervailing duty under Article 2 of the contested regulation, on the other hand, form a non-severable whole.
31 According to settled case-law, partial annulment of an EU legal act is possible only if the element the annulment of which is sought may be severed from the remainder of the act. The requirement of severability, the test for which is objective, is not satisfied in the case where the partial annulment of an act would have the effect of altering its substance (judgments of 24 May 2005, France v Parliament and Council, C‑244/03, EU:C:2005:299, paragraphs 12 and 13, and of 6 December 2012, Commission v Verhuizingen Coppens, C‑441/11 P, EU:C:2012:778, paragraph 38).
32 The EU institutions maintain that they took the undertaking into account in their analysis leading to the contested regulation. In order to achieve the result that was sought by the group of exporting producers, including the applicants, when offering the undertaking, the institutions had to combine the decision relating to the undertaking — which includes a minimum import price (‘the MIP’) for those imports that fall within the ‘annual level’ and consent for payment of definitive duties for imports that exceed that level — and the contested regulation. By offering an undertaking, the applicants thus accepted that injury was caused to the EU industry by their dumped and subsidised imports and that it is in the interest of the European Union to take measures.
33 In the second place, the acceptance of that undertaking offer by the combination of the decision relating to the undertaking and the contested regulation is what the applicants had sought in the administrative procedure. Relying on case-law (order of 28 January 2004, Netherlands v Commission, C‑164/02, EU:C:2004:54, paragraphs 18 to 25; judgments of 17 September 1992, NBV and NVB v Commission, T‑138/89, EU:T:1992:95, paragraphs 30 to 35; of 22 March 2000, Coca-Cola v Commission, T‑125/97 and T‑127/97, EU:T:2000:84, paragraphs 77 to 109; of 30 January 2002, Nuove Industrie Molisane v Commission, T‑212/00, EU:T:2002:21, and of 14 April 2005, Sniace v Commission, T‑141/03, EU:T:2005:129), the institutions maintain that the applicants do not have an interest in challenging acts whose adoption they sought.
34 In the third place, if the application had sought the annulment of the contested regulation as a whole, it would be inadmissible, in so far as it does not contain any plea or argument contesting the undertaking and the minimum import price referred to in Article 2 of the contested regulation. Accordingly, the application prevents the Council from knowing the grounds on which those articles are challenged, thus preventing the Council from defending itself.
35 In the fourth place, according to the Commission, the annual level of imports of the product concerned was not reached either in 2013, 2014, or 2015. Therefore, the applicants have not concluded a single import transaction that would be subject to the definitive duties. For that reason, the Commission fails to see the interest of the applicants in having the contested regulation annulled.
36 The applicants dispute the institutions’ arguments.
37 It should first be borne in mind that, since the admissibility of an action must be assessed at the time when it is brought, that is to say when the application is lodged (see order of 14 February 2012, Grasso v Commission, T‑319/08, not published, EU:T:2012:71, paragraph 16 and the case-law cited), withdrawal of the acceptance of an undertaking under Regulation No 2015/866 and Regulation No 2016/1998, after the applications have been lodged cannot affect the admissibility of that action in so far as concerns the applicants belonging to the groups Canadian Solar and JA Solar.
38 In that regard, first, the acceptance of the offer of an undertaking neither affects the admissibility of an action brought against an act imposing a countervailing duty nor the assessment of the grounds relied on in support of that application, since by accepting an undertaking proposed by an interested party, the institutions merely changed the type of definitive remedy to be adopted, while the reasons for adopting a remedy in the first place remain unaffected. It follows from recital 14, Article 13(1) and (6) and Article 15(1) of the basic regulation that acceptance of an undertaking offered by exporting producers and countervailing duties are two forms of definitive corrective measures which presuppose a positive conclusion as regards the existence of subsidisation and injury, as in the present case. That conclusion is consistent with the wording of the contested regulation itself, section 8 of which addresses undertakings under the heading ‘Form of the measures’.
39 Moreover, the admissibility of actions against regulations imposing definitive duties brought by interested parties whose undertaking had been accepted was, implicitly but necessarily, upheld in the judgment of 14 March 2007, Aluminium Silicon Mill Products v Council (T‑107/04, EU:T:2007:85) delivered in an action brought by parties which had entered into precisely the same type of undertaking as that in question, and in the judgments of 30 April 2013, Alumina v Council (T‑304/11, EU:T:2013:224, paragraph 11) and of 1 October 2014, Council v Alumina (C‑393/13 P, EU:C:2014:2245). The conditions for the admissibility of an action concern an absolute bar to proceeding with the action, which the Court must, if need be, consider of its own motion (see order of 6 October 2015, GEA Group v OHIM (engineering for a better world), T‑545/14, EU:T:2015:789, paragraph 14 and the case-law cited). Neither the General Court nor the Court of Justice found, on account of the undertaking or type of undertaking binding the applicants in those cases, that the actions for annulment they brought against Council Regulation (EC) No 2229/2003 of 22 December 2003 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of silicon originating [in] Russia (OJ 2003 L 339, p. 3) and Council Implementing Regulation (EU) No 464/2011 of 11 May 2011 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of zeolite A powder originating in Bosnia and Herzegovina (OJ 2011 L 125, p. 1) respectively were inadmissible.
40 In so far as exporting producers wish to dispute findings concerning the existence of a subsidy and injury contained in the contested regulation imposing definitive duties, the EU institutions cannot rely on the definitive form of the measure, which they adopted themselves, in order to exempt that regulation from judicial review.
41 The fact that the undertaking in question includes, in addition to the MIP, an annual limit above which countervailing duties become payable, and the parties concerned are unable to choose for themselves whether to sell the product concerned in accordance with the MIP or whether to set the price freely while paying a duty, is not capable of calling that analysis into question. It is merely a particular form of definitive remedy whose protective effect on the EU industry must be equivalent to the countervailing duties. That fact cannot affect the admissibility of an action for annulment of the contested regulation. As regards the institutions’ argument that acceptance of that type of undertaking also requires the adoption of a definitive regulation imposing countervailing duties, it is sufficient to note that that was mutatis mutandis the situation in the cases giving rise to the judgments of 14 March 2007, Aluminium Silicon Mill Products v Council (T‑107/04, EU:T:2007:85), of 30 April 2013, Alumina v Council (T‑304/11, EU:T:2013:224, paragraph 11) and of 1 October 2014, Council v Alumina (C‑393/13 P, EU:C:2014:2245), and it did not have any effect on the admissibility of the action.
42 Next, the applicants have sought annulment of that regulation in its entirety, in so far as it applies to them. In that context, an error capable of invalidating the assessments made by the institutions leading to the adoption of Article 1 of the contested regulation would alter the very substance of that regulation. Article 2 of the contested regulation would automatically lapse, in so far as it sets out an exemption from the payment of the anti-subsidy duties established by virtue of Article 1 of that regulation. It follows, also from point 9.1 of the undertaking offer, that that undertaking is only valid while the contested regulation is in force.
43 It is also incorrect to maintain, as the Commission does, that by seeking annulment of the contested regulation, the applicants are in fact seeking annulment of a measure whose adoption they requested. It is obvious that the applicants did not wish to be subject to the definitive measures laid down in the basic regulation, whether relating to anti-dumping duties or the application of a minimum price by virtue of an undertaking. Such measures hinder the economic freedom of the applicants. In particular, the companies would not be able to sell the product concerned on the EU market below a certain price and would have to fulfil many administrative requirements. Accordingly, the undertaking offer merely expressed a preference for one type of those definitive measures, in the event that the conditions for adopting those measures were fulfilled.
44 Finally, as regards the Commission’s argument concerning the applicants’ interest in bringing proceedings (see paragraph 35 above), it must be noted, as the applicants correctly claim, although subject to the Court’s findings in respect of the first two pleas in law (see paragraph 71 below), that their interest in bringing proceedings in the light of the form of order sought in the application consists, in any event, of the fact that in the event of annulment of the contested regulation — in so far as it concerns the categories of products exported by the applicants during the investigation period and at the time of lodging of the application — all the definitive measures adopted by the Council would have no legal basis, and consequently the applicants would no longer be required to pay any countervailing duties on products not covered by the undertaking or exceeding the annual level or to adhere to the minimum price set out in the undertaking (see paragraph 42 above), which would be capable of boosting the competitiveness of their products on the EU market.
45 It follows that the objection of inadmissibility raised by the institutions must be dismissed. Substance
46 In support of their action, the applicants raise three pleas in law, alleging, first, infringement of Article 10(12) and (13) of the basic regulation, secondly, infringement of Articles 1 and 27 of that regulation and, thirdly, infringement of Article 2(c) of that regulation. The first and second pleas in law, alleging infringement of Article 1, Article 10(12) and (13) and Article 27 of the basic regulation
47 The applicants claim that countervailing duties were imposed in respect of cells originating in third countries but shipped from China, modules originating in third countries but consigned from China and modules originating in China but consigned from third countries, without their being investigated and even without the institutions selecting a representative sample of those products and, as far as the first two categories of those products are concerned, without being referred to in the notice of initiation. They maintain, in essence, that countervailing duties can be imposed only on the import of products which are explicitly identified in the notice of initiation and which have been investigated. The initiation of an anti-subsidy investigation is conditional on the publication of a notice of initiation, which is intended to inform interested parties of their procedural rights and of the scope of the investigation by reference to the targeted product types and countries. Without that information, interested parties are not given the opportunity to cooperate in the investigation, which leads the institutions to rely on partial evidence to reach their findings of subsidisation and injury.
48 In the present case, the applicants submit that the notice of initiation of the procedure leading to the adoption of the contested regulation referred exclusively to imports of modules and key components originating in China. However, the institutions first registered and then imposed countervailing measures on imports of modules and key components both originating in and consigned from China.
49 The applicants claim, in the first place, that a full reading of point 5 of the notice of initiation shows that at that stage the institutions’ intention was not to investigate the product concerned consigned from China but merely to address the origin rules applicable to modules and key components. This interpretation is confirmed by the fact that the institutions ultimately defined specific origin rules for modules in Commission Implementing Regulation (EU) No 1357/2013 of 17 December 2013 amending Regulation (EEC) No 2454/93 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code (OJ 2013 L 341, p. 47). Consequently, contrary to what the institutions claim, exporting producers shipping goods from China were informed that special origin rules could be adopted for modules and key components but they were not given the opportunity to cooperate in the investigation.
50 In the second place, the applicants submit that Annex A to the notice of initiation limited its scope to modules and key components originating in China since, in accordance with that annex, exporting producers must indicate the turnover for sales of modules and key components ‘as defined in the notice of initiation’, which explicitly referred to modules and key components originating in China. Therefore, only exporting producers of modules and key components originating in China were requested to declare information in Annex A to the notice of initiation.
51 In the third place, the applicants claim that Annex A concerned only exporting producers of modules and key components originating in China. Thus, with reference to the judgments of 12 May 1989, Continentale Produkten-Gesellschaft (246/87, EU:C:1989:194, paragraph 12); of 11 July 1990, Sermes (C‑323/88, EU:C:1990:299, paragraph 29 et seq.), and of 30 March 2000, Miwon v Council (T‑51/96, EU:T:2000:92, paragraph 52), the applicants assert that the sample thus selected could not be representative of exporting producers of both modules and key components originating in and consigned from China, since the sample’s representativeness must be assessed on the date it is established. It is on the basis of the data provided by the sampled exporting producers, and the resulting findings of subsidisation, that the institutions applied definitive countervailing measures (recital 847 of the contested regulation) on imports of modules and components originating in or consigned from China. It is also clear from recital 847 that all individual company countervailing duty rates, on the basis of which the residual duty rate is defined for cooperating companies not included in the sample, are exclusively applicable to imports of products originating in China and produced by the sampled exporting producers.
52 In the fourth place, the scope of the investigation was defined by the notice of initiation and the fact that the questionnaire designated China as ‘country concerned’ and not ‘country of origin’ is of no relevance, contrary to the statement made in recital 94 of the contested regulation. The anti-subsidy questionnaire was provided only to the sampled exporting producers. In addition, it is standard practice for the institutions to refer to the country of origin targeted by an anti-subsidy investigation as the ‘country concerned’ in the anti-subsidy questionnaires for exporting producers.
53 In the fifth place, after noting that, under the non-preferential origin rules, the place of production of cells determines their customs origin and that the customs origin of modules is established by reference to the origin of the majority of their component cells, the applicants claim that the investigation conducted by the Commission did not cover cells originating in third countries but consigned from China, modules consigned from China but originating in third countries and modules consigned from third countries but originating in China. Those products were also not represented in the sample. It is particularly relevant, as regards the last category of products, that the rules for determining origin had not yet been clearly established during the investigation.
54 The Commission did not even advise exporting producers, representative organisations and governments in other countries of the initiation of this investigation. The investigation was thus limited to modules and key components originating in and consigned from China, as can also be seen from recital 847 of the contested regulation.
55 Lastly, the applicants maintain that if these two pleas in law were held to be well founded, the contested regulation would have to be annulled in its entirety.
56 The institutions dispute the applicants’ arguments.
57 First of all, it is necessary to bear in mind the rules for determining the origin and provenance of the goods concerned during the investigation. As regards cells, it is the place of their manufacture that determined their customs origin. The customs origin of the majority of the cells, in turn, determined the customs origin of the modules.
58 That rule, based on the application of the general rule that goods whose production involved more than one country are to be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture, laid down in Article 24 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), as amended, was given specific expression, in the field of the product concerned, in Implementing Regulation No 1357/2013, adopted after the adoption of the contested regulation (see paragraph 49 above).
59 Therefore, if cells are made in China and shipped to the European Union from China, it is a case of an import both originating in and consigned from China. If cells are produced in a third country, such as Malaysia, but exported to the European Union from China, such products are of Malaysian origin but consigned from China. The same is true where such a cell is subject in China to non-substantial processing or working within the meaning of Article 24 of Regulation No 2913/92, as amended. As regards modules comprising a majority of cells originating in China and shipped to the European Union from China, this is a case of a product which both originates in and is consigned from China. Modules manufactured (or assembled) in China, but in which the majority of cells are from a third country, are considered to be products originating in a third country, but consigned from China. Finally, a module is of Chinese origin, but is consigned from a third country, if the majority of the cells from which it is composed originate in China, but it was assembled in a third country.
60 In that regard, it is important to ascertain, as the Council requests, whether the applicants are entitled to claim that, first, the notice of initiation did not announce the initiation of an investigation with regard to the product concerned consigned from China, but originating in a third country, and, secondly, the product concerned consigned from China, but originating in a third country, and the modules of Chinese origin, but consigned from a third country, were subject to a countervailing duty, even though the investigation was not carried out with regard to them. The admissibility of those grounds should therefore be examined (see, to that effect, judgment of 15 March 1973, Marcato v Commission, 37/72, EU:C:1973:33, paragraphs 7 and 8).
61 In that regard, according to settled case law concerning an interest in bringing proceedings, an action for annulment brought by a natural or legal person is admissible only in so far as that person has an interest in having the contested act annulled. Such an interest requires that the annulment of that act must be capable, in itself, of having legal consequences and that the action may therefore, through its outcome, procure an advantage to the party which brought it (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 55 and the case-law cited).
62 An applicant’s interest in bringing proceedings must be vested and current. It may not concern a future and hypothetical situation (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 56 and the case-law cited).
63 That interest must, in the light of the purpose of the action, exist at the stage of lodging the action, failing which the action will be inadmissible, and continue until the final decision, failing which there will be no need to adjudicate (see judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 57 and the case-law cited).
64 The applicant must prove that he has an interest bringing proceedings, which is an essential and fundamental prerequisite for any such proceedings. In particular, in order for an action for annulment of an act, submitted by a natural or legal person, to be admissible, the applicant must justify in a relevant manner his interest in the annulment of that act (see judgment of 4 June 2015, Andechser Molkerei Scheitz v Commission, C‑682/13 P, not published, EU:C:2015:356, paragraphs 27 and 28 and the case-law cited; see, to that effect, judgment of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraph 58 and the case-law cited).
65 By analogy, the same is true of an interest in raising a plea in law.
66 First, the applicants have not indicated anywhere in their pleadings what interest they might derive from the potential annulment of the contested regulation on the basis of the first two pleas in law. It is not apparent from those pleadings that, during the investigation and at the time when the action was lodged, they were producing and exporting to the European Union, or importing into the European Union, the product concerned originating in a third country, but consigned from China, or the modules originating in China, but consigned from a third country. Nor do those pleadings refer to any document in the annex which would be such as to demonstrate such a circumstance.
67 When questioned at the hearing, the applicants submitted that they were indeed producing and exporting to the European Union the product concerned originating in a third country, but consigned from China, and modules originating in China but consigned from a third country. However, they were not able to identify in their pleadings or in the annexes thereto the slightest evidence to that effect. They also acknowledged that they had not expressly specified in the application that they export the two categories of the product concerned in question to the European Union. Accordingly, they have not proved their interest in challenging the establishment of a countervailing duty on imports of those categories of the product concerned. Therefore, the applicants have not in any way justified their interest in making an application to that effect, even if the burden of proof lay with them (see paragraph 64 above).
68 Consequently, the applicants have not demonstrated that they have an interest in claiming that, first, the notice of initiation did not announce the initiation of an investigation with regard to the product concerned consigned from China but originating in a third country and, secondly, that the product concerned consigned from China, but originating in a third country, and the modules of Chinese origin, but consigned from a third country, were subject to a countervailing duty, even though the investigation was not carried out with regard to them.
69 In any event, the applicants have provided no evidence at all before the Court that they duly drew the institutions’ attention during the administrative procedure to the fact that they were producing and exporting to the European Union, or importing into the European Union, the product concerned originating in a third country, but consigned from China, and modules originating in China, but consigned from a third country, during the investigation period and at the time when the application was lodged. Although the applicants claim, in essence, that they correctly informed the institutions in the light of the wording of the notice of initiation, it must be noted that point 5 of that notice states that companies which ship the product concerned from China but consider that part or even all of those exports do not have their customs origin in China are invited to come forward in the investigation and to furnish all relevant information, and that the origin of the product under investigation exported from the country concerned will be examined in the light of that and other information gathered in this investigation. That assessment is an integral part of the investigation.
70 Secondly, the applicants’ arguments seeking, in essence, to justify their interest in raising those two pleas in law by the fact that, in the future, they might export both categories in question of the product concerned to the European Union must be rejected, on the basis of the case-law cited in paragraphs 62 and 63 above, as referring to a hypothetical situation.
71 The first and second pleas in law must therefore be rejected as inadmissible. The third plea in law, alleging infringement of Article 2(c) of the basic regulation
72 According to the applicants, the anti-subsidy investigation may cover only one product or one group of closely resembling products. In the present case, the institutions did not regard cells and modules as a single product.
73 The applicants claim that case-law has defined a set of factors that determine whether different product types may be considered to form one single like product, in particular the physical, technical and chemical characteristics of the products; their end use; their interchangeability; the consumer perception; the distribution channels; and their manufacturing processes and costs of production) (judgments of 13 September 2010, Whirlpool Europe v Council, T‑314/06, EU:T:2010:390, paragraph 138; of 17 December 2010 in EWRIA and Others v Commission, T‑369/08, EU:T:2010:549, paragraph 82, and of 10 October 2012 in Gem-Year and Jinn-Well Auto-Parts (Zhejiang) v Council, T‑172/09, not published, EU:T:2012:532, paragraph 59).
74 According to the Court’s case law, a claim that the product concerned is ill defined must be based on arguments which show that either the institutions erred in their assessment with regard to the factors they held to be relevant or that the application of other more relevant factors required that the definition of the product concerned be restricted (judgment of 13 September 2010, Whirlpool Europe v Council, T‑314/06, EU:T:2010:390, paragraph 141).
75 The applicants claim in that regard that although the institutions claim that cells and modules form one single product, it is clear from recitals 475 to 594 of the contested regulation that they conducted separate injury analyses for modules and cells. In addition, while the average sales price of a cell in the European Union ranges from EUR 0.95 to EUR 2.37, the average sales price of a module ranges from EUR 103 to EUR 361.
76 Furthermore, the institutions manifestly erred in their assessment with regard to the factors they held to be relevant in determining the product concerned. Contrary to the statements made by the contested regulation in recitals 47, 60 and 71, cells and modules do not share the same basic physical, technical and chemical characteristics, namely the ability to generate electricity from sunlight, or the same end use, namely potential sale for integration into solar photovoltaic systems.
77 First, with regard to physical characteristics, the applicants submit that cells and modules differ in their size, weight, thickness, mass, density, colour and resistance.
78 Secondly, the main chemical component of cells, namely polysilicon, accounts for a mere 20% of a module’s cost structure. The applicants claim that it is apparent from the institutions’ practice in that field that a common raw material is irrelevant in determining whether different products share the same physical, chemical, and technical characteristics.
79 Thirdly, at the outset, according to the applicants, the principal technical characteristic of a module is to generate and transmit electricity, while a cell cannot transmit electricity. Next, whether cells and modules both have the ability to generate electricity from sunlight cannot be deemed a decisive factor in the determination of the product concerned since the institutions initially excluded three products from the investigation which all have the ability to generate electricity from sunlight, namely solar chargers that consist of less than six cells, are portable and supply electricity to devices or charge batteries; thin-film photovoltaic products; and products that are permanently integrated into electrical goods, where the function of the electrical goods is other than power generation, and where those electrical goods consume the electricity generated by the integrated cells. Cells and modules differ greatly in terms of their performance in the production of electricity.
80 Fourthly, the applicants maintain that two products do not share the same end use where switching from one to another constitutes a technical and economic deterrent. Switching from a cell to a module constitutes a technical deterrent in so far as a cell is just one of numerous inputs used to manufacture a module. This also constitutes an economic deterrent because, as acknowledged in recital 40 of the contested regulation, these inputs amount to 40% of the total cost of a module.
81 Lastly, the application of other more relevant factors required that cells and modules be considered two distinct products. In the present case, the institutions acknowledged that cells and modules have different consumer perception (recital 59 of the contested regulation), different distribution channels (recital 57 of the contested regulation), different manufacturing processes and different costs of production (recital 52 of the contested regulation). Furthermore, it is common knowledge that cells and modules are not interchangeable.
82 While the institutions contend that those factors are not relevant since the main criteria to define a single like product are the physical, chemical and technical characteristics and end uses (recitals 57, 59 and 65 of the contested regulation), the Court has already ruled that the physical, technical, and chemical characteristics of the product, although important factors, do not have priority over other factors (judgment of 13 September 2010, Whirlpool Europe v Council, T‑314/06, EU:T:2010:390, paragraph 141).
83 The institutions dispute the applicants’ arguments.
84 In that regard, it must be noted that the basic regulation does not specify how the product or range of products which may be subject to an anti-subsidy investigation is to be defined; nor does it require an intricate classification to be made (see, to that effect, judgment of 25 September 1997, Shanghai Bicycle v Council, T‑170/94, EU:T:1997:134, paragraph 61).
85 According to settled case-law, to which the parties both refer, the purpose of the definition of the product concerned in an anti-dumping or anti-subsidy investigation is to assist in drawing up the list of the products which will, if necessary, be subject to the imposition of anti-dumping or countervailing duties. For the purposes of that process, the institutions may take account of a number of factors, such as the physical, technical and chemical characteristics of the products, their use, interchangeability, consumer perception, distribution channels, manufacturing process, costs of production and quality (judgment of 13 September 2010, Whirlpool Europe v Council, T‑314/06, EU:T:2010:390, paragraph 138, and of 17 December 2010 in EWRIA and Others v Commission, T‑369/08, EU:T:2010:549, paragraph 82).
86 It necessarily follows that products which are not identical may be grouped together under the same definition of the product concerned and, together, be subject to an anti-subsidy investigation (see, to that effect, judgment of 10 October 2012, Gem-Year and Jinn-Well Auto-Parts (Zhejiang) v Council, T‑172/09, not published, EU:T:2012:532, paragraph 60) .
87 In those circumstances, the examination of whether a specific product has been validly included in the list of products which will, if necessary, be subject to the imposition of countervailing duties must be carried out in the light of the characteristics of the product concerned as defined by the institutions, not in the light of the characteristics of the products comprising the product concerned or its sub-categories (judgment of 18 November 2014, Photo USA Electronic Graphic v Council, T‑394/13, not published, EU:T:2014:964, paragraph 30).
88 Moreover, in the light of the indicative nature of the criteria referred to in paragraph 85 above, the institutions are not under any obligation to determine the product concerned using all of those criteria. Nor is it necessary for the analysis of each of those criteria to be capable of leading to the same result (see, to that effect, judgment of 18 November 2014, Photo USA Electronic Graphic v Council, T‑394/13, not published, EU:T:2014:964, paragraph 51).
89 It is necessary to ascertain, taking into account the above factors, whether the applicants are in a position to show either that the institutions made an error of assessment with regard to the factors which they decided were relevant, or that the application of other, more relevant factors would have required the exclusion of a product from the definition of the product concerned (see, to that effect, judgment of 10 October 2012, Gem-Year and Jinn-Well Auto-Parts (Zhejiang) v Council, T‑172/09, not published, EU:T:2012:532, paragraph 61).
90 In that review, account must be taken of the fact that, in the sphere of measures to protect trade, the EU institutions enjoy a wide discretion by reason of the complexity of the economic, political and legal situations which they have to examine and that, consequently, review by the Courts of the European Union of assessments made by the institutions must be limited to establishing whether the relevant procedural rules have been complied with, whether the facts on which the contested choice is based have been accurately stated and whether there has been a manifest error of assessment of the facts or a misuse of power. In that regard, since it has already been held that the determination of the like product fell within the exercise of the wide discretion given to the institutions and was therefore subject to limited review (judgment of 25 September 1997, Shanghai Bicycle v Council, T‑170/94, EU:T:1997:134, paragraph 63), the same approach must be adopted when reviewing the merits of the definition of the product concerned (judgment of 10 October 2012, Gem-Year and Jinn-Well Auto-Parts (Zhejiang) v Council, T‑172/09, not published, EU:T:2012:532, paragraph 62; judgment of 17 March 2016, Portmeirion Group, C‑232/14, EU:C:2016:180, paragraph 47).
91 In the present case, first, as regards the nature of the criteria chosen by the institutions, at the outset, it follows from recitals 44, 46, 48, 56, 60 to 62, 68, and 71 of the contested regulation that the product concerned was defined in relation to its capacity to convert solar energy into electricity, which presupposes, in terms of end use, its installation in photovoltaic systems.
92 Next, it follows, in particular from recitals 41, 46 and 48 of the contested regulation, that the criteria, on which the institutions rely, are physical, chemical and technical characteristics and the corresponding end use.
93 While the Council wrongly contends that some of the criteria referred to in paragraph 85 above, that is to say, those used, are in principle more decisive than others (judgment of 18 November 2014, Photo USA Electronic Graphic v Council, T‑394/13, not published, EU:T:2014:964, paragraph 41), it does not necessarily follow that the decision to rely on those criteria in the present case is vitiated by a manifest error of assessment.
94 It must be noted that the definition of the product concerned by its capacity to convert solar energy into electricity, which presupposes an end use of integration in photovoltaic systems, is objective and the applicants have neither claimed nor demonstrated that that criterion is arbitrary or that the institutions committed a manifest error of assessment in using that definition. In addition, it follows from the judgment of 10 October 2012, Gem-Year and Jinn-Well Auto-Parts (Zhejiang) v Council, T‑172/09, not published, EU:T:2012:532, paragraph 65) that the institutions may include products under the definition of the product concerned on the ground that they have, inter alia, the same basic function.
95 That basic criterion was moreover applied by the institutions in a consistent manner, since wafers were excluded from the definition of the product concerned as a result of the conclusion that, they do not convert, as such, solar energy into electricity (see recital 46 of the contested regulation).
96 Having regard to the decision, which was not challenged, to investigate products capable of converting solar energy to electricity, it was not manifestly unreasonable for the institutions to rely principally on the physical, chemical and technical characteristics and end use of the products. On the contrary, those criteria appear to be particularly relevant.
97 Furthermore, it is apparent from the contested regulation that the institutions did not disregard the other criteria. Those criteria raised by the interested parties which participated in the administrative investigation were evaluated, but their assessment was not such as to modify the institutions’ conclusions as regards the determination of the product concerned.
98 Secondly, as regards the question whether the institutions committed a manifest error of assessment of the criteria they deemed relevant, it must be noted that while the applicants rightly claim that cells and modules are different in terms of physical characteristics, size, weight, thickness, mass, density, and indeed colour, that fact must be analysed in the light of the fact that cells are fundamental components of modules and that the characteristics of modules are broadly determined by the characteristics of the cells of which they are composed. The applicants’ arguments cannot therefore give reason to believe that the products are different, but rather that they are similar.
99 As regards the chemical characteristics of cells and modules, the parties do not dispute that the main chemical component, that is to say, the component conferring the essential technical characteristics is polysilicon. Even if that component accounts for a mere 20% of the price of a module, that fact, if it were established by the applicants, has no bearing on the conclusion relating to the similarity of the chemical characteristics of cells and modules. As has been stated, it is necessary to assess in particular, in the present case, whether the two product categories contain the same essential component, that is to say a component conferring their essential technical characteristics. While the applicants claim that the Commission’s position as regards the relevance of the raw material was different in other investigations, it suffices to note that it is settled case-law that, where the institutions use the discretion conferred upon them by the basic regulation, they are not required to explain in detail and in advance the criteria that they intend to apply in every situation, even in cases where they create new policy options. Nor are economic operators justified in having a legitimate expectation that the criterion initially selected, which is capable of being altered by the EU institutions in the exercise of their discretion, will be maintained. Therefore, there is no need to rule on the earlier practice alleged by the applicant, as the existence of such a practice did not in itself deprive the institutions of the possibility of changing it subsequently (see, to that effect, judgments of 7 May 1987, Nippon Seiko v Council, 258/84, EU:C:1987:205, paragraphs 34 and 35, of 10 March 1992, Canon v Council, C‑171/87, EU:C:1992:106, paragraph 41, and of 17 July 1998, Thai Bicycle v Council, T‑118/96, EU:T:1998:184, paragraphs 68 and 69 and the case-law cited).
100 The relevance of the raw material depends in particular on the basic criterion used by the institutions. In the present case, it is indisputable that the qualities of polysilicon are decisive both for cells and modules and that in their absence they cannot fulfil their function of converting solar energy into electricity.
101 Therefore, the applicants’ argument relating to chemical properties cannot succeed.
102 As regards technical characteristics, it is clearly apparent from the contested regulation that the specific feature of cells and modules is their capacity to convert solar energy to electricity. There is no requirement in the basic regulation that other technical functionalities should be the same for all categories of products which fall within the definition of the product concerned. If that were so, all products covered by the definition of the product concerned would have to be practically identical, which the basic regulation does not require. Furthermore, as regards the applicants’ argument that three other products capable of converting solar energy into electricity were excluded from the investigation, it suffices to note that the applicants have not put forward any argument capable of demonstrating that the institutions would be obliged to investigate all products corresponding to the criteria they adopted, or to impose definitive measures on them. It follows that the applicants’ arguments relating to technical characteristics must be rejected.
103 As regards the applicants claim that two products do not share the same purpose or use where switching from one to another constitutes a deterrent, it suffices to note that both the cells and modules are intended to be installed in photovoltaic systems (see, inter alia, recitals 48, 68 and 71 of the contested regulation), which the applicants do not deny. In the present case, it is also significant that neither of the two product categories has any use other than integration in those systems for the purposes of producing electricity. The applicants’ arguments seeking to show that cells and modules differ in terms of their purpose, or use, must therefore be rejected.
104 It is therefore necessary to conclude that the applicants have failed to show that the institutions committed any manifest error of assessment of the factors which they applied.
105 Thirdly, as regards the question whether the application of other more relevant criteria than those applied by the institutions would have led to the exclusion of a product type from the definition of the product concerned, it is necessary, at the outset, to point out that the application of those other criteria could call into question the conclusions drawn by the institutions in the light of the criteria applied, only if the applicants demonstrate first that those other criteria are manifestly more relevant. It must however be noted that the applicants have adduced no evidence to that effect in the present case. That is sufficient, in the light of the assessment of the earlier arguments, to reject the present plea in law.
106 In any event, as regards, first, the perception of consumers, recital 59 of the contested regulation, to which the applicants, in essence, refer, indicates that the main criteria used to define a single product are the same physical, chemical and technical characteristics and the end uses of the product in question, and that, in accordance with those criteria, it was concluded, on the basis of recitals 47 to 49 of that regulation, that different perceptions on the part of consumers were not considered to be a decisive factor. The applicants have not explained why that finding should be regarded as manifestly incorrect. Nor have they explained how that criterion is more relevant than those applied by the institutions (see paragraph 105 above). It is for the applicants to adduce evidence to that effect. Furthermore, it does not follow either from the basic regulation or from case-law that the assessment of the similarity of the products in the light of each of the criteria must necessarily produce the same result each time (see paragraph 88 above and the case-law cited). The applicants’ argument must therefore be rejected.
107 Secondly, as regards distribution channels, the applicants have not shown how that criterion was relevant in the light of the institutions’ decision to investigate products capable of converting solar energy into electricity, or manifestly more relevant than those applied by the institutions (see paragraph 105 above). In any event, the applicants are wrong to claim that, in recital 57 of the contested regulation, the institutions acknowledged that cells and modules necessarily have different distribution channels. That recital indicates that the investigation showed that those channels are sometimes different and sometimes similar. The applicants have not analysed that fact in any way nor shown how it is manifestly such as to invalidate the institutions finding that the distribution channels had no effect on the definition of the product concerned in the present case. Consequently, their argument must be rejected.
108 Thirdly, the applicants have submitted no analysis, on the one hand, capable of substantiating the claim that the production costs of cells and modules are different and, on the other hand, concerning the potential consequences of such a circumstance in respect of the inclusion of cells and modules in the definition of the product concerned. Nor have the applicants proved that that criterion would be more relevant than those applied by the institutions (see paragraph 105 above). In any event, that argument has no basis in fact, since recital 52 of the contested regulation indicates that the production of cells is the most sophisticated part of the production process and that, since the three production stages are linked, the added value does not derive from a particular stage. The question of production costs was not therefore addressed in the passage of the recital in question.
109 Fourthly, as is rightly stated in recital 56 of the contested regulation, modules and cells, which are essential components of modules, both derive from the same production process, with the result that the question of interchangeability is not relevant in the present case.In any event, assuming that the lack of interchangeability is proved, the applicants have not shown that that was a more relevant criterion than those applied by the institutions in respect of their decision to carry out the investigation of devices capable of converting solar energy into electricity (see paragraph 105 above).
110 It follows that the applicants’ arguments seeking to demonstrate that other more relevant criteria than those applied by the institutions would have led to the conclusion that cells and modules would not be part of the same definition of the product concerned must be rejected.
111 In the fourth place, that finding cannot be called into question by the argument that the institutions carried out separate investigations for the two types of products. As the Council contends, the institutions carried out an investigation taking into account indicators on the basis of categories of products, which indeed corresponds to their established practice. Accordingly, the Commission compiled a single sample of exporting producers, which took into account the largest exporters in terms of volume of wafers, cells and modules, in order to ensure that the sample was representative. The institutions therefore took into account differences between the types of products.
112 The argument must therefore be rejected.
113 As regards the argument alleging different prices, it is true that cells cost less than modules because they are their main components. However, it must also be noted that according to recital 40 of Regulation No 1238/2013, cells account for 66% of the cost of a module. Likewise, it follows from recital 54 of the contested regulation that there is a close correlation between the prices of cells and modules which depends on the prices of polysilicon. That argument cannot therefore succeed, since those circumstances tend instead to support the conclusion that cells and modules belong to the same definition of the product concerned. In any event, the applicants have not submitted any analysis of the relevance of that criterion.
114 Finally, it should be observed that it is the processing of wafers into cells and not cells to modules that constitutes the last substantial processing or working resulting in a new product or representing an important stage of manufacture, within the meaning of Article 24 of Regulation No 2913/92, as amended. That constitutes an additional and significant indication that cells and modules fall within the same definition of the product concerned.
115 It follows that the third plea in law must be rejected.
116 Consequently, the action must be dismissed in its entirety. Costs
117 Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. In accordance with Article 138(1) of those rules, institutions which have intervened in the proceedings are to bear their own costs.
118 As the applicants have been unsuccessful, they must be ordered to bear their own costs and pay those incurred by the Council in accordance with the form of order sought by the Council. The Commission is to bear its own costs. On those grounds, THE GENERAL COURT (Fifth Chamber) hereby: 1. Dismisses the action; 2. Orders JingAo Solar Co. Ltd, and the other applicants whose names appear in the annex to bear their own costs and to pay those incurred by the Council of the European Union; 3. Orders the European Commission to bear its own costs.
Dittrich
Schwarcz
Tomljenović
Delivered in open court in Luxembourg on 28 February 2017.
Registrar
President
E. Coulon
H. Kanninen
* Language of the case: English. |
JUDGMENT OF THE COURT (Fifth Chamber)
23 November 2016 * ( *1 )
‛Reference for a preliminary ruling — Environment — Aarhus Convention — Directive 2003/4/EC — Article 4(2) — Public access to information — Concept of ‘information relating to emissions into the environment’ — Directive 91/414/EEC — Directive 98/8/EC — Regulation (EC) No 1107/2009 — Placing of plant protection products and biocides on the market — Confidentiality — Protection of industrial and commercial interests’
In Case C‑442/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the College van Beroep voor het bedrijfsleven (Administrative Court of Appeal for Trade and Industry, Netherlands), made by decision of 12 September 2014, received at the Court on 24 September 2014, in the proceedings
Bayer CropScience SA-NV,
Stichting De Bijenstichting
v
College voor de toelating van gewasbeschermingsmiddelen en biociden,
third party:
Makhtesim-Agan Holland BV,
THE COURT (Fifth Chamber),
composed of J.L. da Cruz Vilaça, President of the Chamber, A. Tizzano (Rapporteur), Vice-President of the Court, M. Berger, E. Levits and F. Biltgen, Judges,
Advocate General: J. Kokott,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 4 February 2016,
after considering the observations submitted on behalf of:
—
Bayer CropScience SA-NV, by E. Broeren and A. Freriks, advocaten,
—
Stichting De Bijenstichting, by L. Smale, advocaat,
—
the College voor de toelating van gewasbeschermingsmiddelen en biociden, by J. Geerdink and D. Roelands-Fransen, advocaten,
—
the Netherlands Government, by B. Koopman and M. Bulterman, acting as Agents,
—
the German Government, by T. Henze and A. Lippstreu, acting as Agents,
—
the Greek Government, by I. Chalkias and by O. Tsirkinidou and A. Vasilopoulou, acting as Agents,
—
the Swedish Government, by L. Swedenborg and E. Karlsson and by A. Falk, C. Meyer-Seitz, U. Persson and N. Otte Widgren, acting as Agents,
—
the European Commission, by L. Pignataro-Nolin and by F. Ronkes Agerbeek, P. Ondrusek and H. Kranenborg, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 7 April 2016,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Article 14 of Council Directive 91/414/EEC of 15 July 1991 concerning the placing of plant protection products on the market (OJ 1991 L 230, p. 1), Article 19 of Directive 98/8/EC of the European Parliament and of the Council of 16 February 1998 concerning the placing of biocidal products on the market (OJ 1998 L 123, p. 1), Articles 59 and 63 of Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market and repealing Council Directives 79/117/EEC and 91/414/EEC (OJ 2009 L 309, p. 1) and Article 4(2) of Directive 2003/4/EC of the European Parliament and of the Council of 28 January 2003 on public access to environmental information and repealing Council Directive 90/313/EEC (OJ 2003 L 41, p. 26).
The request has been made in proceedings between Bayer CropScience BV (‘Bayer’) and Stichting De Bijenstichting (‘Bijenstichting’) and the College voor de toelating van gewasbeschermingsmiddelen en biociden (the Plant Protection Products and Biocides Approval Board, ‘the CTB’) concerning the decision of 18 March 2013 by which the CTB, in essence, partially upheld Bijenstichting’s request for disclosure of documents submitted by Bayer during procedures for the authorisation of the placing on the Dutch market of certain plant protection products and biocides based on the active ingredient imidacloprid.
Legal context
International law
Article 39(3) of the Agreement on Trade-Related Aspects of Intellectual Property Rights (‘the TRIPS Agreement’), which constitutes Annex 1C to the Agreement establishing the World Trade Organisation (WTO), signed in Marrakesh on 15 April 1994 and approved by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1), provides as follows:
‘Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilise new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.’
Article 4 of the Convention on access to information, public participation in decision-making and access to justice in environmental matters, approved on behalf of the European Community by Council Decision 2005/370/EC of 17 February 2005 (OJ 2005 L 124, p. 1) (‘the Aarhus Convention’), entitled ‘Access to environmental information’, provides as follows:
‘1. Each party shall ensure that, subject to the following paragraphs of this article, public authorities, in response to a request for environmental information, make such information available to the public, within the framework of national legislation …
…
4. A request for environmental information may be refused if the disclosure would adversely affect:
…
(d)
The confidentiality of commercial and industrial information, where such confidentiality is protected by law in order to protect a legitimate economic interest. Within this framework, information on emissions which is relevant for the protection of the environment shall be disclosed;
…
The aforementioned grounds for refusal shall be interpreted in a restrictive way, taking into account the public interest served by disclosure and taking into account whether the information requested relates to emissions into the environment.
...’
EU law
Rules on authorisation to place plant protection products and biocides on the market
Article 2(2) of Directive 91/414 defines ‘residues of plant protection products’ as follows:
‘One or more substances present in or on plants or products of plant origin, edible animal products or elsewhere in the environment and resulting from the use of a plant protection product, including their metabolites and products resulting from their degradation or reaction.’
Article 14 of that directive provides as follows:
‘Member States and the Commission shall, without prejudice to Directive [2003/4], ensure that information submitted by applicants involving industrial and commercial secrets is treated as confidential if the applicant wishing to have an active substance included in Annex I or the applicant for authorisation of a plant protection product so requests, and if the Member State or the Commission accepts that the applicant’s request is warranted.
…’
Under Article 2(1)(g) of Directive 98/8, ‘residues’ is defined as follows:
‘One or more of the substances present in a biocidal product which remains as a result of its use including the metabolites of such substances and products resulting from their degradation or reaction.’
According to Article 19 of that directive, entitled ‘Confidentiality’:
‘1. Without prejudice to [Directive 2003/4], an applicant may indicate to the competent authority the information which he considers to be commercially sensitive and disclosure of which might harm him industrially or commercially and which he therefore wishes to be kept confidential from all persons other than the competent authorities and the Commission. Full justification will be required in each case. …
2. The competent authority receiving the application shall decide, on the basis of documentary evidence produced by the applicant, which information shall be confidential within the terms of paragraph 1.
…’
Article 3(1) of Regulation No 1107/2009 defines ‘residues’ as follows:
‘One or more substances present in or on plants or plant products, edible animal products, drinking water or elsewhere in the environment and resulting from the use of a plant protection product, including their metabolites, breakdown or reaction products;
…’
Article 33 of that regulation, entitled ‘Application for authorisation or amendment of an authorisation’, provides as follows:
‘1. An applicant who wishes to place a plant protection product on the market shall apply for an authorisation or amendment of an authorisation himself, or through a representative, to each Member State where the plant protection product is intended to be placed on the market.
…
4. When submitting the application, the applicant may, pursuant to Article 63, request certain information, including certain parts of the dossier, to be kept confidential and shall physically separate that information.
…
Upon a request for access to information the Member State examining the application shall decide what information is to be kept confidential.
…’
Article 63 of that regulation, entitled ‘Confidentiality’, provides as follows:
‘1. A person requesting that information submitted under this regulation is to be treated as confidential shall provide verifiable evidence to show that the disclosure of the information might undermine his commercial interests …
2. Disclosure of the following information shall normally be deemed to undermine the protection of the commercial interests or of privacy and the integrity of the individuals concerned:
(a)
the method of manufacture;
(b)
the specification of impurity of the active substance except for the impurities that are considered to be toxicologically, ecotoxicologically or environmentally relevant;
(c)
results of production batches of the active substance including impurities;
(d)
methods of analysis for impurities in the active substance as manufactured except for methods for impurities that are considered to be toxicologically, ecotoxicologically or environmentally relevant;
(e)
links between a producer or importer and the applicant or the authorisation holder;
(f)
information on the complete composition of a plant protection product;
(g)
names and addresses of persons involved in testing on vertebrate animals.
3. This Article shall be without prejudice to Directive [2003/4].’
Rules on access to environmental information
Recitals 1, 5, 9 and 16 of Directive 2003/4 read as follows:
‘(1)
Increased public access to environmental information and the dissemination of such information contribute to a greater awareness of environmental matters, a free exchange of views, more effective participation by the public in environmental decision-making and, eventually, to a better environment.
…
(5)
On 25 June 1998 the European Community signed the [Aarhus Convention]. Provisions of Community law must be consistent with that Convention with a view to its conclusion by the European Community.
…
(9)
It is also necessary that public authorities make available and disseminate environmental information to the general public to the widest extent possible, in particular by using information and communication technologies. …
…
(16)
The right to information means that the disclosure of information should be the general rule and that public authorities should be permitted to refuse a request for environmental information in specific and clearly defined cases. Grounds for refusal should be interpreted in a restrictive way, whereby the public interest served by disclosure should be weighed against the interest served by the refusal. …’
Article 1 of the directive provides as follows:
‘The objectives of this Directive are:
(a)
to guarantee the right of access to environmental information held by or for public authorities and to set out the basic terms and conditions of, and practical arrangements for, its exercise; and
(b)
to ensure that, as a matter of course, environmental information is progressively made available and disseminated to the public in order to achieve the widest possible systematic availability and dissemination to the public of environmental information. To this end the use, in particular, of computer telecommunication and/or electronic technology, where available, shall be promoted.’
Article 2 of the directive, entitled ‘Definitions’, provides as follows:
‘For the purposes of this Directive:
1.
“Environmental information” shall mean any information in written, visual, aural, electronic or any other material form on:
(a)
the state of the elements of the environment, such as air and atmosphere, water, soil, land, landscape and natural sites including wetlands, coastal and marine areas, biological diversity and its components, including genetically modified organisms, and the interaction among these elements;
(b)
factors, such as substances, energy, noise, radiation or waste, including radioactive waste, emissions, discharges and other releases into the environment, affecting or likely to affect the elements of the environment referred to in (a);
…’
Under Article 3(1) of the directive, entitled ‘Access to environmental information upon request’:
‘Member States shall ensure that public authorities are required, in accordance with the provisions of this Directive, to make available environmental information held by or for them to any applicant at his request and without his having to state an interest.’
Article 4(2) of Directive 2003/4 entitled ‘Exceptions’, provides:
‘Member States may provide for a request for environmental information to be refused if disclosure of the information would adversely affect:
...
(d)
the confidentiality of commercial or industrial information where such confidentiality is provided for by national or Community law to protect a legitimate economic interest, including the public interest in maintaining statistical confidentiality and tax secrecy;
...
The grounds for refusal mentioned in paragraphs 1 and 2 shall be interpreted in a restrictive way, taking into account for the particular case the public interest served by disclosure. In every particular case, the public interest served by disclosure shall be weighed against the interest served by the refusal. Member States may not, by virtue of paragraph 2(a), (d), (f), (g) and (h), provide for a request to be refused where the request relates to information on emissions into the environment.
…’
Rules applicable to industrial emissions
Article 2(3) and (5) of Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control (OJ 1996 L 257, p. 26) provides as follows:
‘For the purposes of this Directive:
…
3.
“installation” shall mean a stationary technical unit where one or more activities listed in Annex I are carried out, and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions and pollution;
…
5.
“emission” means the direct or indirect release of substances, vibrations, heat or noise from individual or diffuse sources in the installation into air, water or land;
…’
Article 3(3) and (4) of Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (OJ 2010 L 334, p. 17) provides as follows:
‘For the purposes of this Directive:
…
(3)
“installation” means a stationary technical unit within which one or more activities listed in Annex I or in Part 1 of Annex VII are carried out, and any other directly associated activities on the same site which have a technical connection with the activities listed in those Annexes and which could have an effect on emissions and pollution;
(4)
“emission” means the direct or indirect release of substances, vibrations, heat or noise from individual or diffuse sources in the installation into air, water or land.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
By decisions of 28 April and 8 July 2011, the CTB, the competent Dutch authority for the granting and amending of authorisations to place plant protection products and biocides on the market, decided to amend the authorisations of several plant protections products and one biocide on the basis of the active ingredient imidacloprid, which, inter alia, has an insecticide effect.
By letters of 11 May, 24 August and 25 October 2011, Bijenstichting, a Dutch association for the protection of bees, made a request, on the basis of Directive 2003/4 to the CTB for disclosure of 84 documents concerning those authorisations.
Bayer, a company operating, inter alia, in the fields of crop protection and pest control and the holder of a large number of those authorisations, objected to that disclosure, on the ground that it would infringe copyright and adversely affect the confidentiality of commercial or industrial information and, furthermore, would completely undermine the right to data protection.
By decision of 9 July 2012, the CTB, initially, refused Bijenstichting’s requests for disclosure in their entirety. In support of that refusal, the CTB in particular took the view that those requests did not relate to ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4. Accordingly, those requests could be upheld only if the weighing of the general interest in disclosure, on the one hand, against the specific interest of the marketing authorisation holder in the confidentiality of the data in question, on the other hand, justified their disclosure, which, in the view of the CTB, was, however, not so in the present case.
Following an appeal by Bijenstichting against that refusal, the CTB, at a second stage, partially reversed the earlier decision and, by decision of 18 March 2013, declared that appeal to be well founded in part.
Consequently, in that decision, the CTB considered that factual information relating to actual emissions of plant protection products or biocides into the environment should be regarded as ‘information on emissions into the environment’, within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4.
In the present case, 35 of the documents in respect of which disclosure was requested contained, according to the CTB, such information. Consequently, the grounds which could be relied on in order to refuse such disclosure were, according to that authority, very restricted. Those grounds included protection of the intellectual property rights of the holder of the authorisation to place the product in question on the market. However, as regards the weighing of the general interest in disclosure against the protection of those rights, the CTB considered that the former should prevail. Consequently, it ordered the disclosure of those documents.
The 35 documents included, inter alia, laboratory studies concerning the effects of imidacloprid on bees, and studies performed partly in the field measuring the residues of plant protection products and biocides and their active ingredients present after use of those products in the air or soil, in seeds, leaves, pollen or nectar of the treated plant, as well as in honey and on bees. Those documents also include a summary of a study concerning imidacloprid migration in plants and guttation fluid, that is to say the secretion of water droplets by a plant, and two presentations.
As regards the remaining 49 documents, the CTB, by contrast, considered that they did not relate to ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4. Consequently, access to those 49 documents could, according to the CTB, be refused on the basis not only of protection of intellectual property rights, but also on the basis of the confidentiality of commercial or industrial information. After weighing, in accordance with that provision, the relevant interests, the CTB refused to disclose those documents.
Both Bijenstichting and Bayer challenged the decision of the CTB of 18 March 2013 before the referring court, the College van Beroep voor het bedrijfsleven (Administrative Court of Appeal for Trade and Industry, Netherlands).
In order to resolve the dispute before it, that court raises questions, inter alia, concerning the relationship between, on the one hand, the rules on confidentiality laid down by the specific legislation concerning the placing of plant protection products and biocides on the market, namely, at the time of the facts in the main proceedings, Directives 91/414 and 98/8 and Regulation No 1107/2009 and, on the other hand, the general rules on access to information in environmental matters governed by Directive 2003/4.
In particular, the referring court asks whether, as Bijenstichting submits, the confidentiality of the information requested by the latter ought to have been recognised by the CTB, upon Bayer’s request, at the latest at the time of the amendment to the authorisation to place the products in question on the market, or whether, as the CTB maintains, the confidential nature of that information could also be recognised subsequently, in the context of Bayer’s objection to the requests for access to that information made subsequently by Bijenstichting on the basis of Directive 2003/4, even though those requests concerned information for which Bayer had not requested confidential treatment at the time of the procedure for amendment of the marketing authorisation.
In the first scenario, the CTB should have upheld all the requests for disclosure made by Bijenstichting, without, where appropriate, being able to refuse those requests pursuant to Article 4(2) of Directive 2003/4. By contrast, in the second scenario, the CTB could have taken into account Bayer’s comments concerning the confidentiality of the information which were made for the first time at the time of those requests.
Moreover, the referring court also has doubts as to the interpretation of ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 and asks whether the information to which Bijenstichting requested access is covered by that concept.
If the answer is in the affirmative, the requests for disclosure made by the latter could not, in accordance with that provision, be refused on the ground that that disclosure would adversely affect the confidentiality of commercial or industrial information submitted by Bayer. On the contrary, if the answer is in the negative, in order to establish whether that information should be disclosed, it would be necessary to weigh the interest relating to the confidentiality of that information against the public interest served by that disclosure.
In those circumstances the College van Beroep voor het bedrijfsleven (Administrative Court of Appeal for Trade and Industry) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Do the provisions of Article 14 of Directive 91/414, and Article 63, read in conjunction with Article 59 of Regulation No 1107/2009 and Article 19 of Directive 98/8, respectively, mean that a request for confidentiality, as referred to in the aforementioned Articles 14, 63 and 19 from an applicant referred to in those articles, must be decided on for each individual information source before or when granting the authorisation, or before or when amending the authorisation, respectively, by means of a decision which can be made known to interested third parties?
(2)
If the previous question is answered in the affirmative: must Article 4(2) of Directive 2003/4 be interpreted as meaning that in the absence of a decision as referred to in the previous question, the respondent, as a national authority, is obliged to disclose the environmental information requested when such a request is made after the granting of the authorisation or after the amendment of the authorisation respectively?
(3)
How must the term “emissions into the environment” in [the second subparagraph of] Article 4(2) of Directive 2003/4 be interpreted, given what the parties have stated in that regard in Section 5.5 [of the decision of the referring court], against the background of the content of the documents as set out in Section 5.2 [of that decision]?
(4)
(a)
Can data which provide an estimate of the release into the environment of a product, its active ingredient(s) and other components as a result of the use of the product be deemed to be “information on emissions into the environment”?
(b)
If so, does it matter whether those data have been obtained by means of (semi-) field studies or other types of studies (such as, for example, laboratory studies and translocation studies)?
(5)
Can laboratory studies be deemed to be “information on emissions into the environment” when the test is aimed at examining isolated aspects under standardised conditions and in that framework many factors, such as, for example (climatological influences) are excluded and the tests are often conducted with — in comparison with customary practice — high dosages?
(6)
In that regard, must residues after the application of the product in the experimental set-up, in, for example, the air or on the ground, leaves, pollen or nectar of a crop (which is derived from treated seed), in honey or on non-target organisms also be included under “emissions into the environment”?
(7)
And is that also the case in respect of the measurement of the (substance’s) drift when the product is applied in the experimental set-up?
(8)
Do the words “information on emissions into the environment”, as referred to in the second subparagraph of Article 4(2) [of Directive 2003/4], mean that, if there are emissions into the environment, the information source must be disclosed in its entirety and not be limited to the (measurement) data which may, where applicable, be derived therefrom?
(9)
Does the application of the exception relating to commercial or industrial information within the meaning of point (d) of [the first subparagraph of] Article 4(2) [of Directive 2003/4] require a distinction to be made between “emissions”, on the one hand, and “discharges and other releases into the environment” within the meaning of Article 2(1)(b) of [that directive], on the other hand?’
The application to reopen the oral procedure
Following the delivery of the Advocate General’s Opinion on 7 April 2016, Bayer, by document lodged at the Court Registry on 9 May 2016, applied for the oral part of the procedure to be reopened.
In support of that application, Bayer maintains, first, that it is for the national court alone to determine whether the information at issue in the main proceedings referred to in the fourth to eighth questions submitted for a preliminary ruling relates to ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4. However, if the Court, following the example of the Advocate General, decides to adopt a position on those questions, Bayer seeks to reopen the oral part of the procedure so that the Court might have access to the documents to which Bijenstichting has requested access and establish, on that basis, whether the information contained in those documents relates to ‘emissions into the environment’. Next, Bayer considers that the answers to the questions referred as proposed by the Advocate General disregard the complete and comprehensive system of disclosure of documents implemented by Directives 91/414 and 98/8 and by Regulation No 1107/2009. Finally, in the event that the Court considers that the information at issue in the main proceedings concerns emissions into the environment, Bayer asks the Court also to examine the question of the specific arrangements for access to that information and in particular whether disclosure in a reading room would be acceptable.
In that regard, it must be pointed out at the outset, first, that neither the Statute of the Court of Justice of the European Union nor its Rules of Procedure make provision for the parties to submit observations in response to the Advocate General’s Opinion (see, inter alia, order of 4 February 2000, Emesa Sugar, C‑17/98, EU:C:2000:69, paragraph 2, and judgment of 6 September 2012, Döhler Neuenkirchen, C‑262/10, EU:C:2012:559, paragraph 29).
Secondly, it should be pointed out that the Court may, at any time, after hearing the Advocate General, order the reopening of the oral part of the procedure, under Article 83 of its Rules of Procedure, in particular if it considers that it lacks sufficient information or where the case must be decided on the basis of an argument which has not been debated between the parties or the interested persons referred to in Article 23 of the Statute of the Court of Justice of the European Union (see, inter alia, judgment of 28 April 2016, Borealis Polyolefine and Others, C‑191/14, C‑192/14, C‑295/14, C‑389/14 and C‑391/14 to C‑393/14, EU:C:2016:311, paragraph 40).
In the present case, it must be noted that the application to reopen the oral part of the procedure made by Bayer seeks in essence to reply to the Advocate General’s Opinion. Furthermore, the Court considers that it has sufficient information to be able to adjudicate and that the present case does not need to be decided on the basis of arguments which have not been debated between the parties.
As a result, the application must be dismissed.
Consideration of the questions referred
Questions 1 and 2
By its first two questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 4(2) of Directive 2003/4, read in conjunction with Article 14 of Directive 91/414, Article 19 of Directive 98/8 and Article 33(4) and Article 63 of Regulation No 1107/2009 must be interpreted as meaning that, if the applicant for an authorisation to place a plant protection product or biocide on the market has not, during the procedure laid down for obtaining that authorisation, requested that the information submitted in the context of that procedure be treated as confidential, the competent authority, having received after the closure of that procedure a request from a third party for access to that information on the basis of Directive 2003/4, is required to grant it, without being able to examine that applicant’s objection to the request for access and, if necessary, refuse it on the ground that the disclosure of the information in question would adversely affect the confidentiality of commercial or industrial information.
In order to answer those questions, it must be noted that, in accordance with Article 14 of Directive 91/414, Article 19 of Directive 98/8 and Article 33(4) and Article 63 of Regulation No 1107/2009, an applicant for an authorisation to place a plant protection product or biocide on the market may, in the context of the procedure laid down for obtaining that authorisation, request confidential treatment of information which constitutes an industrial or commercial secret or which it regards as commercially sensitive whose dissemination could cause the applicant harm industrially or commercially.
However, the first subparagraph of Article 14 of Directive 91/414, Article 19(1) of Directive 98/8 and Article 63 of Regulation No 1107/2009 also provide that those provisions are to apply without prejudice to Directive 2003/4.
Consequently, it is apparent that the EU legislature intended to subject requests for access by third parties to information contained in application dossiers for authorisation to place plant protection products or biocides on the market, in respect of which confidential treatment may be requested pursuant to the abovementioned provisions, to the general provisions of Directive 2003/4 (see, a contrario, judgment of 22 December 2010, Ville de Lyon, C‑524/09, EU:C:2010:822, paragraph 40).
Article 4(2) of that directive authorises Member States to provide for a request for access to environmental information to be refused if disclosure of that information would adversely affect any of the interests referred to in that article, inter alia, the confidentiality of commercial or industrial information.
That provision does not require submission of a request for confidential treatment prior to the request for disclosure.
It follows that, contrary to Bijenstichting’s claim, the competent authority, which, on the basis of Directive 2003/4 has received a request for access to information submitted by the applicant for an authorisation to place a plant protection product or biocide on the market in the context of the procedure for obtaining that authorisation, is not required to grant it and to disclose the information requested on the sole ground that the applicant did not request earlier that the information be treated confidentially, in the context of that procedure.
Therefore, that authority must be able to examine, as appropriate on the basis of that applicant’s objection, whether that disclosure would adversely affect the confidentiality of commercial or industrial information and whether that request should not be refused pursuant to point (d) of the first subparagraph of Article 4(2) of that directive.
In the light of the above, the answer to the first two questions is that Article 4(2) of Directive 2003/4 must be interpreted as meaning that the fact that the applicant for authorisation to place a plant protection product or biocide on the market, did not, during the procedure for obtaining that authorisation, request that information submitted under that procedure be treated as confidential on the basis of Article 14 of Directive 91/414, Article 19 of Directive 98/8 or Article 33(4) and Article 63 of Regulation No 1107/2009 does not preclude the competent authority, which has received, following the closure of that procedure, a request for access to the information submitted on the basis of Directive 2003/4 by a third party, from examining the applicant’s objection to that request for access and refusing it, if necessary, pursuant to point (d) of the first subparagraph of Article 4(2) of that directive on the ground that the disclosure of that information would adversely affect the confidentiality of commercial or industrial information.
Questions 3 to 7 and 9
By its third to seventh and ninth questions, which should be examined together, the referring court asks, in essence, whether releases of plant protection products or biocides, or the substances contained in those products, into the environment fall within the scope of ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 and, if the answer is in the affirmative, whether data relating to the evaluation of those releases into the environment and the effects of those releases, including data from studies performed entirely or in part in the field and from laboratory or translocation studies, information relating to residues in the environment following application of the product in question and studies on the measurement of the substance’s drift during that application fall within the scope of ‘information on emissions into the environment’ within the meaning of that provision.
While it is a matter for the referring court to determine whether the various documents to which access is, in the present case, requested by Bijenstichting fall with the scope of ‘information relating to emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4, it is, however, for the Court of Justice to point out to it the objective elements which must prevail in such an assessment.
In that regard, at the outset, it must be stressed that since that directive defines neither ‘emissions into the environment’ nor ‘information relating to emissions into the environment’ the interpretation of those concepts must take into account the context of the second subparagraph of Article 4(2) of that directive and its objective.
First, as recital 5 of Directive 2003/4 confirms, in adopting that directive the EU legislature intended to ensure the consistency of EU law with the Aarhus Convention with a view to its conclusion by the Community, by providing for a general scheme to ensure that any natural or legal person in a Member State has a right of access to environmental information held by or on behalf of public authorities, without that person having to state an interest (see, inter alia, judgment of 19 December 2013, Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 36).
It follows that, for the purposes of interpreting Directive 2003/4, account is to be taken of the wording and aim of the Aarhus Convention, which that directive is designed to implement in EU law (see, inter alia, judgment of 19 December 2013, Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 37) and, in particular, point (d) of the first subparagraph of Article 4(4) of that convention which provides that the confidentiality of commercial and industrial information may not be invoked against the disclosure of information on emissions relevant for the protection of the environment.
Secondly, in accordance with the Court’s settled case-law, the objective of Directive 2003/4 is to ensure a general principle of access to environmental information held by or for public authorities and, as is apparent from recital 9 and Article 1 of that directive, to achieve the widest possible systematic availability and dissemination to the public of environmental information (see, inter alia, judgment of 19 December 2013, Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 66).
It follows that, as expressly provided for in the second subparagraph of Article 4(4) of the Aarhus Convention and recital 16 and the second subparagraph of Article 4(2) of Directive 2003/4, the disclosure of information must be the general rule and the grounds for refusal referred to by those provisions must be interpreted in a restrictive way (see, inter alia, judgments of 16 December 2010, Stichting Natuur en Milieu and Others, C‑266/09, EU:C:2010:779, paragraph 52, and of 28 July 2011, Office of Communications, C‑71/10, EU:C:2011:525, paragraph 22).
By establishing that the confidentiality of commercial or industrial information may not be invoked against the disclosure of ‘information relating to emissions into the environment’, the second subparagraph of Article 4(2) of Directive 2003/4 allows for specific application of that rule and of the principle of the widest possible access to the environmental information held by or for public authorities.
It follows that, contrary to what, inter alia, Bayer, the German Government and the European Commission submit, it is not necessary to apply a restrictive interpretation of ‘emissions into the environment’ and ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4.
It is in the light of those considerations that the questions referred must be answered.
– The concept of ‘emissions into the environment’
In order to interpret ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4, it is necessary to establish whether, as Bayer, the German Government and the Commission maintain, a distinction must be made between that concept and those of ‘discharges’ and ‘releases’, and whether that concept must be restricted to emissions covered by Directive 2010/75, namely emissions emanating from certain industrial installations specified therein, or whether that concept also covers releases into the environment of products or substances such as plant protection products or biocides and the substances contained in those products.
As regards, in the first place, the question whether a distinction must be made between ‘emissions’ and ‘discharges’ and ‘releases’, it should be pointed out that Article 2(1)(b) of Directive 2003/4, which lists the factors which may fall within the scope of ‘environmental information’, appears, prima facie, to establish such a distinction.
However, first, no such distinction is made by the Aarhus Convention which merely provides in point (d) of the first subparagraph of Article 4(4) that the confidentiality of commercial and industrial information may not be invoked against the disclosure of ‘information on emissions which is relevant for the protection of the environment’.
Secondly, as set out in point 59 of the Advocate General’s Opinion, a distinction between emissions, discharges and other releases is irrelevant in the light of the objective of Directive 2003/4 concerning the disclosure of environmental information and would be artificial.
Emissions of gas or substances into the atmosphere and other releases or discharges such as the release of substances, preparations, organisms, micro-organisms, vibrations, heat or noise into the environment, in particular into air, water or land, may affect those various elements of the environment.
Furthermore, the concepts of ‘emissions’, ‘discharges’ and ‘releases’ broadly coincide, as shown by the use of the expression ‘other releases’ in Article 2(1)(b), of that directive from which it follows that emissions and discharges are also releases into the environment.
Numerous European Union acts, such as Directive 2010/75 and also Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage (OJ 2004 L 143, p. 56), and Regulation (EC) No 166/2006 of the European Parliament and of the Council of 18 January 2006 concerning the establishment of a European Pollutant Release and Transfer Register and amending Council Directives 91/689/EEC and 96/61/EC (OJ 2006 L 33, p. 1) largely equate the concepts of ‘emissions’ and ‘releases’ and ‘discharges’.
It follows that it is not necessary, for the purposes of interpreting ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 to draw a distinction between that concept and those of ‘discharges’ and ‘releases’ into the environment.
In the second place, it remains to be established whether, as Bayer, the German Government and the Commission submit, the concept of ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 should be restricted to emissions covered by Directive 2010/75 — namely, in accordance with Article 3(4) of that directive, to the direct or indirect release of substances, vibrations, heat or noise from individual or diffuse sources in certain industrial installations defined therein into air, water or land —, excluding emissions emanating from other sources such as those arising from a product being sprayed in the air or applied to plants, in water or on land.
It is true that the 2000 edition of the Aarhus Convention Implementation Guide proposed, in order to define the concept of ‘emissions’ to use the definition of that concept set out in Article 2(5) of Directive 96/61 which was reproduced in identical terms in Article 3(4) of Directive 2010/75, and the 2014 edition now refers to the definition set out in the latter provision.
However, by virtue of the Court’s settled case-law, while that guide may be regarded as an explanatory document, capable of being taken into consideration, if appropriate, among other relevant material for the purpose of interpreting the Aarhus Convention, the indications contained therein have no binding force and do not have the normative effect of the provisions of that convention (see, inter alia, judgment of 19 December 2013, Fish Legal and Shirley, C‑279/12, EU:C:2013:853, paragraph 38 and the case-law cited).
Nothing in the Aarhus Convention or in Directive 2003/4 permits the view that the concept of ‘emissions into the environment’ should be restricted to emissions emanating from certain industrial installations.
Moreover, such a restriction would be contrary to the express wording of point (d) of the first subparagraph of Article 4(4) of that convention. That provision states that information on emissions which is relevant for the protection of the environment must be disclosed. Information concerning emissions emanating from sources other than industrial installations, such as those resulting from the application of plant protection products or biocides, are just as relevant to environmental protection as information relating to emissions of industrial origin.
Furthermore, restriction of the concept of ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 to emissions emanating from certain industrial installations would be contrary to that directive’s objective of the widest possible disclosure of environmental information.
Consequently, such an interpretation of that concept cannot be accepted.
It follows from the above that it is not necessary to make a distinction between the concept of ‘emissions into the environment’ and those of ‘discharges’ and ‘releases’ or to confine that concept to the emissions covered by Directive 2010/75, excluding the release of products or substances into the environment emanating from sources other than industrial installations.
Consequently, ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 may not exclude the release into the environment of products and substances such as plant protection products or biocides and the substances contained in those products.
However, that concept must nevertheless be limited to non-hypothetical emissions, that is to say actual or foreseeable emissions from the product or substance in question under normal and realistic conditions of use.
In that regard, although the placing of a product on the market alone is not sufficient in general to consider that that product must necessarily be released into the environment and that information concerning it relates to ‘emissions into the environment’, the situation is different as regards a product, such as a plant protection product or biocide, which is, in the context of normal use, intended to be released into the environment by virtue of its function. Therefore the foreseeable emissions from that product into the environment are not, in the latter case, hypothetical.
Under those circumstances, ‘emissions into the environment’ covers emissions which are actually released into the environment at the time of the application of the product or substance in question and foreseeable emissions from that product or that substance into the environment under normal or realistic conditions of use of that product or substance corresponding to those under which the authorisation to place the product in question on the market is granted and which prevail in the area where that product is intended for use.
By contrast, as stated in points 82 and 83 of the Advocate General’s Opinion, that concept may not include purely hypothetical emissions. It follows in essence from Article 1 of Directive 2003/4, read in conjunction with Article 2(1) thereof, that the objective of that directive is to ensure access to information concerning factors, such as emissions affecting or likely to affect elements of the environment, in particular air, water and land. By definition, that does not include purely hypothetical emissions.
In the light of all of the above, ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as including, inter alia, the release into the environment of products or substances such as plant protection products or biocides and substances contained in those products, to the extent that that release is actual or foreseeable under normal or realistic conditions of use.
– The concept of ‘information on emissions into the environment’
As regards the question whether the different categories of information referred to in paragraph 50 of the present judgment are covered by ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4, it is necessary, in the first place, to ascertain whether, as the Netherlands Government submits, that concept covers only information on emissions from the plant protection product or biocide in question — or from substances that that product contains — as such, that is to say information concerning the nature, composition, quantity, date and place of those emissions, or if that concept also covers data relating to the effects of those emissions on the environment.
In that regard, it must be noted, as regards the wording of that provision, that there are differences between the language versions. Therefore while the French version of that provision refers to ‘informations relatives à des émissions dans l’environnement’ [information relating to emissions into the environment] a number of other language versions use the expression ‘information on emissions into the environment’. In particular the German language version refers to ‘Informationen über Emissionen in die Umwelt’, the Italian to ‘informazioni sulle emissioni nell’ambiente’ and the English to ‘information on emissions into the environment’.
According to settled case-law of the Court, the need for a uniform interpretation of a provision of EU law means that, where there is divergence between the various language versions of the provision, the latter must be interpreted by reference to the context and purpose of the rules of which it forms part (see, inter alia, judgment of 15 October 2015, Grupo Itevelesa and Others, C‑168/14, EU:C:2015:685, paragraph 42 and the case-law cited).
As set out in paragraph 55 of the present judgment, the objective of Directive 2003/4 is to ensure a general principle of access to environmental information held by or for public authorities and to achieve the widest possible systematic availability and dissemination to the public of environmental information. As noted in recital 1 of that directive, such access and dissemination seek, inter alia, to contribute to a greater awareness of environmental matters and more effective participation by the public in environmental decision-making (see, inter alia, judgment of 28 July 2011, Office of Communications, C‑71/10, EU:C:2011:525, paragraph 26).
For those purposes, the public must have access not only to information on emissions as such, but also to information concerning the medium to long-term consequences of those emissions on the state of the environment, such as the effects of those emissions on non-targeted organisms. The public interest in accessing information on emissions into the environment is specifically to know not only what is, or foreseeably will be, released into the environment, but also, as the Advocate General stated in point 86 of her Opinion, to understand the way in which the environment could be affected by the emissions in question.
It follows that ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as covering not only information on emissions as such, namely information concerning the nature, composition, quantity, date and place of those emissions but also data concerning the medium to long-term consequences of those emissions on the environment.
That being noted, it should be established, in the second place, whether the fact that the data at issue come from studies performed entirely or in part in the field, laboratory studies or translocation studies — that is to say studies concerning the analysis of the migration of the product or substance in question into the plant —, affects its classification as ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 and, in particular, whether data deriving from laboratory studies may be covered by that concept.
It is necessary, in reply to that question, to consider that that fact is not conclusive on its own. What matters is not so much that the data in question come from studies performed entirely or in part in the field or in laboratories or even from a translocation examination, but that the purpose of those studies is to assess ‘emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4 — that is to say, as stated in paragraphs 77 and 78 of the present judgment, the actual or foreseeable emissions of the product or substance in question into the environment under circumstances representing normal or realistic conditions of use of that product or substance —, or to analyse the effects of those emissions.
Therefore, data from tests whose objective is to study the effects of the use of a dose of the product or substance in question which is significantly above the maximum dose for which the marketing authorisation is granted and which is to be used in practice, or a dose in a much higher concentration, do not, in particular, constitute ‘information on emissions into the environment’, since that information relates to emissions which are not foreseeable under normal or realistic conditions of use.
By contrast, contrary to the Commission’s submission, ‘information on emissions into the environment’ covers studies which seek to establish the toxicity, effects and other aspects of a product or substance under the most unfavourable realistic conditions which could possibly occur, and studies carried out in conditions as close as possible to normal agricultural practice and conditions which prevail in the area where that product or substance is to be used.
As regards, in the third place, the question whether information relating to residues present in the environment after application of the product in question and studies on the measurement of the substance’s drift at the time of that application constitute ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4, it must be noted, first, that, in accordance with Article 2(2) of Directive 91/414, Article 2(1)(g) of Directive 98/8 and Article 3(1) of Regulation No 1107/2009, residues are substances present, in particular, in or on plants or elsewhere in the environment and resulting from the use of a plant protection product or biocide, including metabolites of those substances, their breakdown or reaction products.
Accordingly, the presence of residues in the environment is caused by emissions into the environment from the product concerned or substances contained therein. It is therefore a consequence of those emissions. That is the case not only in respect of what remains of substances sprayed into the air or deposited by the product in question on plants, soil or non-targeted organisms, but also of metabolites of those substances and their breakdown or reaction products. Although metabolites derive from the transformation of substances contained in the product in question, they are a consequence of the emission from that product and those substances into the environment.
Moreover, it must be noted that drift is the airborne carrying by droplets or vapour of plant protection products or biocides outside the area targeted for treatment. Therefore, it is also a consequence of the emission from those products or substances into the environment.
It follows that the information on residues present in the environment following application of the product concerned and the studies on the measurement of that substance’s drift at the time of that application are covered by ‘information on emissions into the environment’ within the meaning of the second subparagraph of Article 4(2) of Directive 2003/4.
In the light of all the above, it is necessary to consider that ‘information on emissions into the environment’ covers information concerning the nature, composition, quantity, date and place of the ‘emissions into the environment’ of plant protection products and biocides and substances contained therein, and data concerning the medium to long-term consequences of those emissions on the environment, in particular information relating to residues in the environment following application of the product in question, and studies on the measurement of the substance’s drift during that application, whether those data come from studies performed entirely or in part in the field or from laboratory or translocation studies.
Moreover, it must be stressed that, contrary to what, in essence, Bayer and the German Government claim, such an interpretation of the second subparagraph of Article 4(2) of Directive 2003/4 does not disregard either Articles 16 and 17 of the Charter of Fundamental Rights of the European Union (‘the Charter’) as regards freedom to conduct a business and the right to property, or Article 39(3) of the TRIPS Agreement which ensures the confidentiality of undisclosed data submitted by an applicant for authorisation to place pharmaceutical or chemical products on the market. Nor does it deprive of its effectiveness Article 63 of Regulation No 1107/2009 which, in paragraph 2 thereof, lists data normally deemed to undermine, inter alia, the protection of commercial interests and in respect of such information, any person may, pursuant to paragraph 1 of that article, request that it is to be treated as confidential.
As regards, first, Articles 16 and 17 of the Charter and Article 39(3) of the TRIPS Agreement, it should be noted that, in accordance with Article 52(1) of the Charter, rights guaranteed under the Charter may be subject to certain limitations, as long as they are provided for by law, respect the essence of those rights and freedoms, are necessary and genuinely meet objectives of general interest recognised by the European Union. Furthermore, Article 39(3) of the TRIPS Agreement allows disclosure of data submitted by an applicant for authorisation to place a pharmaceutical or chemical product on the market where necessary to protect the public.
In the context of weighing the rights ensured by Articles 16 and 17 of the Charter and Article 39(3) of the TRIPS Agreement, on the one hand, against the objectives of environmental protection and of the widest possible disclosure of environmental information, on the other hand, the EU legislature, in accordance with its discretion, considered that it was necessary, to ensure that those objectives were met, to provide that a request for access concerning ‘information on emissions into the environment’ could not, in the light of the relevance and importance of that information in terms of environmental protection, be refused on the ground that its disclosure would adversely affect the confidentiality of commercial or industrial information.
In that regard, the interpretation of ‘information on emissions into the environment’ set out in paragraph 96 of the present judgment does not in any way mean that all data contained in dossiers for authorisation to place plant protection products or biocides on the market, in particular, all data from studies carried out in order to obtain that authorisation, are covered by that concept and must always be disclosed. Only data relating to ‘emissions into the environment’ are covered by that concept, which excludes, inter alia, not only information which does not concern emissions from the product in question into the environment, but also, as is apparent from paragraphs 77 to 80 of the present judgment, information which relates to hypothetical emissions, that is to say emissions which are not actual or foreseeable from the product or substance in question under representative circumstances of normal or realistic conditions of use. That interpretation does not therefore lead to disproportionate undermining of protection of the rights ensured by Articles 16 and 17 of the Charter and by Article 39(3) of the TRIPS Agreement.
As regards Article 63 of Regulation No 1107/2009, it should be noted that, as set out in paragraph 43 of the present judgment, that article applies without prejudice to Directive 2003/4. Accordingly, it does not in any way follow from that article that the information referred to therein could not be classified as ‘information on emissions into the environment’ or that that data could never be disclosed pursuant to that directive.
Furthermore, it must be pointed out that the interpretation of that concept set out in paragraph 96 of the present judgment does not deprive Article 63 of its effectiveness. The presumption established by paragraph 2 of that article allows the competent authority to consider that information submitted by an applicant for a marketing authorisation covered by that provision is in principle confidential and may not be made available to the public if no request for access to that information has been made on the basis of Directive 2003/4. That presumption also guarantees the applicant, in the event that such a request is made, that the competent authority may disclose that information only after establishing, on an individual basis, whether that information relates to emissions into the environment or whether another overriding public interest justifies that disclosure.
– Conclusion
In the light of the foregoing considerations, the answer to the third to seventh and ninth questions is that the second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as follows:
—
‘emissions into the environment’ within the meaning of that provision covers the release into the environment of products or substances such as plant protection products or biocides and substances contained in those products, to the extent that that release is actual or foreseeable under normal or realistic conditions of use;
—
‘information on emissions into the environment’ within the meaning of that provision covers information concerning the nature, composition, quantity, date and place of the ‘emissions into the environment’ of those products or substances, and data concerning the medium to long-term consequences of those emissions on the environment, in particular information relating to residues in the environment following application of the product in question and studies on the measurement of the substance’s drift during that application, whether the data come from studies performed entirely or in part in the field, or from laboratory or translocation studies.
The eighth question
By its eighth question, the referring court asks, in essence, whether the second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as meaning, in the event of a request for access to information on emissions into the environment, that the source of that information must be disclosed in its entirety or to the extent of relevant data which may be extracted.
It follows from that provision that the grounds referred to in points (a), (d) and (f) to (h) of the first subparagraph of Article 4(2) of Directive 2003/4 may not be invoked in respect of a request for access to environmental information, in so far as that request concerns information on emissions into the environment. Under those circumstances, when the disclosure of the information requested would adversely affect one of the interests referred to in that provision, only the relevant data which may be extracted from the source of information concerning emissions into the environment must be disclosed, where it is possible to separate those data from the other information contained in that source, which is for the referring court to assess.
In the light of the above considerations, the answer to the eighth question is that the second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as meaning, in the event of a request for access to information on emissions into the environment whose disclosure would adversely affect one of the interests referred to in points (a), (d) and (f) to (h) of the first subparagraph of Article 4(2) of that directive, that only relevant data which may be extracted from the source of information concerning emissions into the environment must be disclosed where it is possible to separate those data from the other information contained in that source, which is for the referring court to assess.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
1.
Article 4(2) of Directive 2003/4/EC of the European Parliament and of the Council of 28 January 2003 on public access to environmental information and repealing Council Directive 90/313/EEC must be interpreted as meaning that the fact that the applicant for authorisation to place a plant protection product or biocide on the market, did not, during the procedure for obtaining that authorisation, request that information submitted under that procedure be treated as confidential on the basis of Article 14 of Council Directive 91/414/EEC of 15 July 1991 concerning the placing of plant protection products on the market, Article 19 of Directive 98/8/EC of the European Parliament and of the Council of 16 February 1998 concerning the placing of biocidal products on the market or Article 33(4) and Article 63 of Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market and repealing Council Directives 79/117/EEC and 91/414/EEC does not preclude the competent authority, which has received, following the closure of that procedure, a request for access to the information submitted on the basis of Directive 2003/4 by a third party, from examining the applicant’s objection to that request for access and refusing it, if necessary, pursuant to point (d) of the first subparagraph of Article 4(2) of that directive on the ground that the disclosure of that information would adversely affect the confidentiality of commercial or industrial information.
2.
The second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as follows:
—
‘emissions into the environment’ within the meaning of that provision covers the release into the environment of products or substances such as plant protection products or biocides and substances contained in those products, to the extent that that release is actual or foreseeable under normal or realistic conditions of use;
—
‘information on emissions into the environment’ within the meaning of that provision covers information concerning the nature, composition, quantity, date and place of the ‘emissions into the environment’ of those products or substances, and data concerning the medium to long-term consequences of those emissions on the environment, in particular information relating to residues in the environment following application of the product in question and studies on the measurement of the substance’s drift during that application, whether the data comes from studies performed entirely or in part in the field, or from laboratory or translocation studies.
3.
The second subparagraph of Article 4(2) of Directive 2003/4 must be interpreted as meaning, in the event of a request for access to information on emissions into the environment whose disclosure would adversely affect one of the interests referred to in points (a), (d), and (f) to (h) of the first subparagraph of Article 4(2) of that directive, that only relevant data which may be extracted from the source of information concerning emissions into the environment must be disclosed where it is possible to separate those data from the other information contained in that source, which is for the referring court to assess.
[Signatures]
( *1 ) * Language of the case: Dutch. |
JUDGMENT OF THE COURT (Fifth Chamber)
10 September 2015 ( *1 )
‛Reference for a preliminary ruling — Directive 1999/13/EC — Annex IIB — Atmospheric pollution — Volatile organic compounds — Emission reductions — Use of organic solvents in certain activities and installations — Obligations applying to existing installations — Time extension’
In Case C‑81/14,
REQUEST for a preliminary ruling under Article 267 TFEU from the Raad van State (Netherlands), made by decision of 12 February 2014, received at the Court on 17 February 2014, in the proceedings
Nannoka Vulcanus Industries BV
v
College van gedeputeerde staten van Gelderland,
THE COURT (Fifth Chamber),
composed of T. von Danwitz, President of the Chamber, C. Vajda, A. Rosas (Rapporteur), E. Juhász and D. Šváby, Judges,
Advocate General: J. Kokott,
Registrar: M. Ferreira, Principal Administrator,
having regard to the written procedure and further to the hearing on 26 February 2015,
after considering the observations submitted on behalf of:
—
Nannoka Vulcanus Industries BV, by M. Baneke, advocaat,
—
the Netherlands Government, by M. Bulterman, B. Koopman and C. Schillemans, acting as Agents,
—
the European Commission, by E. Manhaeve and S. Petrova, acting as Agents,
after hearing the Opinion of the Advocate General at the sitting on 12 March 2015,
gives the following
Judgment
This request for a preliminary ruling concerns the interpretation of Annex IIB to Council Directive 1999/13/EC of 11 March 1999 on the limitation of emissions of volatile organic compounds due to the use of organic solvents in certain activities and installations (OJ 1999 L 85, p. 1, and corrigenda OJ 1999 L 188, p. 54 and OJ 1999 L 240, p. 24).
The request was made in proceedings between Nannoka Vulcanus Industries BV (‘Nannoka’) and the College van gedeputeerde staten van Gelderland (Executive Board of the Provincial Committee for the Region of Gelderland; ‘the Board’), concerning the Board’s order requiring Nannoka to discontinue and rectify, on pain of imposition of periodic penalties, its infringement of the Netherlands legislation transposing Directive 1999/13.
Legal context
EU law
Recitals 5 to 9 in the preamble to Directive 1999/13 state:
‘(5)
Whereas, because of their characteristics, the use of organic solvents in certain activities and installations gives rise to emissions of organic compounds into the air which can be harmful for public health and/or contributes to the local and transboundary formation of photochemical oxidants in the boundary layer of the troposphere which cause[s] damage to natural resources of vital environmental and economic importance and, under certain exposure conditions, has harmful effects on human health;
(6)
Whereas the high incidence of high tropospheric ozone concentrations in recent years has triggered widespread concern regarding the impact on public health and the environment;
(7)
Whereas, therefore, preventive action is required to protect public health and the environment against the consequences of particularly harmful emissions from the use of organic solvents and to guarantee citizens the right to a clean and healthy environment;
(8)
Whereas emissions of organic compounds can be avoided or reduced in many activities and installations because potentially less harmful substitutes are available or will become available within the coming years; whereas, where appropriate substitutes are not available, other technical measures should be taken to reduce emissions into the environment as much as economically and technically feasible;
(9)
Whereas the use of organic solvents and the emissions of organic compounds which have the most serious effects on public health should be reduced as much as technically feasible.’
Recitals 14 and 15 in the preamble to Directive 1999/13 state:
‘(14)
Whereas a high level of environmental protection requires the setting and achievement of emission limits for organic compounds and appropriate operating conditions, in accordance with the principle of best available techniques, for certain installations and activities using organic solvents within the Community;
(15)
Whereas in some cases Member States may exempt operators from complying with the emission limit values because other measures, such as the use of low-solvent or solvent-free products or techniques, provide alternative means of achieving equivalent emission reductions.’
According to Article 1 of Directive 1999/13, the purpose of that directive is to prevent or reduce the direct and indirect effects of emissions of volatile organic compounds into the environment, mainly into the air, and the potential risks to human health, by providing measures and procedures to be implemented for the industrial activities defined in Annex I to that directive, in so far as they are operated above the thresholds listed in Annex IIA to that directive.
Article 2(1) of Directive 1999/13 defines ‘installation’ for the purposes of that directive as a stationary technical unit where one or more activities falling within the scope defined in Article 1 of that directive are carried out, and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions.
Article 3 of Directive 1999/13 provides:
‘Member States shall adopt the necessary measures to ensure that:
(1)
all new installations comply with Articles 5, 8 and 9;
...’
Article 4 of Directive 1999/13 provides:
‘Without prejudice to [Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control (OJ 1996 L 257, p. 26)] Member States shall adopt the necessary measures to ensure that:
(1)
existing installations comply with Articles 5, 8 and 9 no later than 31 October 2007;
...
(3)
those installations to be authorised or registered using the reduction scheme of Annex IIB notify this to the competent authorities by 31 October 2005 at the latest;
...’
According to Article 5(2) of Directive 1999/13:
‘All installations shall comply with:
(a)
either the emission limit values in waste gases and the fugitive emission values, or the total emission limit values, and other requirements laid down in Annex IIA;
(b)
the requirements of the reduction scheme specified in Annex IIB.’
Article 9(1) of Directive 1999/13 is worded thus:
‘Compliance with the following shall be demonstrated to the satisfaction of the competent authority:
...
—
the requirements of the reduction scheme under Annex IIB,
...’
The first subparagraph of Article 15(1) of Directive 1999/13 provides:
‘Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than 1 April 2001. They shall forthwith inform the Commission thereof.’
Annex IIB to Directive 1999/13, entitled ‘Reduction Scheme’, is worded as follows:
‘1.
Principles
The purpose of the reduction scheme is to allow the operator the possibility to achieve by other means emission reductions, equivalent to those achieved if the emission limit values were to be applied. To that end the operator may use any reduction scheme, specially designed for his installation, provided that in the end an equivalent emission reduction is achieved. Member States shall report according to Article 11 of the Directive to the Commission about the progress in achieving the same emission reduction, including the experience from the application of the reduction scheme.
2.
Practice
In the case of applying coatings, varnishes, adhesives or inks, the following scheme can be used. Where the following method is inappropriate the competent authority may allow an operator to apply any alternative exemption scheme which it is satisfied fulfils the principles outlined here. The design of the scheme takes into account the following facts:
(i)
where substitutes containing little or no solvent are still under development, a time extension must be given to the operator to implement his emission reduction plans;
(ii)
the reference point for emission reductions should correspond as closely as possible to the emissions which would have resulted had no reduction action been taken.
The following scheme shall operate for installations for which a constant solid content of product can be assumed and used to define the reference point for emission reductions:
(i)
the operator shall forward an emission reduction plan which includes in particular decreases in the average solvent content of the total input and/or increased efficiency in the use of solids to achieve a reduction of the total emissions from the installation to a given percentage of the annual reference emissions, termed the target emission. This must be done on the following time frame:
Time limit
Maximum allowed total annual emissions
New installations
Existing installations
By 31.10.2001
By 31.10.2005
Target emission × 1,5
By 31.10.2004
By 31.10.2007
Target emission
(ii)
The annual reference emission is calculated as follows:
(a)
The total mass of solids in the quantity of coating and/or ink, varnish or adhesive consumed in a year is determined. Solids are all materials in coatings, inks, varnishes and adhesives that become solid once the water or the volatile organic compounds are evaporated.
...’
With effect from 7 January 2014, Directive 1999/13 was repealed by Directive 2010/75/EU of the European Parliament and the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) (OJ 2010 L 334, p. 17).
It is clear from recital 1 in the preamble to Directive 2010/75 that that directive recasts seven directives, including Directive 1999/13.
Under the first subparagraph of Article 59(1) of Directive 2010/75:
‘Member States shall take the necessary measures to ensure that each installation complies with either of the following:
(a)
the emission of volatile organic compounds from installations shall not exceed the emission limit values in waste gases and the fugitive emission limit values, or the total emission limit values, and other requirements laid down in Parts 2 and 3 of Annex VII are complied with;
(b)
the requirements of the reduction scheme set out in Part 5 of Annex VII provided that an equivalent emission reduction is achieved compared to that achieved through the application of the emission limit values referred to in point (a).’
Article 80(1) of Directive 2010/75 provides:
‘Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with … point 1 of Part 5 … of Annex VII … by 7 January 2013.
They shall apply those measures from that same date.
...’
Article 81(1) of Directive 2010/75 provides:
‘[Directive 1999/13 and other directives] … are repealed with effect from 7 January 2014, without prejudice to the obligations of the Member States relating to the time limits for transposition into national law and application of the Directives set out in Annex IX, Part B.’
Part 5, entitled ‘Reduction scheme’, of Annex VII to Directive 2010/75, itself entitled ‘Technical provisions relating to installations and activities using organic solvents’, is worded as follows:
‘1.
The operator may use any reduction scheme, specially designed for his installation.
2.
In the case of applying coatings, varnishes, adhesives or inks, the following scheme can be used. Where the following method is inappropriate, the competent authority may allow an operator to apply any alternative scheme achieving equivalent emission reductions to those achieved if the emission limit values of Parts 2 and 3 were to be applied. The design of the scheme shall take into account the following facts:
(a)
where substitutes containing little or no solvent are still under development, a time extension shall be given to the operator to implement his emission reduction plans;
(b)
the reference point for emission reductions should correspond as closely as possible to the emissions which would have resulted had no reduction action been taken.
3.
The following scheme shall operate for installations for which a constant solid content of product can be assumed:
(a)
The annual reference emission is calculated as follows:
(i)
The total mass of solids in the quantity of coating and/or ink, varnish or adhesive consumed in a year is determined. Solids are all materials in coatings, inks, varnishes and adhesives that become solid once the water or the volatile organic compounds are evaporated.
(ii)
The annual reference emissions are calculated by multiplying the mass determined in (i) by the appropriate factor listed in the table below. Competent authorities may adjust these factors for individual installations to reflect documented increased efficiency in the use of solids.
...’
Netherlands law
It is apparent from the order for reference that Articles 4(1) and 5(2) of Directive 1999/13 were transposed into Netherlands law by Articles 3(1) and 5(a) of the Solvents Decree implementing Directive 1999/13 (Oplosmiddelenbesluit omzetting EG-VOS-richtlijn milieubeheer, Stb. 2001, No 161; ‘the Solvents Decree’).
Those provisions of the Solvents Decree required the undertakings concerned to take the measures necessary to ensure that their installations would, by no later than 31 October 2007, comply with the emission limit values specified in Annex IIA to that decree, or with the requirements of the plan to reduce emissions of volatile organic compounds (‘the reduction scheme’) specified in Annex IIB to that decree. The content of the latter annex is identical to that of Annex IIB to Directive 1999/13.
The dispute in the main proceedings and the questions referred for a preliminary ruling
Nannoka operates an installation for varnish and coating processes.
By decision of 7 October 2010, the Board imposed an order requiring Nannoka to discontinue and rectify, on pain of imposition of periodic penalties, its infringement of the combined provisions of Articles 3(1) and 5(a) of the Solvents Decree.
By decision of 13 July 2011, the Board dismissed the administrative appeal lodged by Nannoka against its decision of 7 October 2010.
By judgment of 3 May 2012, the Rechtbank Arnhem (District Court, Arnhem) dismissed the action brought by Nannoka against the Board’s decision of 13 July 2011.
Nannoka brought an appeal against that judgment before the Raad van State (Council of State).
The referring court states that the fact that the Board’s decision of 7 October 2010 was withdrawn on 7 March 2013 does not remove Nannoka’s interest in a substantive appraisal on appeal of the case at issue in the main proceedings. According to the referring court, Nannoka has convincingly established that it suffered actual harm as a consequence of the withdrawn decision, since it was obliged to subcontract a portion of its business to another company.
According to the referring court, it is common ground that Nannoka was, on 31 October 2007, not in compliance with the emission limit values laid down in Annex IIA to the Solvents Decree.
Nannoka’s argument, however, before the referring court is that it was in compliance with the requirements of the reduction scheme specified in Annex IIB to the Solvents Decree, since, according to Nannoka, that annex gave it an extension of the time-limit beyond 31 October 2007 in order to implement its own reduction scheme.
According to Nannoka, Annex IIB to Directive 1999/13 provides that a time extension must be given to the operator to implement his reduction scheme where substitutes containing little or no solvent are still under development. Nannoka takes the view that that is the situation in the main proceedings.
Before the referring court, the parties agreed that Nannoka, by letter of 27 October 2005, notified the competent national authorities of its intention to have recourse to a reduction scheme. It is, furthermore, undisputed that Nannoka drew up such a reduction scheme. According to the referring court, that reduction scheme did not however enable Nannoka to meet by 31 October 2007 the ‘target emission’, set out in the second paragraph of Annex IIB(2) to Directive 1999/13.
The referring court notes that Annex IIB to Directive 1999/13 does not require the adoption of a reduction scheme which has to conform to a specific template, but rather sets out principles, guidance and requirements with which, in accordance with Article 5(2) of the directive, the operator must comply where he establishes his own reduction scheme.
Annex IIB to Directive 1999/13 does not, however, enable the referring court to determine with precision either the situations in which the time extension which it provides for can be legally given or the possible duration of such an extension.
The referring court points out that that annex provides, in respect of installations for which a constant solid content of product can be assumed and used to define the reference point for emission reductions, for the application of a particular reduction scheme (‘the standard scheme’). That annex subsequently provides a time frame for the attainment of the ‘target’ emissions and a calculation method for determining those emissions.
According to the referring court, there is nothing to support the conclusion that, in the main proceedings, Nannoka’s installations did not meet the conditions to which the application of that standard scheme is subject. It appears that, in situations where that standard scheme operates, the time frame set out in Annex IIB to Directive 1999/13 may not be departed from. Given that, according to that time frame, the target emission was to be attained by 31 October 2007 and that it was plainly impossible for Nannoka’s reduction scheme to achieve that result, doubt remains, according to the referring court, as to whether that reduction scheme complied with the requirements of Annex IIB to Directive 1999/13.
However, given that that annex states that account must also be taken of the fact that a time extension must be given to the operator to implement his emission reduction plans where substitutes containing little or no solvent are still under development, the referring court asks whether, even in situations where the standard scheme is applicable, that scheme’s time frame may none the less be departed from.
The referring court accordingly envisages two possible interpretations of Annex IIB to Directive 1999/13. According to the first interpretation, the time extension can be given only where the standard scheme is not appropriate to the situation concerned and a different type of reduction scheme is drawn up for that reason. According to the second interpretation, even where the standard scheme is applicable, a time extension can be obtained by way of derogation from the time frame provided for in that scheme.
In the event that that second interpretation is accepted by the Court, the referring court is also unsure about the conditions required for an operator to qualify for a time extension and the length of time that extension may last. Annex IIB to Directive 1999/13 does not specify, for example, whether a time extension is contingent on an authorisation from the competent authorities or whether it occurs automatically. That annex does not state to what extent the development of the substitutes containing little or no solvent must have materialised, or what stage that development must have reached, in order to confer an entitlement to a time extension. Further, the annex does not specify the criteria on the basis of which the duration of the time extension is to be determined.
In those circumstances, the Raad van State decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:
‘(1)
Does it follow from Annex IIB to Directive [1999/13] that the operator of installations for which a constant solid content of product can be assumed and used to define the reference point for emission reductions, where substitutes containing little or no solvent are still under development, must be given a time extension for the implementation of his reduction scheme, by way of derogation from the time frame set out in that annex?
[If Question 1 is answered in the affirmative]
(2)
Is particular action on the part of the operator of the installation or authorisation from a competent authority required for the conferring of a time extension for the implementation of the reduction scheme provided for in Annex IIB to Directive [1999/13]?
(3)
On the basis of which criteria can the duration of the time extension provided for in Annex IIB to Directive [1999/13] be determined?’
Consideration of the questions referred
The first question
By its first question, the referring court seeks to ascertain, in essence, whether Annex IIB to Directive 1999/13 must be interpreted as meaning that the time extension provided for in point (i) of the first paragraph of Annex IIB(2) to that directive can be given to the operator of an ‘installation’ within the meaning of Article 2(1) of that directive, for the implementation of his reduction scheme, where substitutes containing little or no solvent are still under development, even though, for that installation, a constant solid content of product can be assumed and used to define the reference point for emission reductions.
Pursuant to Article 5(2) of Directive 1999/13, all installations covered by that directive must comply either with the emission limit values of the volatile organic compounds laid down in Annex IIA to that directive, or with the requirements of the reduction scheme in Annex IIB to that directive.
According to Annex IIB(1) to that directive, the purpose of the reduction scheme is to allow the operator the possibility of achieving by other means than by the application of those emission limit values, emission reductions which are equivalent to those he would achieve if those values were to be applied. As the Advocate General observed in point 14 of her Opinion, a reduction scheme is based on the use of substitutes and processes that generate fewer emissions.
According to the first paragraph of Annex IIB(2) to Directive 1999/13, in the case of applying coatings, varnishes, adhesives or inks, a specific scheme, laid down in the second paragraph of Annex IIB(2), namely the standard scheme, can be used. Pursuant to that latter provision, that scheme is to operate for installations for which a constant solid content of product can be assumed and used to define the reference point for emission reductions. The first paragraph of Annex IIB(2) states that where that method is inappropriate the competent authority may allow an operator to apply any alternative exemption scheme which it is satisfied fulfils the principles outlined in Annex IIB(1).
In the main proceedings, it appears from the order for reference that there is nothing to suggest that Nannoka’s installations did not meet the conditions required for the application of the standard scheme.
Since point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 provides that a time extension must be given to the operator concerned for the implementation of his reduction scheme where substitutes containing little or no solvent are still under development, it must be determined whether that time extension must be given irrespective of which reduction scheme is applicable to that operator’s installation or whether the granting of such a time extension is possible only in the case of the operation of a reduction scheme other than the standard scheme.
In that regard, it should be noted at the outset that the wording of that annex does not provide a clear answer to that question.
Although the wording of point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 appears to indicate that a time extension must be given to the operator to implement his emission reduction plans where substitutes containing little or no solvent are still under development, the sequence of the three sentences in the first paragraph of that section (2) does not make possible a determination whether a time extension must also be given in the specific situation where that operator applies the standard scheme.
It should be noted that although, in the French version of Directive 1999/13, the phrase ‘[à] cet effet’ [to that end], at the start of the third sentence of Annex IIB(2) to Directive 1999/13, seems, at first sight, to refer only to the possibility, mentioned in the previous sentence of that section, of the application of ‘any alternative exemption scheme’ [other than the standard scheme], that interpretation cannot, however, be confirmed unequivocally in the light of other language versions of Directive 1999/13, such as the German, English and Dutch language versions, which contain no phrase equivalent to the expression ‘[à] cet effet’. In those versions, the third sentence could accordingly be interpreted broadly, as referring to any reduction scheme, including the standard scheme.
In that context, the Netherlands Government argues that, whatever reduction scheme is implemented by the operator concerned, any time extension given to it could not go beyond 31 October 2007, since that is the date by which the emissions of existing installations had to comply, in accordance with Article 4(1) of Directive 1999/13 and Annex IIB(2), second paragraph, point (i) thereto, with the requirements of Article 5 of that directive, namely, the thresholds referred to in Annex IIA to that directive or the reduction scheme described in Annex IIB thereto.
That position cannot, however, be accepted.
The possibility, expressly provided for in point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13, of giving an operator a time extension for the implementation of his reduction scheme necessarily implies that all the periods referred to in that directive, including that expiring on 31 October 2007 in respect of existing installations, can be extended. As the Advocate General observed in point 22 of her Opinion, the position of the Netherlands Government would mean that point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 would no longer be prescriptive and would reduce that provision to a mere explanation of how the period in question was to be calculated.
It should, moreover, be noted that, when Directive 2010/75 was adopted in 2010, the EU legislature reproduced in point 2(a) of Part 5 of Annex VII to that directive, in terms identical to the provisions contained in point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13, the possibility of giving a time extension to an operator for the application of a reduction scheme. However, as the Advocate General observed in point 32 of her Opinion, there is nothing to suggest that the provision at issue of Directive 1999/13 was to be amended when incorporated into Directive 2010/75. The legislature therefore proceeded on the assumption that a time extension could be envisaged even after 31 October 2007.
The Commission, for its part, argues that the second paragraph of Annex IIB(2) to Directive 1999/13 contains a special rule, applicable to installations in which a product with a constant solid content is used, which prevails over the provision relating to the time extension. According to the Commission, a time extension is accordingly possible only for installations in which a product without a constant solid content is used.
In that regard, while it is true that, in accordance with the second paragraph of Annex IIB(2) to Directive 1999/13, a specific reduction scheme, namely the standard scheme, is to operate for installations for which a constant solid content of product can be assumed and used to define the reference point for emission reductions, that scheme does not, however, constitute a special rule precluding a time extension from being given to the operators of such installations.
It should be noted that the first paragraph of Annex IIB(2) to Directive 1999/13 states that in the case of applying coatings, varnishes, adhesives or inks, the standard scheme ‘can’ be used and, where that scheme is not appropriate, the competent authority ‘may’ allow an operator to apply any alternative exemption scheme which it is satisfied fulfils the principles outlined in Annex IIB(1) to that directive. It should be noted that nothing in the wording of that provision precludes, in the case where the standard scheme is not appropriate, the application of any alternative scheme in respect of installations for which a constant solid content of product can be assumed. Accordingly, just as it is possible for the standard scheme not to apply to such installations, a time extension may be given to them where substitutes containing little or no solvent are still under development.
Moreover, the possibility of giving a time extension in respect of all types of installations regardless of the reduction scheme adopted is borne out by the ratio legis underpinning the provisions of Directive 1999/13 which relate to the time extension and to the installations which have a constant solid content of product.
First, as the Advocate General observed in point 36 of her Opinion, that time extension is an expression of the principle of proportionality. In the light of that principle, it seems excessive to require operators of an installation to make investments aimed at reducing the emissions of volatile organic compounds of an installation before a certain date if those emissions can be avoided or very significantly reduced in the near future, at a lower cost, when substitutes containing little or no solvent, which are still under development, will be available. Second, as is apparent from recital 8 in the preamble to Directive 1999/13, the extension is based on the consideration that emissions of organic compounds can be avoided or reduced by less harmful substitutes which are or which will become available in the coming years. If an undertaking can avoid expensive measures to reduce emissions, by using substitutes, it will probably be prepared to develop or support the development of such substitutes. In addition, since substitutes containing little or no solvent can contribute, beyond the confines of the installations concerned, to limiting emissions of volatile organic compounds into the environment, their development may justify a longer transitional period.
Concerning installations in which a product with a constant solid content is used, it is clear from the second paragraph of Annex IIB(2) to Directive 1999/13 that this content can be used to ‘define the reference point for emission reductions’. As the interested parties explained at the hearing, the presence of a constant solid content of product accordingly makes possible the identification of a method for determining the emissions targets of the installations concerned, a method to which the operator concerned cannot have recourse where a product with such a constant content is not used. It is also not stated in any provision of that annex that the objective pursued by introducing the criterion relating to the presence of a constant solid content of product was to preclude a time extension being given to the operator of an installation in which a product with such a constant content is used.
That criterion therefore appears to be unconnected to the ratio legis which underpins the provisions of Directive 1999/13 relating to the possibility of granting a time extension where substitutes containing little or no solvent are still under development. There is therefore no justification for a distinction, as regards that possibility, between installations in which a product with a constant solid content is used and other installations, and moreover no such distinction can be clearly inferred from the wording of point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13.
Admittedly, at the hearing, the Commission argued that, when Directive 1999/13 was adopted, there were already a large number of substitutes for products with a constant solid content. According to the Commission, the EU legislature took that fact into account and, accordingly, when it laid down, in point (i) of the second paragraph of Annex IIB(2) to Directive 1999/13, the periods applicable to the standard scheme, it must have intended to preclude any right to a time extension in respect of the installations for which a constant solid content of product can be assumed.
However, neither the provisions of Directive 1999/13 nor the available preparatory documents relating to that directive support the Commission’s claims.
In that regard, it should be added that an interpretation of Annex IIB to Directive 1999/13 as precluding a time extension from being given, where substitutes containing little or no solvent are still under development, to the operator of an installation for which a constant solid content of product can be assumed, would, in any event, be contrary to the principle of legal certainty, which requires that EU rules enable those concerned to know precisely the extent of the obligations which are imposed on them and that those persons must be able to ascertain unequivocally what their obligations are and take steps accordingly (see, to that effect, judgments in BGL, C‑78/01, EU:C:2003:490, paragraph 71 and ArcelorMittal Luxembourg v Commission and Commission v ArcelorMittal Luxembourg and Others, C‑201/09 P and C‑216/09 P, EU:C:2011:190, paragraph 68).
Since such an interpretation cannot be clearly inferred from the wording of Annex IIB to Directive 1999/13 and does not appear to be supported either in the light of the ratio legis underpinning the provisions of point (i) of the first paragraph of Annex IIB(2), relating to the time extension or in the light of the structure of that annex, the principle of legal certainty precludes an undertaking, such as Nannoka, being deprived of the right to qualify for such a time extension, on the basis of that annex.
The necessary conclusion therefore is that the possibility must exist of giving a time extension irrespective of the reduction scheme applicable to the installation concerned, where substitutes containing little or no solvent are still under development.
In the light of all the foregoing, the answer to the first question is that Directive 1999/13 must be interpreted as meaning that the time extension provided for in point (i) of the first paragraph of Annex IIB(2) to that directive can be given to the operator of an ‘installation’ within the meaning of Article 2(1) of that directive, for the implementation of his reduction scheme, where substitutes containing little or no solvent are still under development, even though, for that installation, a constant solid content of product can be assumed and used to define the reference point for emission reductions.
The second and third questions
By its second and third questions, which it is appropriate to consider together, the referring court asks, in essence, first, whether point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 must be interpreted as meaning that a time extension for the implementation of the reduction scheme requires particular action by the operator of the installation concerned or an authorisation from the competent authorities and, second, on the basis of which criteria can the duration of that time extension be determined.
In that regard, it is clear from the very wording of point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 that the time extension referred to in that provision must be ‘given’. It follows that such a time extension cannot occur automatically and must necessarily ensue from a decision of the competent authorities. Moreover, as the Advocate General observed in point 65 of her Opinion, such a decision necessarily requires a prior application by the operator of the installation concerned, given that the latter seeks a derogation from the requirements which, in the absence of a time extension, would be applicable to him.
In that context, it is important to note the central role conferred on the competent authorities by the provisions of Directive 1999/13 in connection with an operator applying a reduction scheme.
Pursuant to Article 4(3) of Directive 1999/13, operators intending to implement a reduction scheme were required to notify the competent authorities by 31 October 2005 at the latest. In addition, pursuant to Article 9(1) of that directive, the compliance of the reduction scheme thus notified with the requirements of the reduction scheme under Annex IIB to that directive is to be demonstrated by the operator ‘to the satisfaction of the competent authority’. Finally, under Annex IIB(2) to that directive, in cases where the standard schema is not appropriate, ‘the competent authority may allow an operator to apply any alternative exemption scheme which it is satisfied fulfils the principles’ outlined in Annex IIB(1).
It follows from those provisions that the competent authority enjoys discretion when called upon to rule on an operator’s application for permission to apply a reduction scheme.
The same must necessarily hold good for the granting of a time extension for the implementation of such a reduction scheme, since that grant is closely linked to the authorisation given to an operator to apply that scheme.
A time extension can therefore take effect only pursuant to an authorisation given by the competent authorities, on the application of the operator concerned.
In that regard, point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 merely provides that, where substitutes containing little or no solvent are still under development, a time extension must be given to the operator to implement his ‘emission reduction plans’.
Since it is an exception to the general provisions of Directive 1999/13, the time extension provided for in point (i) of the first paragraph of Annex IIB(2) to that directive must be interpreted strictly (see, to that effect, judgment in ACI Adam and Others, C‑435/12, EU:C:2014:254, paragraph 22, and the case-law cited).
In that regard, it follows from the very wording of point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 — which provides for a time ‘extension’ only — that the application of a reduction scheme based on that annex must be limited in time.
When determining whether a time extension must be given to an operator for the implementation of a reduction scheme and fixing the duration of the time extension which may be given, account should be taken of the objectives pursued by the provisions of Annex IIB to Directive 1999/13 relating to the time extension, namely, as has been stated in paragraph 56 above, on the one hand, encouraging the development of substitutes and, on the other hand, taking into account the principle of proportionality.
As the Advocate General observed in points 56 and 57 of her Opinion, it is accordingly for the competent authorities, within the discretion available to them, to verify in particular that substitutes which may be used in the installations concerned and which may reduce the emissions of volatile organic compounds are actually under development, and that the work in progress, in the light of the evidence provided, is capable of perfecting such substitutes.
When examining the proportionality of the time extension requested in relation to the objective of encouraging the development of substitutes, account should be taken of the relationship between, on the one hand, the emission reductions which can be achieved by means of the substitutes under development and their costs and, on the other hand, the additional emissions resulting from the time extension and also the costs of any alternative measures. In addition, it is necessary to verify that there is no alternative measure which may result in similar or even greater emission reductions, at a lower cost, and, in particular, that other substitutes are not already available.
Accordingly, where the development of a substitute promises significant emission reductions, the operator concerned may be given such a time extension.
As regards the duration of the time extension which may be given, it is apparent that neither Annex IIB to Directive 1999/13 nor any other provision of that directive provides any guidance in that regard.
However, unless the other provisions of Directive 1999/13 are to be deprived of all practical effect, point (i) of the first paragraph of Annex IIB(2) to that directive cannot be interpreted as meaning that the competent authorities must give to the operator concerned a time extension until substitutes are available, without any limitation in time.
It is apparent in that regard from recital 8 in the preamble to Directive 1999/13 that the grant of an extension under point (i) of the first paragraph of Annex IIB(2) to that directive is to be contemplated only where substitutes containing little or no solvent are actually under development on the date on which the time extension is to be given and where it can be expected that they will become available ‘within the coming years’.
Although it appears from that provision that the extension may last for several years, it should, however, be held that the duration of that extension must not go beyond what is necessary for substitutes to be developed. That must be assessed in the light of all the relevant factors and, in particular by weighing, on the one hand, the magnitude of the emission reductions that will be achieved by the substitutes under development and also the cost of those substitutes and, on the other hand, the magnitude of the additional emissions which will result from the time extension and the cost of any alternative measures.
In view of all the foregoing, the answer to the second and third questions is that point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 must be interpreted as meaning that a time extension for the implementation of a reduction scheme requires an authorisation from the competent authorities, which presupposes a prior application from the operator concerned. When determining whether a time extension must be given to an operator for the implementation of a reduction scheme and fixing the duration of the time extension which may be given, it is for those competent authorities, within the discretion available to them, to verify in particular that substitutes which may be used in the installations concerned and which may reduce the emissions of volatile organic compounds are actually under development, that the work in progress, in the light of the evidence provided, is capable of perfecting such substitutes and that there is no alternative measure which may result in similar or even greater emission reductions, at a lower cost, and, in particular, that other substitutes are not already available. Furthermore, account should be taken of the relationship between, on the one hand, the emission reductions which can be achieved by means of the substitutes and the cost of those substitutes and, on the other hand, the additional emissions engendered by the time extension and the cost of any alternative measures. The duration of the time extension must not go beyond what is necessary for substitutes to be developed. That must be assessed in the light of all the relevant factors and, in particular, the magnitude of the additional emissions engendered by the time extension and the cost of any alternative measures as compared with the magnitude of the emission reductions that will be achieved by the substitutes under development and the cost of those substitutes.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Fifth Chamber) hereby rules:
1.
Council Directive 1999/13/EC of 11 March 1999 on the limitation of emissions of volatile organic compounds due to the use of organic solvents in certain activities and installations must be interpreted as meaning that the time extension provided for in point (i) of the first paragraph of Annex IIB(2) to that directive may be given to the operator of an ‘installation’ within the meaning of Article 2(1) of that directive, for the implementation of his plan to reduce emissions of volatile organic compounds, where substitutes containing little or no solvent are still under development, even though, for that installation, a constant solid content of product can be assumed and used to define the reference point for emission reductions.
2.
Point (i) of the first paragraph of Annex IIB(2) to Directive 1999/13 must be interpreted as meaning that a time extension for the implementation of a scheme to reduce emissions of volatile organic compounds requires an authorisation from the competent authorities, which presupposes a prior application from the operator concerned. When determining whether a time extension must be given to an operator for the implementation of a plan to reduce emissions of volatile organic compounds and fixing the duration of the time extension which may be given, it is for those competent authorities, within the discretion available to them, to verify in particular that substitutes which may be used in the installations concerned and which may reduce the emissions of volatile organic compounds are actually under development, that the work in progress, in the light of the evidence provided, is capable of perfecting such substitutes and that there is no alternative measure which may result in similar or even greater emission reductions, at a lower cost, and, in particular, that other substitutes are not already available. Furthermore, account should be taken of the relationship between, on the one hand, the emission reductions which can be achieved by means of the substitutes under development and the cost of those substitutes and, on the other hand, the additional emissions engendered by the time extension and the cost of any alternative measures. The duration of the time extension must not go beyond what is necessary for substitutes to be developed. That must be assessed in the light of all the relevant factors and, in particular, the magnitude of the additional emissions engendered by the time extension and the cost of any alternative measures as compared with the magnitude of the emission reductions that will be achieved by the substitutes under development and the cost of those substitutes.
[Signatures]
( *1 ) Language of the case: Dutch. |
JUDGMENT OF THE COURT (Grand Chamber)
21 April 2015 ( *1 )
‛Failure of a Member State to fulfil obligations — Value added tax — Sixth Directive 77/388/EEC — Directive 2006/112/EC — Articles 132(1)(a) and 135(1)(h) — Exemptions — Public postal services — Postage stamps — Directive 97/67/CE’
In Case C‑114/14,
ACTION for failure to fulfil obligations under Article 258 TFEU, brought on 10 March 2014,
European Commission, represented by J. Enegren and L. Lozano Palacios, acting as Agents, with an address for service in Luxembourg,
applicant,
v
Kingdom of Sweden, represented by U. Persson and A. Falk, acting as Agents,
defendant,
THE COURT (Grand Chamber),
composed of V. Skouris, President, K. Lenaerts, Vice-President, M. Ilešič, L. Bay Larsen, T. von Danwitz, J.‑C. Bonichot (Rapporteur), S. Rodin and K. Jürimäe, Presidents of Chambers, A. Rosas, E. Juhász, A. Borg Barthet, J. Malenovský and E. Levits, Judges,
Advocate General: M. Wathelet,
Registrar: A. Calot Escobar,
having regard to the written procedure,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
By its action, the European Commission asks the Court to declare that, by failing to exempt from value added tax (VAT) the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto, and the supply at face value of postage stamps valid for use for postal services within national territory, the Kingdom of Sweden has failed to fulfil its obligations under Articles 132(1)(a) and 135(1)(h) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).
Legal context
Directive 2006/112
Title IX of Directive 2006/112, ‘Exemptions’, includes Chapter 2, ‘Exemptions for certain activities in the public interest’. Article 132, which appears in that title, provides in paragraph 1(a):
‘Member States shall exempt the following transactions:
(a)
the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto.’
Article 135 of Directive 2006/112, which appears in the next chapter, ‘Exemptions for other activities’, provides in paragraph 1(h):
‘Member States shall exempt the following transactions:
…
(h)
the supply at face value of postage stamps valid for use for postal services within their respective territory, fiscal stamps and other similar stamps.’
The provisions referred to in paragraphs 2 and 3 above are identical to those previously applicable of Article 13A(1)(a) and B(e) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), which Directive 2006/112 repealed and replaced.
Directive 97/67/EC
Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (OJ 1988 L 15, p. 14), as amended by Directive 2002/39/EC of the European Parliament and of the Council of 10 June 2002 (OJ 2002 L 176, p. 21), (‘Directive 97/67’) establishes, as stated in Article 1, common rules concerning inter alia the provision of a universal postal service within the European Community and the criteria defining the services which may be reserved for universal service providers.
Article 3(1) of Directive 97/67 reads as follows:
‘Member States shall ensure that users enjoy the right to a universal service involving the permanent provision of a postal service of specified quality at all points in their territory at affordable prices for all users.’
Article 4 of Directive 97/67 provides:
‘Each Member State shall ensure that the provision of the universal service is guaranteed and shall notify the Commission of the steps it has taken to fulfil this obligation and, in particular, the identity of its universal service provider(s). Each Member State shall determine in accordance with Community law the obligations and rights assigned to the universal service provider(s) and shall publish them.’
Pre-litigation procedure and proceedings before the Court
On 10 April 2006 the Commission sent a letter of formal notice to the Kingdom of Sweden, complaining that it had failed to fulfil its obligations under Article 13A(1)(a) and B(e) of the Sixth Directive 77/388 by failing to exempt from VAT the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto, and the supply at face value of postage stamps valid for use within national territory.
By letter of 7 June 2006, the Swedish authorities replied to that letter, contesting that they had failed to fulfil their obligations under the Sixth Directive 77/388.
By letter of 18 July 2007, the Commission, not satisfied with that reply, sent the Kingdom of Sweden a reasoned opinion calling on it to comply with its obligations within a period of two months from receipt of the opinion.
By letter of 17 September 2007, the Kingdom of Sweden replied to the reasoned opinion, arguing that the exemption for supplies by the public postal services, provided for by Directive 2006/112 in the same terms as by the Sixth Directive 77/388, was not applicable in the Swedish market because such services did not exist there.
Since it was not satisfied with the position taken by the Kingdom of Sweden, the Commission decided to bring the present action before the Court.
Pursuant to the third paragraph of Article 16 of the Statute of the Court of Justice of the European Union, the Kingdom of Sweden requested the Court to sit as a Grand Chamber.
The action
First complaint: incorrect transposition of Article 132(1)(a) of Directive 2006/112
Arguments of the parties
The Commission submits that the Kingdom of Sweden should exempt from VAT the supplies of services, other than passenger transport and telecommunications services, and incidental supplies of goods which Posten AB has to supply in accordance with Directive 97/67.
It submits that supplies of services by a universal service provider in accordance with its obligations under Articles 3 to 6 of Directive 97/67 fall within the definition of ‘the supply by the public postal services of services’ within the meaning of Article 132(1)(a) of Directive 2006/112.
It observes in this respect that Posten AB, a private law company, was designated as a universal service provider in Sweden. In support of that assertion, the Commission relies on the dispute between Posten AB and the Swedish postal and telecommunications authorities concerning their decision to attach to the authorisation for Posten AB to carry on a postal activity conditions relating to its designation as a universal service provider. According to the Commission, it is clear from the judgment of the Kammarrätten i Stockholm (Administrative Court of Appeal, Stockholm) that the operations carried out by Posten AB may be distinguished on that basis from those of other operators in the Swedish market.
According to the Commission, the Kingdom of Sweden is required to implement the exemption laid down in Article 132(1)(a) of Directive 2006/112 even if it considers that it can better ensure fiscal neutrality by means other than the exemption. The Commission relies in this respect on the judgment in Commission v Spain (C‑204/03, EU:C:2005:588, paragraph 28).
Moreover, the Commission infers from the judgment in TNT Post UK (C‑357/07, EU:C:2009:248) that the VAT exemption in question does not infringe the principle of fiscal neutrality.
Finally, it submits that no distortion of competition, even if one did exist, could dispense the Kingdom of Sweden from its obligation to apply the exemption in Article 132(1)(a) of Directive 2006/112, which differs from other provisions of that directive by being unconditional. On the contrary, according to the Commission, it is precisely the existence of a situation in which all the Member States with one exception apply that exemption that may produce distortions of competition in the internal market.
The Kingdom of Sweden submits, contrariwise, that to exempt Posten AB from VAT on the basis of the exception for public postal services would be contrary to Directive 2006/112, the provisions of the FEU Treaty on competition, and the objectives of Directive 97/67.
It submits that in Sweden some 30 undertakings operate under identical financial conditions in a postal market that was liberalised long ago — even before the accession of the Kingdom of Sweden to the European Union — and no longer has a ‘public postal service’. In particular, Posten AB receives no compensation from the State for its universal service obligations, although this is permitted by the second sentence of Article 7(1) of Directive 97/67.
The Kingdom of Sweden argues further that the Swedish market in postal services differs from the British market examined in the judgment in TNT Post UK (C‑357/07, EU:C:2009:248), in that, at the date of delivery of that judgment, numerous public postal services within the European Union were entrusted to public undertakings in a monopoly situation, whereas that is no longer the case since Article 7(1) of Directive 97/67 put an end to the possibility of granting exclusive or special rights in that sector.
In those circumstances, the Kingdom of Sweden submits that exempting Posten AB from VAT would amount to giving it an artificial competition/price advantage over its competitors which could go as far as the VAT rate applicable, namely 20%, which would reduce the pressure of competition on the postal market to the detriment of the end consumer. Moreover, such an exemption would increase the price of the outsourced services Posten AB makes use of, since it would no longer be able to deduct input VAT on those purchases, which could thus induce it to reorganise its activities with a view to performing more services itself internally.
The Kingdom of Sweden argues, moreover, that VAT has been charged on all postal services in Sweden since 1993 without that system being challenged — except by the banking/insurance sector, precisely because of the VAT exemption it enjoys, which prevents it from deducting input VAT on the postal services it uses.
It argues, finally, that the present case concerns principally the functioning of the postal market, and that the rules on exemption from VAT are not necessary for the best possible functioning of that market.
Findings of the Court
It should be observed, as a preliminary point, that the Kingdom of Sweden relies on Directive 97/67 as amended by Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 (OJ 2008 L 52, p. 3). However, Directive 2008/6 had not yet entered into force when the period prescribed in the reasoned opinion expired. The present action must therefore be examined on the basis of Directive 97/67 as amended by Directive 2002/39.
It is common ground that the Kingdom of Sweden considers that since it ended its historic operator’s monopoly in 1993 there has no longer been a ‘public postal service’ within the meaning of Directive 2006/112 in its territory, and consequently no longer an obligation to exempt any postal service provider from VAT. The Kingdom of Sweden thus subjected to VAT supplies of services and goods incidental thereto by all postal service providers.
On this point, it should be recalled that the Court has previously held that the term ‘public postal services’ in Article 13A(1)(a) of the Sixth Directive 77/388, the wording of which is reproduced identically in Article 132(1)(a) of Directive 2006/112, must be interpreted to cover operators, whether they are public or private, who undertake to provide in a Member State all or part of the ‘universal postal service’ within the meaning of Directive 97/67 (see, to that effect, judgment in TNT Post UK, C‑357/07, EU:C:2009:248, paragraph 40).
It is not disputed that, when the period prescribed by the reasoned opinion of 18 July 2007 expired, Posten AB had been designated a ‘universal service provider’ in Sweden within the meaning of Directive 97/67.
Furthermore, the Kingdom of Sweden’s pleadings show that, as provided for by Article 4(2) of Directive 97/67, national legislation imposes specific obligations on Posten AB to ensure that it provides the universal postal service within the meaning of that directive throughout national territory.
It follows that, since Posten AB provides all or part of the ‘universal postal service’ within the meaning of Directive 97/67 in Sweden, it must be classified as a ‘public postal service’ within the meaning of Article 132(1)(a) of Directive 2006/112, and consequently that supplies of services, other than passenger transport and telecommunications services, and supplies of goods incidental thereto made by Posten AB as a universal service provider must be exempted from VAT.
That conclusion cannot be called in question by the Kingdom of Sweden’s argument that the principle of neutrality precludes the interpretation of Directive 2006/112 put forward by the Commission, in so far as the situation of the Swedish postal market differs markedly from that examined by the Court in the judgment in TNT Post UK (C‑357/07, EU:C:2009:248) in that the services of Posten AB are no different from those provided by other operators in the Swedish market.
It is apparent from paragraphs 37 to 39 of the judgment in TNT Post UK (C‑357/07, EU:C:2009:248) that the difference between ‘public postal services’ and other operators depends not on the nature of the services provided but on the fact that the operators who provide part or all of the universal postal service are subject to a special legal regime with specific obligations. As stated in paragraph 30 above, Posten AB is indeed subject to such obligations.
Nor is the conclusion reached in paragraph 31 above called in question by the fact that the judgment in TNT Post UK (C‑357/07, EU:C:2009:248) was delivered after the expiry of the period prescribed by the reasoned opinion of 18 July 2007 for bringing Swedish law into conformity.
Where an obligation derives from an interpretation of EU law by the Court, the Court has clarified and defined the meaning and scope of the rule as it ought to have been understood and applied from the time of its entry into force, so that the Member States should, from that time, have interpreted and applied EU law as it follows from the Court’s judgment, even if that was later. It is otherwise only if, for reasons of legal certainty, the Court has exceptionally restricted, as regards the past, the opportunity of relying on the law as thus interpreted with a view to reopening legal relationships (see judgment in Denkavit Italiana, 61/79, EU:C:1980:100, paragraphs 16 and 17), which is not the case with the judgment in TNT Post UK (C‑357//07, EU:C:2009:248).
Consequently, the first complaint raised by the Commission in support of its action must be upheld.
Second complaint: incorrect transposition of Article 135(1)(h) of Directive 2006/112
Arguments of the parties
The Commission submits that the Kingdom of Sweden should exempt from VAT the supply at face value of postage stamps valid for use for postal services within national territory.
It argues that postage stamps are a means of payment for postal services and that the scope of the exemption laid down for them should in any event correspond to that of the exemption laid down for public postal services.
The Kingdom of Sweden adopts that argument of the Commission, but draws the conclusion, contrary to the Commission’s conclusion, that since public postal services should not be exempted from VAT, the same applies to postage stamps.
Findings of the Court
It follows from the very wording of Article 135(1)(h) of Directive 2006/112 that the Member States must exempt from VAT the supply at face value of postage stamps valid for use for postal services within national territory.
First, it appears from the documents submitted to the Court that on the expiry of the period prescribed by the reasoned opinion of 18 July 2007 Swedish legislation did not provide for the exemption for postage stamps laid down by Article 135(1)(h) of Directive 2006/112.
Secondly, in support of its contention that this complaint should be rejected, the Kingdom of Sweden confines itself to submitting, in essence, that supplies at face value of postage stamps valid for use for postal services within national territory are not exempted from VAT as a consequence of the subjection to VAT of supplies of goods incidental to supplies by the public postal services of services other than telecommunications and passenger transport. However, it has been held in paragraphs 26 to 32 above that that subjection is contrary to the provisions of Article 132(1)(a) of Directive 2006/112.
In those circumstances, the second complaint must also be upheld.
The Commission’s action is consequently well founded in its entirety.
It follows from all the above considerations that, by failing to exempt from VAT the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto, and the supply at face value of postage stamps valid for use for postal services within national territory, the Kingdom of Sweden has failed to fulfil its obligations under Articles 132(1)(a) and 135(1)(h) of Directive 2006/112.
Costs
Under Article 138 of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Kingdom of Sweden has been unsuccessful, the Kingdom of Sweden must be ordered to pay the costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Declares that, by failing to exempt from value added tax the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto, and the supply at face value of postage stamps valid for use for postal services within national territory, the Kingdom of Sweden has failed to fulfil its obligations under Articles 132(1)(a) and 135(1)(h) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax;
2.
Orders the Kingdom of Sweden to pay the costs.
[Signatures]
( *1 ) Language of the case: Swedish. |
OPINION OF ADVOCATE GENERAL
BOT
delivered on 12 November 2015 ( )
Case C‑12/14
European Commission
v
Republic of Malta
‛Failure of a Member State to fulfil obligations — Social security — Old-age pensions — Rules against overlapping — Persons entitled to an old-age pension under the rules of one Member State and to a civil-service pension under the rules of another Member State — Reduction in the amount of the old-age pension’
I – Introduction
1.
The rules of secondary law coordinating the social security systems of the Member States contain specific rules limiting or prohibiting the application of domestic provisions against overlapping which have the effect of reducing the old-age pension to which an insured person may be entitled in one Member State by reason of the fact that he receives a benefit of the same kind from another Member State.
2.
The implementation of these specific rules lies at the heart of the present dispute, in which the European Commission asks the Court to declare that, by imposing a rule to prevent overlapping of national old-age pensions and civil-service old-age pensions from other Member States, the Republic of Malta has failed to fulfil its obligations under, first, Article 46b of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, ( ) and, secondly, Article 54 of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems. ( )
3.
The circumstances at the origin of these proceedings derive from a particular historical context, which the Republic of Malta has set out in its pleadings, and concern retired Maltese citizens who, as they had worked for the British services in Malta prior to 31 March 1979 — the date on which the last British forces left the island — receive both a Maltese retirement pension and a ‘supplementary’ civil-service pension from the United Kingdom, which, under a provision against overlapping contained in Maltese legislation, is deducted from the Maltese old-age pension.
4.
In this Opinion, I will argue that the fact that a pension scheme of a Member State which may be classified as legislation relating to a branch of social security, for the purposes of Article 1(j) of Regulation No 1408/71 and Article 1(l) of Regulation No 883/2004, was not declared to be such by the Member State within whose jurisdiction it falls has no bearing on that classification.
5.
I will also submit that, although the service pensions granted under the civil service schemes of the United Kingdom are paid as a supplement to the basic old-age pension provided by the National Health Service and relate to the previous employment of the person concerned, they come within the scope of the system for the coordination of social security schemes.
6.
I will conclude that the application should be granted.
II – Legal framework
A – EU law
1. Regulation No 1408/71
7.
The aim of Regulation No 1408/71 is to coordinate national social-security legislation, within the context of the free movement of persons.
8.
Article 1 of that regulation, entitled ‘Definitions’, provides:
‘For the purpose of this Regulation:
…
(j)
legislation means in respect of each Member State statutes, regulations and other provisions and all other implementing measures, present or future, relating to the branches and schemes of social security covered by Article 4(1) and (2) …
The term excludes provisions of existing or future industrial agreements, whether or not they have been the subject of a decision by the authorities rendering them compulsory or extending their scope …
…’
9.
Article 4 of that regulation, which defines the matters covered thereby, provides, in its paragraph 1:
‘This Regulation shall apply to all legislation concerning the following branches of social security:
…
(c)
old-age benefits;
…’
10.
Article 5 of Regulation No 1408/71, entitled ‘Declarations by the Member States on the scope of this Regulation’, requires, in particular, that the Member States specify the legislation and schemes referred to in Article 4(1) of that regulation in declarations to be notified to the President of the Council of the European Union and published in the Official Journal of the European Union.
11.
Article 46b of Regulation No 1408/71, entitled ’Special provisions applicable in the case of overlapping of benefits of the same kind under the legislation of two or more Member States’, states:
‘1. The provisions on reduction, suspension or withdrawal laid down by the legislation of a Member State shall not be applicable to a benefit calculated in accordance with Article 46(2).
2. The provisions on reduction, suspension or withdrawal laid down by the legislation of a Member State shall apply to a benefit calculated in accordance with Article 46(1)(a)(i) only if the benefit concerned is:
(a)
either a benefit, which is referred to in Annex IV, part D, the amount of which does not depend on the length of the periods of insurance or of residence completed;
or
(b)
a benefit, the amount of which is determined on the basis of a credited period deemed to have been completed between the date on which the risk materialised and a later date. …
…
The benefits referred to in (a) and (b) and agreements are mentioned in Annex IV, part D.’
2. Regulation No 883/2004
12.
Regulation No 883/2004 replaced Regulation No 1408/71 with effect from 1 May 2010.
13.
Under Article 1 of this regulation, entitled ‘Definitions’:
‘For the purposes of this Regulation:
…
(l)
“legislation” means, in respect of each Member State, laws, regulations and other statutory provisions and all other implementing measures relating to the social security branches covered by Article 3(1).
This term excludes contractual provisions other than those which serve to implement an insurance obligation arising from the laws and regulations referred to in the preceding subparagraph or which have been the subject of a decision by the public authorities which makes them obligatory or extends their scope, provided that the Member State concerned makes a declaration to that effect, notified to the President of the European Parliament and the President of the Council …
…’
14.
Article 3 of that regulation, entitled ‘Matters covered’, provides, in paragraph 1 thereof:
‘This Regulation shall apply to all legislation concerning the following branches of social security:
…
(d)
old-age benefits;
…’
15.
Article 9 of Regulation No 883/2004, entitled ‘Declarations by the Member States on the scope of this Regulation’, provides, in paragraph 1 thereof:
‘The Member States shall notify the ... Commission in writing of … the legislation and schemes referred to in Article 3 … Such notifications shall indicate the date of entry into force of the laws and schemes in question …’
16.
Article 54 of that regulation, entitled ‘Overlapping of benefits of the same kind’, provides:
‘1. Where benefits of the same kind due under the legislation of two or more Member States overlap, the rules to prevent overlapping laid down by the legislation of a Member State shall not be applicable to a pro rata benefit.
2. The rules to prevent overlapping shall apply to an independent benefit only if the benefit concerned is:
(a)
a benefit the amount of which does not depend on the duration of periods of insurance or residence,
or
(b)
a benefit the amount of which is determined on the basis of a credited period deemed to have been completed between the date on which the risk materialised and a later date, overlapping with:
…
The benefits and agreements referred to in subparagraphs (a) and (b) are listed in Annex IX.’
3. Directive 98/49/EC
17.
The aim of Directive 98/49/EC, ( ) according to the first sentence of Article 1 thereof, is to protect the rights of members of supplementary pension schemes who move from one Member State to another, thereby contributing to the removal of obstacles to the free movement of employed and self-employed persons.
18.
Recital 4 in the preamble to this directive states that ‘the system of coordination provided for in [Regulation No 1408/71], and in particular the rules of aggregation, are not appropriate to supplementary pension schemes, except for schemes which are covered by the term “legislation”’.
19.
According to recital 5 in the preamble to the directive, ‘no pension or benefit should be subject to both the provisions of this Directive and those of [Regulation No 1408/71]’.
20.
The second sentence of Article 1 of Directive 98/49 provides that the protection of members refers to pension rights under both voluntary and compulsory supplementary pension schemes, ‘with the exception of schemes covered by Regulation … No 1408/71’.
21.
As set out in Article 3 of Directive 98/49:
‘For the purpose of this Directive:
(a)
“supplementary pension” means retirement pensions and, where provided for by the rules of a supplementary pension scheme established in conformity with national legislation and practice, invalidity and survivors’ benefits, intended to supplement or replace those provided in respect of the same contingencies by statutory social security schemes;
(b)
“supplementary pension scheme” means any occupational pension scheme established in conformity with national legislation and practice, such as a group insurance contract or pay-as-you-go scheme agreed by one or more branches or sectors, funded scheme or pension promise backed by book reserves, or any collective or other comparable arrangement intended to provide a supplementary pension for employed or self-employed persons;
…’
B – Maltese law
22.
Article 56 of the Social Security Act provides that, where a person is entitled to a service pension, other than a service pension which has been commuted, at any time, in whole, any pension arrived at in accordance with the provisions of Articles 53 to 55 of that Act is to be abated by the amount of such service pension.
III – Pre-litigation procedure
23.
Prompted by three petitions submitted to the Parliament by three Maltese citizens, who complained that the amount of their pensions under three United Kingdom pension schemes, namely the schemes for personnel of the civil service, the National Health Service and the armed forces, ( ) was deducted from their Maltese statutory old-age pension in accordance with Article 56 of the Social Security Act, the Commission sent a letter to the Republic of Malta on 25 November 2010 putting it on notice to submit its observations.
24.
The Republic of Malta replied by letter of 27 January 2011, contending, in substance, that the pensions paid under the United Kingdom civil-service schemes do not come within the scope of Regulations No 1408/71 and No 883/2004.
25.
By letter of 28 December 2011, the Republic of Malta provided additional supporting information to the Commission.
26.
On 28 February 2012, the Commission sent to the Republic of Malta a reasoned opinion in which it reaffirmed its view and invited Malta to comply with that reasoned opinion within two months of its notification.
27.
Since the Republic of Malta maintained its position in its reply of 25 July 2012, the Commission decided to bring the present action.
IV – The action
A – Admissibility of the action
28.
The Republic of Malta challenges the admissibility of the action, claiming that it should have been directed against the United Kingdom, and not against Malta.
29.
In support of this argument, the Republic of Malta submits that the schemes at issue were not mentioned in the declaration made by the United Kingdom under Article 5 of Regulation No 1408/71 and Article 9(1) of Regulation No 883/2004, since the United Kingdom takes the view that those schemes are supplementary occupational schemes coming, not under those regulations, but under Directive 98/49.
30.
The Republic of Malta submits that, if the Commission disagrees with a Member State’s declaration regarding the benefits which come within the scope of the field of coordination of social-security schemes, then, as guardian of the Treaties, it is required to pursue the matter directly with the Member State concerned and may not take an indirect route by commencing proceedings against another Member State which correctly applies the provisions of those regulations in accordance with that declaration. In the Republic of Malta’s opinion, bringing an action against a Member State that is clearly not in a position to adduce evidence relating to a pension scheme that it does not administer amounts to an interference with the right to a fair hearing.
31.
The United Kingdom, which is intervening in the proceedings in support of the Republic of Malta, submits that the Commission misused its powers by having recourse to the procedure laid down in Article 258 TFEU in order to challenge the measures of another Member State. According to the United Kingdom, the Member State subject to this collateral challenge is deprived of the protection conferred by the pre-litigation procedure and, as intervener, has more limited procedural rights in the infringement proceedings brought.
32.
I do not agree with that view and, on the contrary, support the opposite proposition, according to which the fact that the Commission did not bring a prior action for failure to fulfil obligations against the United Kingdom for non-notification of the schemes at issue by means of the declaration made under Article 5 of Regulation No 1408/71 and Article 9(1) of Regulation No 883/2004 in no way affects the admissibility of the action brought against the Republic of Malta because of the application by that Member State of a domestic rule to prevent overlapping.
33.
In the first place, it should be borne in mind that the Court has consistently held that the Commission has discretion to bring an action for failure to fulfil obligations at a time which it deems appropriate ( ) and the considerations which determine its choice cannot affect the admissibility of that action. ( ) Furthermore, the Commission alone is competent to determine the conduct or omission attributable to the Member State concerned on the basis of which those proceedings should be brought. ( )
34.
A finding that the action for failure to fulfil obligations brought against the Republic of Malta is inadmissible because the Commission did not bring prior infringement proceedings against the United Kingdom would effectively require the Commission to bring two actions based on two materially different instances of conduct, even though it has discretion to bring only one, and, moreover, would impose on it the order in which these two actions were to be brought, although the system laid down in Article 258 TFEU also gives the Commission a discretion in deciding on that order.
35.
It is in the exercise of this discretion that the Commission, prompted by petitions submitted by Maltese citizens, decided to bring proceedings against the Republic of Malta, complaining that that Member State had failed to fulfil its obligations by applying a rule to prevent overlapping that provides for the reduction of Maltese old-age pensions in cases where another pension coexists, rather than by bringing an action for failure to fulfil obligations against the United Kingdom because it did not mention the schemes at issue in the declaration provided for by Regulations No 1408/71 and No 883/2004.
36.
In the second place, the Court has ruled on numerous occasions that a Member State cannot justify a failure to fulfil obligations under the TFEU by the fact that other Member States have also failed, and continue to fail, to fulfil their own obligations ( ) and that the Commission is free to initiate infringement proceedings against only some of the Member States which are in a comparable position from the point of view of compliance with EU law. ( ) At the admissibility stage, the impossibility of invoking a plea of failure to fulfil obligations means that the absence of infringement proceedings against one Member State is irrelevant in the assessment of the admissibility of infringement proceedings brought against another Member State. ( ) The admissibility of the present action against the Republic of Malta cannot therefore be brought into question by the fact that the Commission has not instituted infringement proceedings against the United Kingdom.
37.
In the third place, it is also apparent from settled case-law that the procedure laid down in Article 258 TFEU presupposes an objective finding that a Member State has failed to fulfil its obligations under the TFEU or secondary legislation. Where such a finding has been made, it is irrelevant whether the failure to fulfil obligations is the result of intention or negligence on the part of the Member State responsible, or of technical difficulties encountered by it. ( ) To reiterate the wording upheld by the Court, an action for failure to fulfil obligations is the ultima ratio to ensure compliance with EU law, by making the European Union’s interests enshrined in the Treaty prevail. ( )
38.
The Republic of Malta therefore cannot, in order to justify the failure to fulfil its obligations, plead difficulties in understanding foreign pension schemes, difficulties that are, after all, an integral part of the application both of a system for the coordination of different social security schemes and of a domestic rule to prevent overlapping that provides for the reduction of pensions particularly when they exist alongside certain benefits provided in other Member States.
39.
In the fourth place, I cannot agree with the United Kingdom’s argument that the Commission misused its powers by indirectly challenging that Member State, in an incidental manner, depriving it of its right to be heard. Misuse of power presupposes the adoption, by an EU institution, of a measure the exclusive, or at least the main, purpose of which is to achieve an end other than that stated or to evade a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case. In this instance, since the subject-matter of the action, set out in the application, corresponds to the subject-matter of the dispute as stated in the letter of formal notice and in the reasoned opinion, it cannot validly be maintained that the Commission, which is not required to state the reasons that prompted it to bring the action for failure to fulfil obligations, has in any way misused its powers. ( )
40.
The fact that the Court may find it necessary, in an action for failure to fulfil obligations brought against a Member State, to classify the legislation of another Member State with regard to EU law does not affect the admissibility of the action for failure to fulfil obligations and does not mean that the procedural rights of the latter Member State, an intervener in the proceedings, have been infringed. It should be pointed out in this regard that the argument by analogy which the United Kingdom believes it can derive from the fact that, in the context of Article 267 TFEU, a request for a preliminary ruling from a national court provides a means for examining only the measures adopted by that Member State, is based on an incorrect premiss, since, quite to the contrary, the Court has upheld the admissibility of a question referred for a preliminary ruling which was intended to enable a court in one Member State to determine whether the provisions of another Member State were compatible with EU law. ( )
41.
In the light of all of the foregoing considerations, I take the view that the present action for failure to fulfil obligations must be declared admissible.
B – The substance of the action
1. The scope ratione personae of Regulations No 1408/71 and No 883/2004
42.
Stating that the present proceedings relate, in practice, essentially to two categories of pensioners, one of which covers Maltese citizens who have never worked in the United Kingdom or in any other Member State and who receive a service pension from the United Kingdom exclusively on account of work performed for the British services in Malta prior to the closure of the British military base on 31 March 1979, ( ) the Republic of Malta submits that, in the absence of any cross-border element, this category does not, under any circumstances, come within the scope ratione personae of Regulations No 1408/71 and No 883/2004.
43.
This argument is manifestly unfounded.
44.
First, by contesting the applicability of the system for the coordination of social security schemes only as regards Maltese citizens who have always worked in Malta, the Republic of Malta thereby concedes that this system applies to those Maltese citizens who have also worked in the United Kingdom or in another Member State. The exclusion of certain specific situations is not therefore capable of rendering unfounded the Commission’s complaint alleging that the Maltese legislation against overlapping is incompatible with EU law.
45.
Secondly and above all, the absence of any physical movement does not preclude the existence of a connecting factor of such a kind as to render Regulations No 1408/71 and No 883/2004 applicable. Although these regulations do not apply to situations which are confined in all respects within a single Member State, ( ) the Court has consistently held that the decisive criterion for the applicability of these regulations is that the person concerned is affiliated to a social security scheme of one or more Member States within the framework of which he has completed periods of insurance. ( )
46.
The category of pensioners who, according to the Republic of Malta, are excluded from the scope ratione personae of Regulations No 1408/71 and No 883/2004 encompasses individuals who are entitled to a Maltese retirement pension as well as to a United Kingdom occupational retirement benefit under one of the schemes at issue. That double affiliation is sufficient to justify the applicability of those regulations.
2. The material scope of Regulations No 1408/71 and No 883/2004
a) The effect of the absence of any reference to the schemes at issue in the declarations mentioned in Article 5 of Regulation No 1408/71 and in Article 9(1) of Regulation No 883/2004
47.
The Republic of Malta states that it considers itself fully bound by the United Kingdom’s evaluation of its own civil service pension schemes, which have been consistently omitted from its declarations under Article 5 of Regulation No 1408/71 and Article 9(1) of Regulation No 883/2004.
48.
The Republic of Austria and the United Kingdom share the Republic of Malta’s view as regards the consequences of the absence of a declaration by a Member State.
49.
The Commission supports the opposite view.
50.
This question has already been answered in the case-law of the Court.
51.
In its judgment in Beerens, ( ) the Court ruled that the fact that a national law or regulation has not been specified in the declarations referred to in Article 5 of Regulation No 1408/71 is not of itself proof that that law or regulation does not come within the material scope of that regulation. ( )
52.
This case-law approach, which the Court has reiterated on numerous occasions, inter alia in its judgment in Pérez García and Others, ( ) seems to me to be completely justified. If, as suggested by the Republic of Malta, the Republic of Austria and the United Kingdom, the application of Regulations No 1408/71 and No 883/2004 to particular legislation were to be excluded simply because such legislation was not specified by the Member State in its declaration, the provisions of those regulations would be deprived of their substance and their uniform application would become impossible, since any Member State could unilaterally bypass the rules on the coordination of social security schemes by refraining from mentioning a scheme which, nevertheless, objectively comes within the material scope of those regulations.
53.
It should also be noted that, as is apparent from the use of the verbs ‘shall specify’ and ‘shall notify’ in, respectively, Article 5 of Regulation No 1408/71 and Article 9(1) of Regulation No 883/2004, these provisions express, not a simple option, but an actual obligation requiring Member States to declare their statutory provisions and regulations in order to determine the precise extent of the system for the coordination of social security schemes. This obligation to declare would be deprived of all effectiveness if Member States were allowed to exclude from the scope of the system, by failing to act, schemes which, nevertheless, can be objectively classified as ‘social security schemes’.
54.
Moreover, the case-law concerning the non-effect of failing to make a declaration calls to mind other, equally consistent, case-law, in terms of which ‘the distinction between benefits excluded from the scope of Regulation No 1408/71 and those which fall within its scope is based essentially on the constituent elements of each particular benefit, in particular its purposes and the conditions on which it is granted, and not on whether a benefit is classified as a social security benefit by national legislation’. ( ) The concept of social security benefit therefore has an autonomous definition under EU law which is not affected by national classification criteria.
55.
I should also state that, in contrast to the Republic of Austria’s analysis of the matter, I do not think that the implications of the Court’s case-law on the effect of failing to make a declaration should be limited to the Member State that ought to have submitted such declaration, whilst the other Member States might take the view that legislation which is not mentioned in the declaration does not come within the material scope of Regulations No 1408/71 and No 883/2004. The suggested approach, which involves giving different treatment, under EU law, to national systems depending on the Member State concerned, would clearly and directly undermine the requirement of uniform application of the rules on the coordination of social security schemes.
56.
These are my reasons for taking the view that the fact that the schemes at issue were not specified by the United Kingdom in the declaration made under Article 5 of Regulation No 1408/71 and Article 9(1) of Regulation No 883/2004 cannot in itself constitute proof that the schemes do not come within the material scope of those regulations.
57.
While I do not deny that real difficulties may stand in the way of a Member State faced with the non-declaration of a scheme by another Member State, I do not, however, believe that these warrant an infringement of the rules on the coordination of social security schemes. Moreover, the practical difficulties to which I have just referred should be resolved, in part, by the establishment of a system for cooperation and exchange of data between Member States’ authorities and institutions. ( ) Furthermore, as the Commission points out, the Member States are able to put questions to it in the event of doubt or to consult the Administrative Commission for the Coordination of Social Security Systems, one of the tasks of which is specifically to deal with all questions of interpretation of the coordination rules. ( ) I should also state that the difficulty, or even the impossibility, that the Republic of Malta might face were it to examine the schemes at issue must be assessed having regard to the fact that that Member State and the United Kingdom share a common history of such a kind as to facilitate the Republic of Malta’s understanding of the pension scheme applicable to its own citizens who, prior to 1979, worked for the British forces on Maltese territory.
58.
Since I refuse to consider that the non-declaration of a scheme is tantamount to its exclusion from the material scope of Regulations No 1408/71 and No 883/2004, it is necessary to ascertain whether or not the schemes at issue can be objectively classified as ‘social security schemes’ within the meaning of those regulations.
b) Classification of the schemes at issue
59.
Under Article 1(j) of Regulation No 1408/71, ‘legislation means in respect of each Member State statutes, regulations and other provisions and all other implementing measures, present or future, relating to the branches and schemes of social security covered by Article 4(1) and (2)’, while Article 1(l) of Regulation No 883/2004 provides that this term ‘means, in respect of each Member State, laws, regulations and other statutory provisions and all other implementing measures relating to the social security branches covered by Article 3(1)’.
60.
In order to come within the scope of the coordination of social security schemes, a pension scheme must therefore, first, be in the nature of ‘legislation’, within the meaning of the abovementioned provisions, and, second, satisfy the condition of relating to one of the branches expressly listed in Article 4(1) of Regulation No 1408/71 and Article 3(1) of Regulation No 883/2004.
61.
As regards the first condition, the Court has held that the definition of ‘legislation’, within the meaning of Article 1(j) of Regulation No 1408/71, is remarkable for its breadth, including as it does all provisions laid down by law, regulation and administrative action by the Member States, and must be taken to cover all the national measures applicable in the particular case. ( ) These considerations also apply in regard to Article 1(l) of Regulation No 883/2004.
62.
Although the United Kingdom raises an objection, to which I will return below, claiming that this criterion should not be the sole criterion, as the Commission would have it, it does not deny that the provisions governing the schemes at issue have a statutory source, for the purposes of the abovementioned provisions, in so far as those schemes are laid down in regulations concerning the Principal Civil Service Pension Scheme 1974, the National Health Service Pension Scheme 1995 and the Armed Forces Pension Scheme 1975.
63.
As regards the second condition, the Court has consistently held that a benefit may be regarded as a social security benefit in so far as it is granted to the recipients, without any individual and discretionary assessment of personal needs, on the basis of a legally defined position and relates to one of the risks expressly listed in Article 4(1) of Regulation No 1408/71 and in Article 3(1) of Regulation No 883/2004. ( )
64.
First, it is common ground and not disputed that the provisions relating to the granting of the pension confer a legally defined right on the recipients and that the pension is granted automatically to persons who fulfil certain objective criteria, without any individual and discretionary assessment of personal needs.
65.
Secondly, it is necessary to examine whether the schemes at issue relate to the risk of old-age referred to in Article 4(1)(c) of Regulation No 1408/71 and in Article 3(1)(d) of Regulation No 883/2004.
66.
According to settled case-law, in this regard, the essential characteristic of the old-age benefits referred to in those provisions lies in the fact that they are intended to safeguard the means of subsistence of persons who, when they reach a certain age, leave their employment and are no longer required to hold themselves available for work at the employment office. ( ) Given that the benefits paid under the schemes at issue in the present case pursue precisely the same objective, which is to protect persons who have reached a certain age by ensuring that they have the necessary means in the light of, in particular, their needs as pensioners, they constitute old-age benefits.
67.
Since the condition relating to the granting of the benefit without any individual and discretionary assessment and the condition that the benefit must relate to one of the risks listed in Article 4(1) of Regulation No 1408/71 and in Article 3(1) of Regulation No 883/2004 are satisfied, it follows that the schemes at issue, which, moreover, have a statutory source, must be classified as ‘social security schemes’, within the meaning of Regulations No 1408/71 and No 883/2004.
68.
It is now necessary to examine whether the arguments put forward by the United Kingdom call this analysis into question.
69.
In the first place, the United Kingdom contends that the purely formal criterion of the statutory origin of the scheme is not the sole and decisive criterion. In this connection, it submits that the schemes at issue are of an ‘occupational’ nature and are designed to provide their recipients with ‘supplementary’ occupational benefits, which are in addition to the basic retirement pension paid by the National Health Service and which therefore meet the definition of ‘supplementary pension’, within the meaning of Directive 98/49. These schemes, the United Kingdom argues, thus fall outside the rules on the coordination of social security schemes and instead are covered exclusively by the specific provisions governing supplementary occupational retirement schemes.
70.
I do not agree with that view. To my mind, the twofold occupational and supplementary nature of a retirement scheme does not necessarily exclude that scheme from the scope of Regulations No 1408/71 and No 883/2004 if it can also be formally classified as ‘social security legislation’, as in the case of the schemes here at issue.
71.
It is clear that the wide variety of supplementary retirement schemes, which occupy extremely divergent positions from one Member State to the next, results in there being only a subtle distinction between the schemes coming within the scope of the rules on coordination set out in Regulations No 1408/71 and No 883/2004 and the supplementary schemes governed by the specific rules set out in Directive 98/49 as well as in Directive 2014/50/EU of the European Parliament and of the Council of 16 April 2014 on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights. ( )
72.
Among the different ‘pillar’- or ‘tier’-based configurations that have been suggested, ( ) the Commission’s configuration divides pension schemes into three pillars: the first pillar covers basic mandatory ‘social security schemes’, usually financed on a pay-as-you-go basis; the second pillar covers ‘occupational schemes’ characterised by a link to employment and usually operated on a funded basis; and the third pillar covers ‘personal pension plans’. According to this configuration, the schemes under the second and third pillars are ‘supplementary schemes’ intended to ‘supplement public schemes’. ( )
73.
However, this traditional pillar-based structure provides only an incomplete and purely descriptive overview of the wide variety of retirement schemes and has no legislative effect whatsoever, particularly as regards the contrast between coordinated schemes and schemes coming within the scope of Directive 98/49.
74.
In order to identify the criterion for distinguishing between these two types of scheme, it is first necessary to give a literal interpretation of the applicable provisions, which indicates a criterion deriving from the statutory or contractual source of the scheme under consideration. While Article 1(j) of Regulation No 1408/71 and Article 1(l) of Regulation No 883/2004 distinguish between social security ‘legislation’, which falls within the scope of those regulations, and ‘industrial agreements’ or ‘contractual provisions’, which are excluded from their scope, ( ) Article 3 of Directive 98/49 defines the term ‘supplementary pension’ as meaning retirement pensions and, where provided for by the rules of a supplementary pension scheme established in conformity with national legislation and practice, invalidity and survivors’ benefits, ‘intended to supplement or replace those provided in respect of the same contingencies by statutory social security schemes’. ( )
75.
The scope of Article 3 of Directive 98/49 is clarified by recitals 3 and 4 in the preamble to that directive, which state, respectively, that the system of coordination provided for in, inter alia, Regulation No 1408/71 does not extend to supplementary pension schemes, ‘except for’ schemes which are covered by the term ‘legislation’ or in respect of which a declaration has been made, and that the rules of aggregation are not suited to supplementary pension schemes, ‘except for’ schemes which are covered by the term ‘legislation’.
76.
These provisions show clearly that, for the purpose of applying the rules on coordination, the EU legislature intended to establish a single general criterion deriving from the statutory or contractual source of the scheme in question. Accordingly, there is no need to draw a distinction depending on whether the scheme is distributive or contributory, or on whether it is mandatory or voluntary, or even on whether it is financed on a pay-as-you-go or a funded basis. Furthermore, the express exclusion of supplementary pension schemes from the scope of Directive 98/49 when they are covered by the term ‘legislation’ implies that these statutory supplementary schemes come within the scope of Regulations No 1408/71 and No 883/2004.
77.
This interpretation, next, is the correct one for reasons of legal certainty, as the definition of an objective and easy-to-apply criterion makes it possible to ensure that the rules on the coordination of social security schemes are uniformly applied to all statutory schemes, while contractual schemes are in principle excluded, unless the Member States have made a declaration in respect of them.
78.
The inclusion of all statutory retirement schemes, including supplementary schemes, within the scope of the secondary legislation coordinating the social security systems is, finally, consistent with the aim of protecting the social rights of persons moving within the European Union. In the absence of coordination, the exercise of freedom of movement might be discouraged for the recipients of a supplementary retirement pension granted under a statutory scheme, especially in cases where the basic scheme provides them with only a minimum level of income. In the light of this fundamental aim, the practical coordination difficulties created by the wide range of retirement schemes ( ) does not, to my mind, warrant the exclusion of supplementary statutory schemes from the scope of Regulations No 1408/71 and No 883/2004. Such exclusion would, in any event, be contrary to the intention of the EU legislature as expressed clearly in the provisions of those regulations. ( )
79.
Accordingly, contrary to the United Kingdom’s claim, the applicability of those regulations cannot be excluded on the sole ground that the pensions granted under the schemes at issue are supplementary pensions in relation to those provided by the National Health Service. The fact that those pensions are designed, not to ensure a mere minimum level of income for the interested persons, but rather to provide them with an income based on the amount of contributions which they paid during their employment, is also irrelevant.
80.
In the second place, the United Kingdom submits that occupational pension entitlements under the schemes at issue are not social security benefits, but pay. The United Kingdom relies on the Court’s settled case-law, in particular its judgment in Barber, ( ) according to which the fact that a benefit is paid after the termination of the employment relationship does not prevent it from being in the nature of pay, even if it is a statutory payment, ( ) as well as its judgment in Beune, ( ) in which the Court acknowledged that a civil service pension scheme which essentially relates to the employment of the person concerned forms part of the pay received by that person. ( )
81.
In support of its analysis, the United Kingdom submits that the level of pension entitlement is determined by the length of service and the final salary, and that pensions thus granted are not intended to provide basic subsistence, as is clear from the fact that these pensions may be considerably higher than those provided under the statutory social security scheme.
82.
As the Court has consistently held, ‘the fact that certain benefits are paid after the termination of the employment relationship does not prevent them from being “pay” within the meaning of Article [157 TFEU]’. ( ) The Court has thus ruled that ‘benefits granted under a pension scheme, which essentially relates to the employment of the person concerned, form part of the pay received by that person and come within the scope of Article [157 TFEU]’, ( ) even if the scheme has a statutory basis.
83.
However, the fact that a retirement pension paid to a worker by reason of his employment relationship must be regarded as pay for the purpose of applying the principle of equal pay for men and women, enshrined in Article 157 TFEU, does not mean that that pension is not in the nature of a social security benefit for the purpose of the application of the coordination measures provided for by Regulations No 1408/71 and No 883/2004.
84.
In contrast to what the United Kingdom submits in its pleadings, the classifications of ‘pay’, within the meaning of Article 157 TFEU, and ‘old-age pension’, in terms of Regulations No 1408/71 and No 883/2004, are in no way mutually exclusive, since they pursue different aims and have recourse to different criteria.
85.
In particular, it should be noted that the determinant criterion for classifying a benefit as ‘pay’, within the meaning of Article 157 TFEU, based on the finding that the benefit arises from an employment relationship, is irrelevant for the purpose of assessing whether that benefit must be classified as a ‘social security benefit’. Likewise, the specific criteria established by the Court for assessing whether a retirement benefit granted by a civil service retirement scheme based on legislation should be classified as ‘pay’, according to which that benefit must be directly related to the length of service and be calculated by reference to the final salary, are not relevant to the classification of the benefit in the light of the provisions on the coordination of social security schemes.
86.
The Court has also already acknowledged this possibility of concurrent classifications by holding, in its judgment in Niemi, ( ) that a benefit paid under a retirement scheme notified as a scheme coming within the scope of Regulation No 1408/71 must be classified as ‘pay’, in the light of Article 157 TFEU, since it satisfies the criteria characterising the employment relationship. ( )
87.
It follows that neither the fact that the schemes at issue are occupational schemes granting pensions which are linked to the prior employment relationship and are regarded as continuing salary as recompense for the work carried out during the period of employment, nor the fact that those benefits relate directly to the length of service completed and that their amount must be calculated by reference to the final salary, is capable of precluding the application of Regulations No 1408/71 and No 883/2004, since those benefits constitute social security benefits. Moreover, since the amendment made following the adoption of Regulation (EC) No 1606/98, ( ) special retirement schemes for civil servants have been expressly included within the scope of Regulation No 1408/71, even though they are occupational schemes characterised by the fact that the pension received is regarded as a straightforward extension of the salary for active employment. ( )
88.
This conclusion is not affected, either, by the fact — relied on by the United Kingdom — that pensions provided under the Armed Forces Pension Scheme 1975 not only accrued at statutory retirement age, since, in particular, a life pension was paid at age 37 to officers with 16 years’ service after age 21 or at age 40 to other ranks with 22 years’ service after age 18.
89.
Apart from the fact that this argument relates to only one of the three schemes at issue, I take the view that the immediate payability of certain pensions to their recipients, as soon as their duties have come to an end, even though they have not reached the statutory retirement age, does not alter the nature of these pensions which, being for life, are payable until death.
90.
This interpretation of the notion of old-age benefit is supported by the definition of ‘early old-age benefit’ in Article 1(x) of Regulation No 883/2004, ( ) in order to distinguish it from ‘pre-retirement benefit’ which, moreover, also comes within the material scope of this regulation. An early old-age benefit is defined as ‘a benefit provided before the normal pension entitlement age is reached and which either continues to be provided once the said age is reached or is replaced by another old-age benefit’. The possibility of receiving a pension early does not therefore mean that it is not an old-age benefit, according to the autonomous meaning of this notion under EU law.
91.
The foregoing interpretation is also borne out by the case-law of the Court, which accepts that the fact that entitlement to a pension is recognised before the person concerned has reached retirement age does not mean that that benefit is not an old-age pension. ( )
92.
In the light of all of these considerations, I take the view that the pensions provided under the schemes at issue come within the scope of Regulations No 1408/71 and No 883/2004. Finding, moreover, that the Republic of Malta does not deny that, by virtue of the basis on which they are calculated, the Maltese pension and the pensions paid by the schemes at issue come within the scope of Article 46b of Regulation No 1408/71 and of Article 54 of Regulation No 883/2004, I conclude that the complaint alleging that the Republic of Malta applied the Maltese legislation to those pensions in order to prevent overlapping, without taking account of the rules laid down in the above provisions, is well founded.
V – Conclusion
93.
On the basis of the foregoing considerations, I propose that the Court should:
(1)
hold that, by reducing, pursuant to Article 56 of the Social Security Act, Maltese old-age pensions by the amount of United Kingdom pensions provided under the Principal Civil Service Pension Scheme 1974, the National Health Service Pension Scheme 1995 and the Armed Forces Pension Scheme 1975, the Republic of Malta has failed to fulfil its obligations under Article 46b of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, in the version amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996, as amended by Regulation (EC) No 592/2008 of the European Parliament and of the Council of 17 June 2008, and under Article 54 of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems; and
(2)
order the Republic of Malta to pay the costs.
( ) Original language: French.
( ) Regulation as amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996 (OJ 1997 L 28, p. 1), as amended by Regulation (EC) No 592/2008 of the European Parliament and of the Council of 17 June 2008 (OJ 2008 L 177, p. 1) (‘Regulation No 1408/71’).
( ) OJ 2004 L 166, p. 1, and corrected version in OJ 2004 L 200, p. 1.
( ) Council Directive of 29 June 1998 on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community (OJ 1998 L 209, p. 46).
( ) Hereinafter, ‘the schemes at issue’.
( ) See, to that effect, judgment in Commission v Greece (C‑351/13, EU:C:2014:2150, paragraph 24 and the case-law cited).
( ) See, to that effect, judgments in Commission v Poland (C‑311/09, EU:C:2010:257, paragraph 19 and the case-law cited) and Commission v Germany (C‑591/13, EU:C:2015:230, paragraph 14).
( ) See judgment in Commission v Belgium (C‑395/13, EU:C:2014:2347, paragraph 32 and the case-law cited).
( ) See judgment in Commission v Spain (C‑48/10, EU:C:2010:704, paragraph 33 and the case-law cited).
( ) See judgment in Commission v Italy (C‑531/06, EU:C:2009:315, paragraph 24).
( ) See judgment in Commission v France (C‑1/00, EU:C:2001:687, paragraph 75).
( ) See judgment in Commission v Italy (C‑68/11, EU:C:2012:815, paragraphs 62 and 63).
( ) See judgment in Commission v Spain (C‑196/07, EU:C:2008:146, paragraph 28 and the case-law cited).
( ) See, to that effect, judgment in Commission v Spain (C‑562/07, EU:C:2009:614, paragraph 25).
( ) See, inter alia, to that effect, judgment in Eau de Cologne & Parfümerie-Fabrik 4711 (C‑150/88, EU:C:1989:594, paragraph 12).
( ) According to the Republic of Malta, the other category of citizens concerned comprises individuals who were employed by the British services in Malta prior to 31 March 1979 and who went on to work in the United Kingdom after that date or who previously worked in the civil service of the United Kingdom and subsequently worked in Malta.
( ) See, to that effect, order in El Youssfi (C‑276/06, EU:C:2007:215, paragraph 39 and the case-law cited) and judgment in Gouvernement de la Communauté française and Gouvernement wallon (C‑212/06, EU:C:2008:178, paragraph 33 and the case-law cited).
( ) See, to that effect, judgment in Keller (C‑145/03, EU:C:2005:211, paragraph 38 and the case-law cited).
( ) 35/77, EU:C:1977:194.
( ) Paragraph 9. The Court had already stated, in relation to Regulation No 3 of the Council of 25 September 1958 concerning social security for migrant workers (Journal Officiel 1958, p. 561), which preceded Regulation No 1408/71 and also provided for the notification of national social security legislation, that the application of Regulation No 3 to particular legislation was not precluded simply because the latter came into force after that regulation and was not notified (see, to that effect, judgments in van der Veen (100/63, EU:C:1964:65, at p. 573) and Dingemans (24/64, EU:C:1964:86, at p. 653)).
( ) C‑225/10, EU:C:2011:678, paragraph 36 and the case-law cited. See also judgment in Snares (C‑20/96, EU:C:1997:518, paragraph 35 and the case-law cited).
( ) See judgment in Lachheb (C‑177/12, EU:C:2013:689, paragraph 28 and the case-law cited).
( ) See Chapter II of Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation No 883/2004 (OJ 2009 L 284, p. 1).
( ) See Article 72(a) of Regulation No 883/2004.
( ) See judgments in Commission v Belgium (150/79, EU:C:1980:201, paragraph 4 and the case-law cited) and de Ruyter (C‑623/13, EU:C:2015:123, paragraph 32).
( ) See judgment in Commission v Slovakia (C‑361/13, EU:C:2015:601, paragraph 47 and the case-law cited).
( ) Ibidem (paragraph 55 and the case-law cited).
( ) OJ 2014 L 128, p. 1.
( ) Classifications have been drawn up by the World Bank, which distinguishes between a first pillar comprising a mandatory contributory scheme managed by the State with the limited aim of alleviating old-age poverty, a second pillar consisting of a mandatory savings scheme managed by the private sector and a third pillar consisting of voluntary savings (see the report of the World Bank entitled ‘Averting the old age crisis: policies to protect the old and promote growth’, Oxford University Press, 1994, p. 16); by the Organisation for Economic Co-operation and Development (OECD), which distinguishes between a first tier covering redistributive pensions and a second tier comprising mandatory insurance pensions (see OECD (2006), ‘Pension-system Typology’, in OECD Pensions at a Glance 2005: Public Policies across OECD Countries, OECD Publishing); and by Eurostat (see Classification of funded pension schemes and impact on government finance, Office for Official Publications of the European Communities, Luxembourg, 2004).
( ) See p. 2 of the Communication from the Commission of 11 May 1999 entitled ‘Towards a single market for supplementary pensions — Results of the consultations on the Green Paper on supplementary pensions in the single market’ (COM(1999) 134 final).
( ) Unless the Member State concerned has made a declaration.
( ) Emphasis added.
( ) In the staff working document of 20 October 2005 (SEC(2005) 1293), annexed to the Proposal for a Directive of the European Parliament and of the Council on improving the portability of supplementary pension rights (COM(2005) 507 final), the Commission pointed out, in particular, the difficulties in applying the rules of aggregation to supplementary retirement schemes (section 4.4 of the document) (on the problems associated with coordinating schemes of this kind, see also Leppik, L., ‘Coordination of pensions in the European Union: the case of mandatory defined-contribution schemes in the Central and Eastern European countries’, European Journal of Social Security, volume 8, 1 (2006), p. 35).
( ) It should be observed that recital 4 in the preamble to Directive 98/49, which states that the rules of aggregation are not suited to supplementary pension schemes, except for schemes covered by the term ‘legislation’, shows clearly that the Council was aware of the practical difficulties which could arise therefrom but nevertheless considered that those difficulties should not prevent the coordination system from applying to statutory schemes.
( ) C‑262/88, EU:C:1990:209.
( ) Paragraphs 12, 16 and 17.
( ) C‑7/93, EU:C:1994:350.
( ) Paragraph 46.
( ) See judgment in Maruko (C‑267/06, EU:C:2008:179, paragraph 44 and the case-law cited).
( ) See judgment in Commission v Greece (C‑559/07, EU:C:2009:198, paragraph 42).
( ) C‑351/00, EU:C:2002:480.
( ) Paragraph 45.
( ) Council Regulation of 29 June 1998 amending Regulation No 1408/71 and Regulation (EEC) No 574/72 laying down the procedure for implementing Regulation No 1408/71 with a view to extending them to cover special schemes for civil servants (OJ 1998 L 209, p. 1).
( ) See, inter alia, as regards the retirement scheme for French civil servants, judgment in Griesmar (C‑366/99, EU:C:2001:648) and, as regards the retirement scheme for Finnish civil servants, judgment in Niemi (C‑351/00, EU:C:2002:480).
( ) Emphasis added.
( ) See, to that effect, judgment in Öztürk (C‑373/02, EU:C:2004:232, paragraph 67). |
ORDER OF THE COURT (Sixth Chamber) 2 September 2015 (*)
(Appeals — Article 181 of the Rules of Procedure of the Court of Justice — Community trade mark — Invalidity proceedings — Three-dimensional Community trade mark — Regulation (EC) No 207/2009 — Article 7(1)(b) — Absolute ground for invalidity — No distinctive character — Shape of two packaged goblets) In Case C‑531/14 P, APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 21 November 2014, Giorgio Giorgis, residing in Milano (Italy), represented by I. Prado and A. Tornato, avvocati,
applicant, the other parties to the proceedings being: Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), defendant at first instance, Comigel SAS, established in Saint-Julien-lès-Metz (France),
intervener at first instance, THE COURT (Sixth Chamber), composed of S. Rodin, President of the Chamber, A. Borg Barthet (Rapporteur) and F. Biltgen, Judges, Advocate General: M. Szpunar, Registrar: A. Calot Escobar, having decided, after hearing the Advocate General, to give a decision by reasoned order, in accordance with Article 181 of the Rules of Procedure of the Court,
makes the following Order 1 By his appeal, Mr Giorgis seeks to have set aside the judgment of the General Court of the European Union in Giorgis v OHIM — Comigel (Shape of two packaged goblets) (T‑474/12, EU:T:2014:813; ‘the judgment under appeal’), by which the General Court dismissed his action brought against the decision of the First Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) of 26 April 2012 (Case R 1301/2011-1), relating to invalidity proceedings between Comigel SAS (‘Comigel’) and Mr Giorgis (‘the contested decision’).
Legal context 2 Article 7(1) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark (OJ 2009 L 78, p. 1), entitled ‘Absolute grounds for refusal’, provides:
‘The following shall not be registered: … (b) trade-marks which are devoid of any distinctive character; …’ 3 Article 52(1) of that regulation, entitled ‘Absolute grounds for invalidity’, provides:
‘A Community trade mark shall be declared invalid on application to the Office or on the basis of a counterclaim in infringement proceedings,
(a) where the Community trade mark has been registered contrary to the provisions of Article 7; …’ Background to the dispute and the contested decision 4 The background to the dispute, as set out by the General Court in paragraphs 1 to 6 of the judgment under appeal, may be summarised as follows.
5 On 11 November 2009, Mr Giorgis obtained registration from OHIM, pursuant to Regulation No 207/2009, under No 8132681 of the three-dimensional Community trade mark reproduced below (‘the contested trade mark’):
6 The goods in respect of which that mark was registered are in Class 30 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond to the following description: ‘Ice, flavoured ices, mixed sorbets, ice sorbets, ice creams, ice-cream drinks, ice-cream goods, ice-cream desserts, semi-frozen desserts, desserts, frozen yoghurt, pastry’.
7 On 19 January 2010, Comigel filed an application for a declaration that the contested mark was invalid on the basis of Article 7(1)(b) and (d) of Regulation No 207/2009, read in conjunction with Article 52(1)(a) of that regulation.
8 By decision of 21 April 2011, the Cancellation Division of OHIM granted the application for a declaration of invalidity and declared the contested mark to be invalid for all the goods in question on the basis of the abovementioned provisions. In addition, it rejected the argument put forward by Mr Giorgis that the contested mark had acquired distinctive character through use in accordance with Article 7(3) of Regulation No 207/2009.
9 On 16 June 2011, Mr Giorgis filed a notice of appeal at OHIM against the Cancellation Division’s decision.
10 By the contested decision, the First Board of Appeal of OHIM (‘the Board of Appeal’) dismissed the appeal. It confirmed the conclusions of the Cancellation Division that, firstly, the contested mark was devoid of any distinctive character within the meaning of Article 7(1)(b) of Regulation No 207/2009 and, secondly, Mr Giorgis had failed to demonstrate that the contested mark had acquired distinctive character through use, for the purposes of Article 7(3) of Regulation No 207/2009, read in conjunction with Article 52(2) of that regulation.
The proceedings before the General Court and the judgment under appeal 11 By application lodged at the Registry of the General Court on 31 October 2012, Mr Giorgis brought an action for annulment of the contested decision.
12 In support of that action, Mr Giorgis raised two pleas in law.
13 The first plea alleged an infringement of Article 7(1)(b) of Regulation No 207/2009, in that, in essence, the Board of Appeal made an incorrect assessment of the distinctive character of the mark at issue.
14 The second plea alleged an infringement of Article 7(3) of Regulation No 207/2009, in that the Board of Appeal wrongly assessed the evidence adduced by Mr Giorgis as insufficient to show that the mark at issue had acquired distinctive character through use.
15 In paragraphs 10 to 48 of the judgment under appeal, the General Court rejected the first plea in law raised by Mr Giorgis in support of his action on the ground that he had failed to show that the Board of Appeal had erred in considering that the mark at issue was devoid of distinctive character within the meaning of Article 7(1)(b) of Regulation No 207/2009.
16 The General Court held, in particular, in paragraph 38 of the judgment under appeal, that Mr Giorgis could not argue that the Board of Appeal did not carry out an overall assessment of the distinctive character of the contested mark, that it did not take account of its characteristics, and that it found merely that the sum of each of the elements of the contested mark lacked distinctive character.
17 In that regard, in paragraph 37 of the judgment under appeal, the General Court noted, firstly, that the Board of Appeal took the view that the features of the mark at issue were not sufficient to make it an unusual design on the market for desserts, ice creams, sorbets and yoghurts that could clearly be recognised as different from the forms available. Secondly, the General Court was of the view that the Board of Appeal held that the examples provided by Comigel showed certain shapes of packaging that were very similar to the shape of the contested mark and, thirdly, that it took the view that the use of two containers held together by cardboard packaging was one of the most common ways of presenting the products to consumers. Finally, fourthly, the General Court held that the Board of Appeal concluded that, taken as a whole, the mark at issue closely resembled the shapes that the goods in question were most likely to take and that, consequently, it had to be regarded as being devoid of any distinctive character.
18 Furthermore, in answer to Mr Giorgis’ argument that the Board of Appeal was wrong to hold that the mark at issue corresponded to a shape of packaging which is in common use on the market to sell the goods in question, while it was apparent from the examples which he supplied that the most commonly used packaging in that sector is totally different from that of the mark at issue, the General Court held, in paragraph 40 of the judgment under appeal, that the fact that there are other types of packaging on the market for the goods in question is not inconsistent with the Board of Appeal’s finding that there are also shapes of packaging that are very similar to that of the mark at issue and which are not unusual. The General Court then stated that, for a finding that a trade mark does not have distinctive character, it is sufficient that the mark does not depart significantly from the norm or customs of the sector and it is not necessary to show that that mark is the form of packaging that is the most common on the market.
19 In paragraphs 49 to 59 of the judgment under appeal, the General Court rejected the second plea in law raised by Mr Giorgis in support of his action.
The form of order sought by the applicant 20 By his appeal, Mr Giorgis claims that the Court should:
– set aside the judgment under appeal and annul the contested decision; and – order OHIM to pay the costs. The appeal 21 By virtue of Article 181 of its Rules of Procedure, where the appeal is, in whole or in part, manifestly inadmissible or manifestly unfounded, the Court may at any time, acting on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide by reasoned order to dismiss that appeal in whole or in part.
22 In the present case, the Court considers that it has sufficient information from the documents in the case-file and decides, pursuant to that article, to rule by way of reasoned order, without it being necessary to serve the appeal on the defendant.
23 In support of his appeal, Mr Giorgis relies on a single ground of appeal, alleging that the General Court infringed Article 7(1)(b) of Regulation No 207/2009.
24 That ground of appeal is divided into two parts which it is appropriate to examine separately.
The first part of the single ground of appeal The applicant’s arguments 25 By the first part of his single ground of appeal, in essence, Mr Giorgis complains that the General Court held, in paragraphs 37 and 38 of the judgment under appeal, that the Board of Appeal assessed the distinctive character of the mark at issue as a whole, despite the fact that it is clear from the contested decision that it merely examined the distinctive character of each of the two elements of which it is composed.
26 In that regard, Mr Giorgis submits that, although the mark at issue is formed of a combination of elements, each of which may be considered devoid of distinctive character, that fact is not sufficient for the view to be taken that the sign as a whole is devoid of distinctive character, since a correct assessment of the distinctive character ought to take into consideration the manner in which the various elements are combined.
27 In the present case, the combination of elements forming the mark at issue, namely a goblet and a cardboard envelope, creates, in the view of Mr Giorgis, a true distinctive character and cannot be regarded as common in the sector concerned.
Findings of the Court 28 In so far as it alleges that the General Court, in paragraphs 37 and 38 of the judgment under appeal, held that the Board of Appeal assessed the distinctive character of the mark at issue as a whole, while it is clear from the contested decision that that is not the case, the first part of the single ground for appeal must be rejected as manifestly unfounded.
29 In fact, in paragraphs 41 to 45 of the contested decision, the Board of Appeal, as the General Court rightly noted in paragraph 37 of the judgment under appeal, carried out an analysis of the overall impression produced by the shape of the packaging registered under the mark at issue. Thus, the Board of Appeal took the view, in paragraph 41 of the contested decision, that the features of the mark at issue were not sufficient to make it an unusual design on the market for desserts, ice creams, sorbets and yoghurts that could clearly be recognised as different from the forms available. That Board then held, in paragraph 43 of the contested decision, that the examples provided by Comigel showed certain shapes of packaging that were very similar to the shape of the contested mark. Finally, in paragraph 44 of the contested decision, the Board took the view that the use of two containers held together by cardboard packaging was one of the most common ways of presenting the products to consumers. The Board of Appeal concluded, in paragraph 45 of the contested decision, that, taken as a whole, the mark at issue closely resembled the shapes that the goods in question were most likely to take and that, consequently, it had to be regarded as being devoid of any distinctive character.
30 Accordingly, the General Court was able, without erring in law, to conclude, in paragraph 38 of the judgment under appeal, that Mr Giorgis cannot argue that the Board of Appeal did not carry out an overall assessment of the distinctive character of the mark at issue, that it did not take account of its characteristics, and that it found merely that the sum of each of the elements of the mark at issue lacked distinctive character.
31 Furthermore, in so far as Mr Giorgis argues that the combination of the elements forming the mark at issue gives it distinctive character, it must be noted that that analysis falls within the scope of a factual assessment.
32 In that regard, it is necessary to recall that, under Article 256(1) TFEU and the first paragraph of Article 58 of the Statute of the Court of Justice of the European Union, an appeal lies on points of law only. The General Court has exclusive jurisdiction to find and appraise the relevant facts and to assess the evidence. The appraisal of those facts and the assessment of that evidence thus does not, save where the facts or evidence are distorted, constitute a point of law which, as such, is open to review by the Court of Justice on appeal (judgment in Voss of Norway v OHIM, C‑445/13 P, EU:C:2015:303, paragraph 97).
33 Mr Giorgis has not put forward any argument in support of that assertion that shows that the General Court distorted the evidence.
34 Having regard to the foregoing considerations, the first part of the single ground of appeal must be rejected as being in part manifestly inadmissible and in part manifestly unfounded.
The second part of the single ground of appeal Arguments of the applicant 35 By the second part of his single ground of appeal, in essence, Mr Giorgis claims that the Board of Appeal and the General Court wrongly defined the standard model and customs of the sector in question in that they failed to determine the types of packaging widely used in that sector.
36 According to Mr Giorgis, that incorrect approach led the Board of Appeal to conclude, wrongly, that the mark at issue is not very different from the standard model and customs of that sector.
Findings of the Court 37 According to the settled case-law of the Court of Justice, it follows from Article 256 TFEU, the first paragraph of Article 58 of the Statute of the Court of Justice and Article 69(2) of the Rules of Procedure that an appeal must indicate precisely the contested elements of the judgment which the appellant seeks to have set aside and also the legal arguments specifically advanced in support of the appeal (see, inter alia, order in Think Schuhwerk v OHIM, C‑521/13 P, EU:C:2014:2222, paragraph 27).
38 That requirement is not satisfied by an appeal which, without even including an argument specifically identifying the error of law allegedly vitiating the contested judgment, confines itself to reproducing the pleas in law and arguments previously submitted to the General Court. In reality, such an appeal amounts to no more than a request for a re-examination of the application submitted to the General Court, a matter which falls outside the jurisdiction of the Court of Justice (order in Think Schuhwerk v OHIM, C‑521/13 P, EU:C:2014:2222, paragraph 28).
39 Furthermore, arguments in an appeal which criticise the decision whose annulment was applied for before the General Court, rather than the judgment delivered by the General Court following that application for annulment, are inadmissible (order in Think Schuhwerk v OHIM, C‑521/13 P, EU:C:2014:2222, paragraph 29).
40 In the present case, by the second part of the single ground of appeal, Mr Giorgis criticises the contested decision and asks the Court of Justice, in essence, to rule afresh on certain aspects of the dispute, without claiming any error of law vitiating the assessments made by the General Court.
41 Accordingly, it is appropriate to reject the second part of the single ground of appeal as manifestly inadmissible and, thus, to dismiss the appeal as a whole.
Costs 42 Under Article 137 of the Rules of Procedure, applicable to the procedure on appeal pursuant to Article 184 of those rules, a decision as to costs is to be given in the order which closes the proceedings.
43 Since the present order has been adopted before the appeal was notified to OHIM, and therefore before the latter could have incurred costs, it is appropriate to decide that Mr Giorgis is to bear his own costs.
On those grounds, the Court (Sixth Chamber) hereby orders: 1. The appeal is dismissed. 2. Mr Giorgio Giorgis shall bear his own costs. [Signatures]
* Language of the case: English. |
JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
12 July 2018 ( *1 )
(Competition — Agreements, decisions and concerted practices — European market for power cables — Decision finding an infringement of Article 101 TFEU — Single and continuous infringement — Imputability of the infringement — Presumption — Error of assessment — Presumption of innocence — Legal certainty — Principle of personal responsibility — Unlimited jurisdiction)
In Case T‑419/14,
The Goldman Sachs Group, Inc., established in New York, New York (United States), represented by W. Deselaers, J. Koponen and A. Mangiaracina, lawyers,
applicant,
v
European Commission, represented by C. Giolito, L. Malferrari, H. van Vliet and J. Norris-Usher, acting as Agents,
defendant,
supported by
Prysmian SpA, established in Milan (Italy),
Prysmian cavi e sistemi Srl, established in Milan,
represented by C. Tesauro, F. Russo and L. Armati, lawyers,
interveners,
APPLICATION under Article 263 TFEU for the annulment of Commission Decision C(2014) 2139 final of 2 April 2014 relating to a proceeding under Article 101 [TFEU] and Article 53 of the EEA Agreement (Case AT.39610 — Power cables) in so far as it concerns the applicant and, in the alternative, a reduction of the fine imposed on the applicant,
THE GENERAL COURT (Eighth Chamber),
composed of A. M. Collins, President, M. Kancheva (Rapporteur) and R. Barents, Judges,
Registrar: L. Grzegorczyk, Administrator,
having regard to the written part of the procedure and further to the hearing on 28 March 2017,
gives the following
Judgment
I. Background to the dispute
A. The applicant and the sector concerned
The applicant, The Goldman Sachs Group, Inc., is a United States company. It is an investment bank which operates in all the major financial centres around the world. Between 29 July 2005 and 28 January 2009, it was the indirect parent company, through GS Capital Partners V Funds, LP (‘the GSCP V Funds’) and other intermediate companies, of Prysmian SpA and of a wholly owned subsidiary of that company, Prysmian Cavi e Sistemi Srl (‘PrysmianCS’), formerly Pirelli Cavi e Sistemi Energia SpA, and subsequently Prysmian Cavi e Sistemi Energia Srl. Prysmian and PrysmianCS together form the Prysmian group, one of the leading businesses worldwide in the submarine and underground power cables sector.
Submarine power cables are used under water and underground power cables are used under the ground for the transmission and distribution of electrical power. They are classified in three categories: low voltage, medium voltage and high and extra high voltage. High voltage and extra high voltage power cables are, in the majority of cases, sold as part of projects. Such projects consist of a combination of the power cable and the necessary additional equipment, installation and services. High voltage and extra high voltage power cables are sold throughout the world to large national grid operators and other electricity companies, principally through competitive public tender procedures.
B. Administrative procedure
By letter of 17 October 2008, the Swedish company ABB AB provided the Commission of the European Communities with a series of statements and documents concerning restrictive commercial practices in the underground and submarine power cable production and supply sector. Those statements and documents were produced in support of an application for immunity submitted in accordance with the Commission Notice on immunity from fines and reduction of fines in cartel cases (OJ 2006 C 298, p. 17; ‘the Leniency Notice’).
From 28 January to 3 February 2009, further to the statements made by ABB, the Commission carried out inspections at the premises of Prysmian and Prysmian Cavi e Sistemi Energia and at the premises of other European companies concerned, that is to say, Nexans SA and Nexans France SAS.
On 2 February 2009, the Japanese companies, Sumitomo Electric Industries Ltd, Hitachi Cable Ltd and J-Power Systems submitted a joint application for immunity from fines, in accordance with point 14 of the Leniency Notice, or, in the alternative, for a reduction of the amount thereof, in accordance with point 27 of the Leniency Notice. They then supplied the Commission with further oral statements and documentation.
During the course of the investigation the Commission sent several requests for information to undertakings in the underground and submarine power cable production and supply sector pursuant to Article 18 of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles [101] and [102 TFEU] (OJ 2003 L 1, p. 1), and point 12 of the Leniency Notice.
On 30 June 2011, the Commission initiated proceedings and adopted a statement of objections against the following legal entities: Nexans France, Nexans, Pirelli & C. SpA, Prysmian Cavi e Sistemi Energia, Prysmian, Sumitomo Electric Industries, Hitachi Cable, J‑Power Systems, Furukawa Electric Co. Ltd, Fujikura Ltd, Viscas Corp., SWCC Showa Holdings Co. Ltd, Mitsubishi Cable Industries Ltd, Exsym Corp., ABB, ABB Ltd, Brugg Kabel AG, Kabelwerke Brugg AG Holding, nkt cables GmbH, NKT Holding A/S, Silec Cable SAS, Grupo General Cable Sistemas, SA, Safran SA, General Cable Corp., LS Cable & System Ltd, Taihan Electric Wire Co. Ltd and the applicant.
Between 11 and 18 June 2012, all the addressees of the statement of objections, with the exception of Furukawa Electric, took part in an administrative hearing before the Commission.
By judgments of 14 November 2012, Nexans France and Nexans v Commission (T‑135/09, EU:T:2012:596) and of 14 November 2012, Prysmian and Prysmian Cavi e Sistemi Energia v Commission (T‑140/09, EU:T:2012:597), the General Court partly annulled the inspection decisions addressed, first, to Nexans and Nexans France, and, second, to Prysmian and Prysmian Cavi e Sistemi Energia, in so far as they concerned power cables other than high voltage submarine and underground power cables and the material associated with such other cables, and dismissed the action as to the remainder. On 24 January 2013, Nexans and Nexans France brought an appeal against the first of those judgments. By judgment of 25 June 2014, Nexans and Nexans France v Commission (C‑37/13 P, EU:C:2014:2030), the Court of Justice dismissed that appeal.
On 2 April 2014, the Commission adopted its Decision C(2014) 2139 final relating to a proceeding under Article 101 [TFEU] and Article 53 of the [EEA] Agreement (Case AT.39610 — Power cables) (‘the contested decision’).
C. Contested decision
1.
The infringement at issue
Article 1 of the contested decision states that a number of undertakings participated, over various periods of time, in a single and continuous infringement of Article 101 TFEU in the ‘(extra) high voltage underground and/or submarine power cables sector’. In essence, the Commission found that, from February 1999 to the end of January 2009, the main European, Japanese and South Korean producers of submarine and underground power cables participated in a network of multilateral and bilateral meetings and established contacts aimed at restricting competition for (extra) high voltage submarine and underground power cable projects in specific territories, by allocating markets and customers, thereby distorting the normal competitive process (recitals 10 to 13 and 66 of that decision).
In the contested decision, the Commission found that the cartel consisted of two main configurations, which formed a composite whole. More specifically, according to the Commission, the cartel consisted of two aspects, namely:
–
the ‘A/R cartel configuration’, which included the European undertakings, which were generally referred to as ‘R members’, the Japanese undertakings, referred to as ‘A members’, and, lastly, the South Korean undertakings, referred to as ‘K members’. That configuration made it possible to achieve the objective of allocating territories and customers among the European, Japanese and South Korean producers. That allocation followed an agreement relating to the ‘home territory’, under which the Japanese and South Korean producers would refrain from competing for projects in the European producers’ ‘home territory’ and the European producers would undertake to stay out of the Japanese and South Korean markets. In addition, the parties allocated projects in the‘export territories’, namely the rest of the world with the notable exception of the United States. For a time, this allocation was based on a ‘60/40’ quota, meaning that 60% of the projects were reserved for European producers and the remaining 40% were reserved for Asian producers;
–
the ‘European cartel configuration’, which involved the allocation of territories and customers by the European producers for projects to be carried out within the European ‘home territory’ or allocated to the European producers (see section 3.3 of the contested decision and, in particular, recitals 73 and 74 of that decision).
The Commission found that the participants in the cartel had established obligations to exchange information in order to enable the allocation agreements to be monitored (recitals 94 to 106 and 111 to 115 of the contested decision).
The Commission classed the cartel participants in three groups, according to the role each of them had played in implementing the cartel. First, it defined the core group to include the European undertakings Nexans France, the subsidiaries of Pirelli & C., formerly Pirelli SpA, having participated successively in the cartel and Prysmian Cavi e Sistemi Energia and the Japanese undertakings Furukawa Electric Co., Fujikura and their joint undertaking Viscas, as well as Sumitomo Electric Industries, Hitachi Cable and their joint undertaking J‑Power Systems (recitals 545 to 561 of the contested decision). Next, the Commission identified a group of undertakings which had not been part of the core group but which nevertheless could not be regarded as merely fringe players in the cartel. In this group, it placed ABB, Exsym, Brugg Kabel and the entity constituted by Sagem SA, Safran and Silec Cable (recitals 562 to 575 of that decision). Lastly, the Commission took the view that Mitsubishi Cable Industries, SWCC Showa Holdings, LS Cable & System, Taihan Electric Wire and nkt cables were merely fringe players in the cartel (recitals 576 to 594 of that decision).
2.
The applicant’s liability
The applicant was found liable on the basis of the exercise of decisive influence, as parent company, over Prysmian and Prysmian Cavi e Sistemi Energia from 29 July 2005 to 28 January 2009.
In particular, first, the Commission presumed, in light of the principles laid down by the case-law of the Courts of the European Union, that Prysmian had exerted a decisive influence over the market conduct of Prysmian Cavi e Sistemi Energia at least between 29 July 2005 and 28 January 2009 and that the applicant had exerted a decisive influence over the market conduct of Prysmian and Prysmian Cavi e Sistemi Energia at least between 29 July 2005 and 3 May 2007 (recital 782 of the contested decision).
Second, the Commission concluded on the basis of the analysis of the applicant’s economic, organisational and legal links with its subsidiaries that the applicant had in fact exerted a decisive influence over the market conduct of both Prysmian and Prysmian Cavi e Sistemi Energia at least between 29 July 2005 and 28 January 2009 (recital 783 of the contested decision).
3.
The fine imposed
Article 2(f) of the contested decision imposed on the applicant a fine of EUR 37303000, ‘jointly and severally’ with PrysmianCS and Prysmian, for its participation in the cartel during the period 29 July 2005 to 28 January 2009.
In calculating the fines imposed on the applicant and the other addressees of the decision, the Commission applied Article 23(2)(a) of Regulation No 1/2003 and the methodology set out in the Guidelines on the method of setting fines imposed pursuant to [that provision] (OJ 2006 C 210, p. 2, ‘the 2006 Guidelines on setting fines’).
In the first place, as regards the basic amounts of the fines, after establishing the appropriate value of sales in accordance with point 18 of the 2006 Guidelines on setting fines (recitals 963 to 994 of the contested decision), the Commission selected the proportion of the value of sales which would reflect the gravity of the infringement in accordance with points 22 and 23 of those guidelines. In that regard, it considered that the infringement, by its very nature, was among the most harmful restrictions of competition, which justified a gravity percentage of 15%. The Commission also increased the gravity percentage by 2% for all addressees on account of their combined market share and the almost worldwide reach of the cartel, which included, inter alia, all of the territory of the European Economic Area (EEA). In addition, it considered, in particular, that the conduct of the European undertakings had been more detrimental to competition than that of the other undertakings, inasmuch as, in addition to their participation in the ‘A/R cartel configuration’, the European undertakings had allocated power cable projects among themselves in the context of the ‘European cartel configuration’. For that reason, the Commission set the proportion of the value of sales to reflect the gravity of the infringement at 19% for the European undertakings and at 17% for the other undertakings (recitals 997 to 1010 of that decision).
In so far as concerns the multiplier to reflect the duration of the infringement, the Commission used a multiplier of 3.5 for the applicant, which reflected the period of its participation in the cartel from 29 July 2005 to 28 January 2009. The Commission also included in the basic amount of the fines an additional amount, namely the entry fee, of 19% of the value of sales (recitals 1011 and 1016 of the contested decision).
In the second place, the Commission found no aggravating circumstances that could affect the basic amounts of the fine of the cartel participants, with the exception of ABB. On the other hand, in so far as mitigating circumstances are concerned, it decided to reflect in the fines the degree of involvement in the implementation of the cartel of each of the various undertakings. Accordingly, it reduced the basic amount of the fines to be imposed in respect of the fringe cartel participants by 10% and the basic amounts of the fines to be imposed in respect of the undertakings whose involvement had been moderate by 5%. It also granted Mitsubishi Cable Industries and SWCC Showa Holdings, in respect of the period preceding the creation of Exsym, and LS Cable & System and Taihan Electric Wire an additional reduction of 1% on account of the fact that they had been unaware of certain aspects of the single and continuous infringement and were not liable for them. On the other hand, no reduction in the basic amounts of the fines was granted to the undertakings belonging to the core group, which includes the applicant (recitals 1017 to 1020 and 1033 of the contested decision). Applying the 2006 Guidelines on setting fines, the Commission also granted Mitsubishi Cable Industries an additional reduction of 3% on account of its effective cooperation outside the scope of the Leniency Notice (recital 1041 of that decision).
II. Procedure and forms of order sought
By application lodged at the Registry of the General Court on 17 June 2014, the applicant brought the present action.
By documents lodged at the Court Registry on 2 and 11 October 2014, Prysmian and PrysmianCS, and the European Private Equity and Venture Capital Association applied for leave to intervene in the case in support of the form of order sought by the Commission.
By orders of 25 June 2015, the President of the Eighth Chamber of the General Court (former composition) granted Prysmian and PrysmianCS, the interveners, leave to intervene and ordered that they be sent the non-confidential versions of the applicant’s and the Commission’s pleadings and rejected the application for leave to intervene submitted by the European Private Equity and Venture Capital Association.
The interveners lodged their statement in intervention on 29 October 2015. By letters of 14 January and 5 February 2016, the Commission and the applicant respectively submitted their observations on that statement in intervention.
By order of 14 September 2016, the President of the Eighth Chamber (former composition) of the General Court partly granted the applicant’s and the Commission’s requests for confidential treatment, in so far as they were challenged by the interveners.
As a result of changes to the composition of the Chambers of the General Court pursuant to Article 27(5) of the Rules of Procedure, the Judge-Rapporteur was attached to the Eighth Chamber (new composition), to which the present case has therefore been assigned.
Acting upon a proposal of the Judge-Rapporteur, the General Court (Eighth Chamber) decided to open the oral part of the procedure. The parties presented oral argument and answered the questions put to them by the Court at the hearing on 28 March 2017.
The applicant claims that the Court should:
–
annul, wholly or in part, Articles 1 to 4 of the contested decision in so far as they relate to it;
–
reduce the fine imposed on it in Article 2 of the contested decision;
–
order the Commission to pay the costs.
The Commission, supported by the interveners, contends that the Court should:
–
dismiss all of the applicant’s claims;
–
order the applicant to pay the costs.
III. Law
In the application, the applicant seeks partial annulment of the contested decision as well as the reduction of the fine imposed on it.
A. The claims for annulment
In support of its claims for annulment, the applicant raises five pleas in law. The first plea alleges infringement of Article 101 TFEU and Article 23(2) of Regulation No 1/2003, an error of law and a manifest error of assessment as regards the Commission’s conclusion that the applicant is liable for the infringement committed by the interveners. The second plea alleges infringement of Article 2 of that regulation, insufficiency of the evidence and breach of the duty to state reasons laid down in Article 296 TFEU. The third plea alleges infringement of Article 101 TFEU and Article 23(2) of that regulation, as well as breach of the principles of personal responsibility and the presumption of innocence. The fourth plea alleges infringement of Article 101 TFEU and Article 23(2) of that regulation, a manifest error of assessment and breach of the principle of legal certainty and of the principle that penalties must be specific to the offender. The fifth plea alleges infringement of the rights of the defence.
1.
The first plea in law, alleging infringement of Article 101 TFEU and of Article 23(2) of Regulation No 1/2003, an error of law and a manifest error of assessment
The applicant takes issue with the Commission’s decision to hold it jointly and severally liable for payment of the fine imposed for the infringements committed by the interveners between 29 July 2005 and 28 January 2009. In essence, it disputes the Commission’s conclusions, described in paragraphs 15 to 17 above, that it could presume that the applicant had exerted a decisive influence over the interveners from 29 July 2005 to 3 May 2007 and that a decisive influence could, in any event, be inferred from an analysis of the applicant’s economic, organisational and legal links with the interveners throughout the period during which the applicant held shares in the Prysmian group.
The applicant divides the first plea into three limbs. In the first limb, it submits that the Commission committed an error of law and a manifest error of assessment in presuming that it in fact exercised decisive influence over the interveners for the period between 29 July 2005 and 3 May 2007. In the second limb, it claims that the Commission committed a manifest error of assessment by taking the view that, in any event, it exercised decisive influence over the interveners during the entire period during which it held shares in the interveners. In the third limb, it claims that the Commission committed a manifest error of assessment in finding, in essence, that it was not a pure financial investor.
(a)
The first limb, relating to the application of the presumption of actual exercise of decisive influence for the period between 29 July 2005 and 3 May 2007
First of all, the applicant maintains that the Commission erred in presuming that it exerted a decisive influence, given that its holding in Prysmian, through the GSCP V Funds and other intermediate companies, was much less than 100% for most of the time during which it held its investment. It points out in this connection that, leaving aside 41 days, its holding in Prysmian was no more than between 84.4% and 91.1%, until 3 May 2007, the date on which shares in Prysmian were offered to the public in an initial public offering on the Milan Stock Exchange (‘the IPO date’). According to the applicant, the Commission has never applied the presumption of actual exercise of decisive influence in a case involving a shareholding of less than 93%.
Next, the applicant submits that the Commission erred in applying the presumption of actual exercise of decisive influence by reference to the voting rights associated with Prysmian’s shares rather than to that company’s shareholding. According to the applicant, that approach is unprecedented in its decision-making practice and lacks support in the case-law of the EU Courts. Moreover, the applicant contends in essence that holding 100% of the voting rights associated with the shares of a company is not the same as holding 100% of the capital of that company.
In addition, the applicant complains that the Commission failed to have sufficient regard to the divestments of Prysmian’s equity that it made to Apollo Investment Corporation (‘Apollo’) and to the divestments of Prysmian’s equity that it made to Prysmian’s management team. According to the applicant, those divestments effectively prove that it had not been in a position to exercise 100% of the voting rights associated with Prysmian’s shares, contrary to the Commission’s conclusion in the contested decision.
Lastly, the applicant claims that, even if the Commission had been entitled to apply the presumption of actual exercise of decisive influence to it with regard to the period preceding the IPO date, it nevertheless adduced sufficient evidence to rebut that presumption.
The Commission and the interveners dispute those arguments.
By the first limb of the first plea, the applicant essentially submits two complaints, alleging (i) that the Commission wrongly applied the presumption of actual exercise of decisive influence in order to hold it jointly and severally liable for payment of the fine imposed on its subsidiaries for the period between 29 July 2005 and the IPO date and (ii) that the Commission erred in concluding that it had not succeeded in rebutting that presumption.
(1) The first complaint, relating to the application of the presumption of actual exercise of decisive influence for the period between 29 July 2005 au 3 May 2007
It is settled case-law that the conduct of a subsidiary may be imputed to the parent company in particular where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company having regard in particular to the economic, organisational and legal links between those two legal entities (see judgment of 10 September 2009, Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:536, paragraph 58 and the case-law cited).
That is the case because, in such a situation, the parent company and its subsidiary form a single economic unit and therefore form a single undertaking within the meaning of Article 101 TFEU. Thus, the fact that a parent company and its subsidiary constitute a single undertaking within the meaning of that article enables the Commission to address a decision imposing fines to the parent company, without having to establish the personal involvement of the latter in the infringement (see, to that effect, judgment of 10 September 2009, Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:536, paragraph 59 and the case-law cited).
According to further settled case-law, in the specific case where a parent company has a 100% shareholding in a subsidiary that has infringed the competition rules of the European Union: (i) the parent company is able to exercise decisive influence over the conduct of the subsidiary; and (ii) there is a rebuttable presumption that the parent company does in fact exercise a decisive influence over the conduct of its subsidiary (see, to that effect, judgment of 10 September 2009, Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:536, paragraph 60 and the case-law cited).
In those circumstances, it is sufficient for the Commission to prove that the subsidiary is wholly owned by the parent company in order to presume that the parent exercises a decisive influence over the commercial policy of the subsidiary. The Commission will then be able to regard the parent company as jointly and severally liable for the payment of the fine imposed on its subsidiary, unless the parent company, which has the burden of rebutting that presumption, adduces sufficient evidence to show that its subsidiary acts independently on the market (see judgment of 10 September 2009, Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:536, paragraph 61 and the case-law cited).
Lastly, it should be recalled that, in the specific case where a company holds all or almost all of the capital of an intermediate company which, in turn, holds all or almost all of the capital of a subsidiary of its group which has committed an infringement of EU competition law, there is also a rebuttable presumption that that company exercises a decisive influence over the conduct of the intermediate company and indirectly, via that company, also over the conduct of that subsidiary (see, to that effect, judgment of 8 May 2013, Eni v Commission, C‑508/11 P, EU:C:2013:289, paragraph 48 and the case-law cited).
In the present case, it is common ground that the Commission applied the presumption of actual exercise of decisive influence despite the fact that the applicant did not hold a 100% shareholding in Prysmian during the entire period between 29 July 2005 and the IPO date. It is not disputed that, as appears from recitals 739 to 747 of the contested decision, although the applicant initially held 100% of that capital, the level of that holding decreased, shortly afterwards and gradually, following (i) the divestment of equity made on 7 September 2005 to Apollo and (ii) the divestment of equity made on 21 July 2006 to Prysmian’s management team. Accordingly, the applicant is correct to state in its pleadings that, apart from 41 days when its shareholding was 100%, its shareholding before the IPO date was between 91.1% and 84.4% of the equity.
Nevertheless, as is apparent from recitals 748 to 754 of the contested decision, the Commission did not base the application of the presumption of actual exercise of decisive influence on the level of the applicant’s holding in Prysmian’s share capital, but on the fact that, despite the divestment of some equity, the applicant controlled 100% of the voting rights associated with that company’s shares. According to the Commission, that placed it in a situation similar to that of a sole owner of the Prysmian group.
In the first place, regarding the question whether the presumption of actual exercise of decisive influence could be applied in those circumstances, it should be pointed out that, according to settled case-law, the Commission is entitled to apply that presumption where the parent company is in a similar situation to that of a sole owner as regards its power to exercise a decisive influence over the conduct of its subsidiary (see, to that effect, judgments of 7 June 2011, Total and Elf Aquitaine v Commission, T‑206/06, not published, EU:T:2011:250, paragraph 56: of 12 December 2014, Repsol Lubricantes y Especialidades and Others v Commission, T‑562/08, not published, EU:T:2014:1078, paragraph 42, and of 15 July 2015, Socitrel and Companhia Previdente v Commission, T‑413/10 and T‑414/10, EU:T:2015:500, paragraph 204).
Accordingly, it must be held that, as the Commission states in recital 754 of the contested decision, where a parent company is able to exercise all the voting rights associated with its subsidiary’s shares, in particular in combination with a very high majority stake in the share capital of that subsidiary, as in the present case, that parent company is in a similar situation to that of the sole owner of that subsidiary, since that parent company is able to determine the economic and commercial strategy of the subsidiary concerned, even if it does not hold all or virtually all the share capital of that subsidiary.
Moreover, it should be pointed out that the presumption of actual exercise of decisive influence is based, in essence, on the premiss that the fact that a parent company holds all or virtually all the share capital of its subsidiary enables the Commission to conclude, without supporting evidence, that that parent company has the power to exercise a decisive influence over the subsidiary without there being any need to take into account the interests of other shareholders when adopting strategic decisions or in the day-to-day business of that subsidiary, which does not determine its own market conduct independently, but in accordance with the wishes of that parent company (see, to that effect, Opinion of Advocate General Kokott in Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:262, point 73).
Those considerations are fully applicable in the case where a parent company is able to exercise all the voting rights associated with the shares of its subsidiary, since that parent company is in a position to exercise total control over the conduct of that subsidiary without any third parties, in particular other shareholders, being in principle able to object to that control. Admittedly, it cannot be ruled out that, in certain cases, minority shareholders who have no voting rights associated with the shares of that subsidiary, may exercise, with respect to that subsidiary, certain rights enabling them, in certain circumstances, to also have an influence over the conduct of that subsidiary. However, in those circumstances, that parent company may then rebut the presumption of actual exercise of decisive influence by adducing evidence capable of showing that it does not determine the commercial policy of the subsidiary concerned on the market.
In the second place, regarding the question whether the applicant is in such a position, it should be recalled that, in recitals 751 to 754 of the contested decision, the Commission sets out the reasons why the relationship between the applicant and Prysmian between 29 July 2005 and the IPO date was, in its view, similar to that of a parent company which holds 100% of the share capital of its subsidiary. In essence, it explains that the two divestments of Prysmian’s equity that the applicant made (i) to Apollo and (ii) to the management team of Prysmian were subject to conditions ensuring that the new shareholders would be pure passive investors and could not exercise any voting rights associated with their shareholding.
For its part, the applicant submits that the investments made by Apollo and by Prysmian’s management were not purely passive and moreover did not entail relinquishing the ability to exercise the voting rights associated with Prysmian’s shares in favour of the applicant. In addition, it criticises the Commission for having ‘overlooked’, in the analysis, the two divestments of equity that it made (i) to Apollo and (ii) to Prysmian’s management.
First, as regards the applicant’s divestment of Prysmian’s equity to Apollo, it should be observed that, according to recital 751 of the contested decision, this was effected through the establishment of a new partnership, known as GS Prysmian Co-Invest LP, of which Apollo was only a limited partner. The applicant does not dispute that finding of the Commission. In particular, clause 5.7 of the sale and purchase agreement signed between the GSCP V Funds and Apollo on 7 September 2005, as cited in footnote 1115 of that decision, provides as follows:
‘[confidential]’ ( ) (emphasised in the contested decision).
It is apparent from the previous paragraph that, pursuant to the sale and purchase agreement, Apollo recognised [confidential].
Accordingly, the Commission was justified to take the view that the applicant’s divestment of Prysmian’s equity to Apollo was subject to conditions ensuring that the new shareholder would be a pure passive investor.
The applicant’s line of argument that the Commission cannot merely rely on the formal language of the sale and purchase agreement signed between the GSCP V Funds and Apollo on 7 September 2005, which may not reflect the true situation created following the applicant’s divestment of Prysmian’s equity to Apollo, cannot call in question that conclusion. As the Commission states, the applicant does not adduce any evidence to show that that agreement and, in particular, clause 5.7 thereof did not reflect the true situation established between those funds and Apollo.
Next, regarding the applicant’s line of argument that the wording of the sale and purchase agreement signed between the GSCP V Funds and Apollo on 7 September 2005 merely reflected the risk that Apollo was willing to take in connection with its investment, it is sufficient to observe, in order to reject that line of argument, that the reasons which led to the adoption of that agreement are irrelevant for the purpose of ascertaining whether, after the applicant’s divestment of Prysmian’s equity to Apollo, the applicant retained the ability to exercise all the voting rights associated with those shares.
Lastly, the applicant’s line of argument that the increase in the number of shareholders within Prysmian implied in itself the existence of other interests to be taken into account within the undertaking cannot succeed. As regards the investments made by Apollo, the applicant provides no information on the nature of those interests or on the manner in which they might manifest themselves in a context in which Apollo was unable to exercise any voting rights.
Second, as regards the applicant’s divestment of Prysmian’s equity to Prysmian’s management, it is apparent from recital 752 of the contested decision that that divestment was accompanied by a series of conditions that the management was required to accept and which were set out in the context of a co-investment contract and a fiduciary agreement with a third-party bank. In particular, through that contract and that agreement, the managers accepted that their respective shares would be acquired and held through that bank, as a fiduciary. Moreover, it is apparent from that contract and that agreement that the managers could only exercise the rights granted to them under the divestment through the fiduciary, who, in turn, could participate in Prysmian’s shareholder meetings only following receipt of voting instructions from the GSCP V Funds.
The applicant asserts that, as regards its divestment of Prysmian’s equity to Prysmian’s management, the persons involved were either members of Prysmian’s or PrysmianCS’s board of directors. In the applicant’s submission, those managers were therefore able to exercise an influence over Prysmian and, in so far as they were responsible for determining the commercial policy of that group, could not be regarded as pure passive investors. In addition, it submits that that divestment was part of a scheme for incentivising management, which was intended to support the growth of the undertaking.
However, those assertions do not constitute arguments capable of calling into question the findings made by the Commission in recital 752 of the contested decision. It should be pointed out that, contrary to what the applicant asserts, in so far as the members of Prsymian’s management were not entitled to exercise any voting rights associated with Prsymian’s shares, they were not shareholders whose interests had to be taken into account by the parent company. Accordingly, the applicant has failed to show that the position of a manager in that case differs from that of a manager of a subsidiary which is wholly owned by the parent company. Moreover, it should be noted that increasing the motivation of those members of Prysmian’s management did not depend on their being able to exercise those voting rights and was therefore unrelated to the express clauses of the co-investment contract and the fiduciary agreement prohibiting that management from exercising any specific shareholder right.
It follows that the Commission could rightly consider the applicant’s divestments of Prsymian’s equity to Apollo and to Prysmian’s management to be purely passive and that they resulted in the exercise of the voting rights associated with Prsymian’s shares being relinquished to the applicant, which therefore continued to be able to exercise 100% of those voting rights.
Third, to the extent that the applicant alleges a lack of reasoning by the Commission, inasmuch as the Commission allegedly overlooked the applicant’s divestments of Prsymian’s equity to Apollo and to Prysmian’s management in its analysis, it is sufficient to note that the explanations provided in recitals 751 to 754 of the contested decision clearly constitute a detailed and adequate statement of reasons, for the purposes of settled case-law, in order to enable the applicant to understand the logic underlying the Commission’s assessment and the Court to exercise its review of that assessment (see, to that effect, judgment of 29 September 2011, Elf Aquitaine v Commission, C‑521/09 P, EU:C:2011:620, paragraph 147 and the case-law cited).
In the light of the foregoing, the applicant’s ability to exercise decisive influence over the interveners on account of its ability to exercise all the voting rights associated with Prsymian’s shares was, on the facts of the present case, comparable to the ability that it would have enjoyed as sole owner.
Accordingly, it must be held, following an in-depth review, and in the light of the fact that the applicant does not challenge the Commission’s finding that Prysmian exercised decisive influence over PrysmianCS, that the Commission was entitled to take the view, without erring, that the presumption of actual exercise of decisive influence over the interveners’ market conduct could be applied to the applicant for the period between 29 July 2005 and 3 May 2007.
The first complaint of the first limb must therefore be rejected.
(2) The second complaint, relating to the rebuttal of the presumption of actual exercise of decisive influence
In the applicant’s submission, even if the Commission correctly applied the presumption of actual exercise of decisive influence, the applicant, in any event, rebutted that presumption during the administrative procedure. In essence, the applicant submits that there is a great deal of evidence demonstrating that the interveners acted independently on the market, without any direction from the applicant.
First, the applicant submits that the contested decision failed to show that the employee directors of the Principal Investment Area of its ‘Merchant Banking’ Division (‘the PIA’), who controlled the GSCP V Funds, exercised an influence over the interveners’ commercial policy. It claims that the minutes of Prysmian’s board of directors prove that it was its management team that directed such a policy.
As the Commission observes in the context of this complaint, the applicant does not mention specific emails or minutes which substantiate its claim. However, as is clear from the case-law cited in paragraph 45 above, in order to rebut the application of the presumption of actual exercise of decisive influence, it is for the applicant to adduce evidence showing that, in reality and contrary to what the Commission presumed, the interveners determined their commercial strategy independently. The applicant’s first argument must therefore be rejected.
Second, the applicant relies on public statements by the members of Prysmian’s board of directors, including one made at their meeting of 15 December 2005, in which it was allegedly stated that Prysmian was ‘not subject to the management and coordination by any other company’. The applicant adds that, if the interveners had indeed been under its control, it would have been required to declare this publicly, in accordance with Italian law.
However, public statements that the members of Prysmian’s board of directors may have made at their meetings are in themselves incapable of establishing the veracity of their content. The applicant does not adduce any evidence supporting the veracity of those public statements.
Moreover, the fact that such statements were made in accordance with Italian law, as the applicant claims, is incapable of demonstrating that the applicant was not, in reality, the parent company with control of the Prysmian group. As the Commission observes, the exercise of decisive influence has to be assessed on the basis of concrete evidence, so that the question whether a subsidiary can determine its conduct on the market autonomously or, by contrast, is subject to the decisive influence of its parent company cannot be assessed solely on the basis of the provisions of the relevant national law.
Third, the applicant relies on the interveners’ reply to the Commission’s request for information of 20 October 2009 and, in particular, the fact that that document contains no reference to the applicant. However, again, the mere lack of any reference to the applicant in that document does not prove that the applicant did not exercise any influence over the interveners, in particular during the period preceding the IPO date.
Fourth, the applicant submits that it did not give any instructions in relation to, or have any direct control over, matters of a commercial nature relating to the Prysmian group. In that regard, it provides a brief ‘summary’ of a series of arguments to be set out more fully and ‘in detail’ in the context of the second limb of the first plea. However, in the present case, such a reference does not enable the Court to determine precisely the scope of those arguments. Although the basic legal and factual particulars relied on by the applicant may have been set out in the application, it is nevertheless important for the applicant to present them coherently and intelligibly. In particular, it is not the task of the Court to search through all the matters relied on in support of the second limb of the first plea in order to ascertain whether those matters could also be used in support of this ground (judgment of 27 September 2006, Roquette Frères v Commission, T‑322/01, EU:T:2006:267, paragraph 209). Accordingly, this line of argument must be rejected as inadmissible, without prejudice to the analysis to be carried out in the context of the second limb of the first plea.
It is apparent from the foregoing that, contrary to what the applicant claims, it has not succeeded in rebutting the application of the presumption of actual exercise of decisive influence with sufficient evidence to show that its subsidiary acted independently on the market.
The second complaint of the first limb must therefore be rejected, as must that limb in its entirety.
(b)
The second limb, concerning the Commission’s conclusions regarding the period between 29 July 2005 and 28 January 2009
The applicant maintains that the evidence on which the Commission relied in the contested decision to hold it jointly and severally liable throughout the period of the infringement does not establish that it had the ability to exert a decisive influence, or that it actually exerted a decisive influence, over the interveners. In essence, the applicant considers that the Commission did not establish to the requisite legal standard that the interveners and the applicant formed an economic unit within the meaning of the case-law.
The Commission and the interveners dispute those arguments.
As is apparent from the case-law cited in paragraph 42 above, the conduct of a subsidiary may be imputed to the parent company in particular where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company having regard in particular to the economic, organisational and legal links between those two legal entities.
According to settled case-law, in order to ascertain whether a subsidiary determines its conduct on the market independently, account must be taken of all the relevant factors relating to the economic, organisational and legal links which tie the subsidiary to the parent company, which may vary from case to case and cannot therefore be set out in an exhaustive list (see judgments of 14 September 2016, Ori Martin and SLM v Commission, C‑490/15 P and C‑505/15 P, not published, EU:C:2016:678, paragraph 60 and the case-law cited, and of 9 September 2015, Philips v Commission, T‑92/13, not published, EU:T:2015:605, paragraph 41 and the case-law cited).
Where a parent company and its subsidiary form part of a single undertaking for the purposes of Article 101 TFEU, the factor which entitles the Commission to address the decision imposing fines to the parent company is not necessarily a parent-subsidiary relationship in which the parent company instigates the infringement; nor, a fortiori, is it because of the parent company’s involvement in the infringement; rather, it is because the companies concerned constitute a single undertaking for the purposes of Article 101 TFEU (see judgment of 14 September 2016, Ori Martin and SLM v Commission, C‑490/15 P and C‑505/15 P, not published, EU:C:2016:678, paragraph 60 and the case-law cited).
It should also be noted that, in order to be able to impute the conduct of a subsidiary to the parent company, the Commission cannot merely find that the parent company is in a position to exercise decisive influence over the conduct of its subsidiary, but must also establish whether that influence was actually exercised (see judgments of 26 September 2013, EI du Pont de Nemours v Commission, C‑172/12 P, not published, EU:C:2013:601, paragraph 44 and the case-law cited; of 26 September 2013, The Dow Chemical Company v Commission, C‑179/12 P, not published, EU:C:2013:605, paragraph 55 and the case-law cited; and of 9 September 2015, Toshiba v Commission, T‑104/13, EU:T:2015:610, paragraph 95 and the case-law cited).
Having regard to the fact that, under Article 263 TFEU, the Court must confine itself to a review of the legality of the contested decision on the basis of the reasons set out in that decision, the question whether a parent company actually exercises management power over its subsidiary must be assessed solely by reference to the evidence assembled by the Commission in the decision which attributes liability for the infringement to the parent company. The only relevant question is therefore whether the infringement is or is not proved in the light of that evidence (see judgment of 9 September 2015, Toshiba v Commission, T‑104/13, EU:T:2015:610, paragraph 98 and the case-law cited).
In the contested decision, the Commission adopted its conclusion that the applicant exercised decisive influence over the interveners by relying, in its view, on objective factors relating to the economic, organisational and legal links between the applicant and the Prysmian group. Those objective factors, as described in recitals 758 to 781 of that decision, are, first, the power to appoint the members of the various boards of directors of Prysmian, second, the power to call shareholder meetings and to propose the revocation of directors or of entire boards of directors, third, the applicant’s actual level of representation on Prysmian’s board of directors, fourth, management powers of the applicant’s representatives on the board of directors, fifth, the important role played by the applicant on the committees established by Prysmian, sixth, the receipt of regular updates and monthly reports, seventh, the measures to ensure continuation of decisive control after the IPO date and, eighth, evidence of behaviour typical of an industrial owner.
It should be observed that, according to the Commission, the first six objective factors mentioned in paragraph 86 above show that the applicant exercised decisive influence both during the period preceding the IPO date and during the period following that date. By contrast, the last two factors relate exclusively to that latter period. In that context, even though, as regards the period preceding the IPO date, the Court has already held that the Commission correctly applied the presumption of actual exercise of decisive influence and that the applicant has not succeeded in rebutting that presumption, it is still necessary to examine all the factors relied on by the Commission in the contested decision, since they are also applicable to the period following that date.
It is therefore necessary to examine the merits of each factor on which the Commission relies, in the light of the arguments put forward by the applicant, and, in particular, to ascertain, in accordance with the case-law cited in paragraphs 81 to 85 above, whether those factors are capable as a whole of demonstrating both the applicant’s ability to exercise a decisive influence over the interveners’ market conduct and that that influence was actually exercised.
(1) The power to appoint the members of the various boards of directors of Prysmian and the power to call shareholder meetings and to propose the revocation of directors or of entire boards of directors
In recitals 758 to 760 of the contested decision, the Commission explains that the applicant had the power to appoint directors to Prysmian’s board of directors and that the applicant exercised that power throughout the entire infringement period. It adds that the applicant also had the power to call shareholder meetings and to propose, at those meetings, the revocation of directors or of the entire board of directors.
The applicant does not dispute the findings in the contested decision that it had the power to appoint the members of Prysmian’s board of directors and to call shareholder meetings and to revoke directors or the entire board of directors. Moreover, it does not dispute, as it confirmed at the hearing, the Commission’s findings regarding the specific composition of the various boards of directors of Prysmian during the infringement period. However, the applicant claims that those powers did not confer on it the ability to exercise actual control over the board or thus to influence, decisively, Prysmian’s commercial policy. In its view, the Commission has failed to prove that it exercised such actual control.
In the first place, as regards the applicant’s ability to exercise decisive influence over the interveners, it must be stated that the ability to decide upon the composition of the board of directors of a company constitutes an objective factor which determines, in itself, whether it is possible to control the decisions that may be adopted by that board and, therefore, by the company concerned. The board of directors constitutes, by definition, the body responsible for administering and representing the company. It is tasked, inter alia, with determining and monitoring the commercial policy of the company in question and with appointing that company’s management team. As regards, in particular, Prysmian, the Commission’s finding that the applicant had the power to appoint all the members who were to sit on the various boards of directors of that company, albeit indirectly, through the GSCP V Funds, supports the conclusion that the applicant had the ability to control those boards as well as the decisions that the boards were required to take in performing their duties.
In the second place, as regards the question whether the applicant actually exercised that control, it should be pointed out, in accordance with recital 759 of the contested decision and with the findings made in the examination of the first limb of this plea, that the applicant had complete control over the voting rights associated with Prysmian’s shares during the period prior to the IPO date and that it also had an absolute majority at shareholder meetings until November 2007. As it confirmed at the hearing, the applicant thus appointed all the members of the boards of directors both, first, of GSCP Athena Srl and GSCP Athena Energia Srl, on 9 and 11 May 2005, which became, in essence Prysmian and PrysmianCS respectively, and, subsequently, the boards of Prysmian, on 15 December 2005 and on 28 February 2007.
Moreover, it should be pointed out, as the Commission observes in recital 759 of the contested decision, that the board of directors appointed on 28 February 2007, that is to say before the IPO date, was appointed until 31 December 2009 and remained unchanged, after the IPO date, until the date on which the infringement ceased. Although, during that period, the applicant no longer had absolute control over the voting rights associated with Prysmian’s shares, the fact that that board continued to have the same composition is evidence that the applicant continued to exercise control over the board of directors.
The foregoing assessments are, moreover, supported by the Commission’s finding, which is not challenged by the applicant, that the applicant also had the power to call shareholder meetings and to propose the revocation of directors, or even the entire board of directors. That power highlights the applicant’s ability to exercise control over the successive boards of directors of Prysmian and over the decisions that those boards might adopt. It is true, as the applicant asserts, that the only occasion established by the Commission on which the applicant revoked the appointment of the members of Prysmian’s board of directors was, according to recital 760 of the contested decision, on 9 April 2009, that is to say, after the infringement period. However, as the Commission observes, nothing prevents facts and matters arising after the formal end date of an infringement from being taken into account as indicia, on account of their relevance, in order to assess facts and matters that occurred during the infringement period. In addition, it should be pointed out that the applicant had the same powers throughout the entire infringement period.
It follows that the Commission was entitled to rely on the applicant’s power to appoint directors to Prysmian’s board of directors and on its power to propose their revocation as objective factors to show that the applicant had the ability to, and did in fact, control that board.
The applicant disputes however that its powers to appoint directors to Prysmian’s board of directors and to propose their revocation constitute objective factors in order to show that it in fact controlled that board. First, it claims that the Commission was in addition required to demonstrate how specifically the applicant had exercised such control over the members of Prysmian’s boards of directors. It relies, in that regard, on the judgment of 6 March 2012, FLS Plast v Commission (T‑64/06, not published, EU:T:2012:102).
It should be recalled that the judgment of 6 March 2012, FLS Plast v Commission (T‑64/06, not published, EU:T:2012:102), by which the Court annulled in part the decision at issue, concerned a parent company which held 60% of the shares of the subsidiary, the remaining 40% belonging to a third company. The Court found that exercise of control by the parent company could not be presumed since, with a 40% shareholding, the third company was also able to exercise influence over the conduct of the subsidiary. The Commission was therefore still required to show that it was the applicant in question which exercised decisive influence unilaterally. Moreover, the Court found that the Commission had not provided any explanation concerning the power of the representatives of the parent company within the subsidiary’s board of directors, so that it had not been established that those representatives had the power to actually control the board as a whole during part of the infringement period (judgment of 6 March 2012, FLS Plast v Commission, T‑64/06, not published, EU:T:2012:102, paragraphs 39 and 43).
Thus, the facts of the case which gave rise to the judgment of 6 March 2012, FLS Plast v Commission (T‑64/06, not published, EU:T:2012:102), differ from those of the present case, in which the applicant was able to exercise all the voting rights associated with Prysmian’s shares during the period preceding the IPO date and, even after that date, there was, as the applicant confirmed at the hearing, no other shareholder with a significant shareholding who could also influence the conduct of the subsidiary. Consequently, the applicant cannot reasonably rely on that judgment to claim that the Commission was in addition required to demonstrate how specifically the applicant had exercised such control over the members of Prysmian’s boards of directors.
Second, the applicant submits that the directors on Prysmian’s first board of directors, of 15 December 2005, were in fact appointed by Mr B., who, at that time, was the Chief Executive Officer (CEO) of Pirelli Cavi e Sistemi Energia and who subsequently became the CEO of Prysmian.
However, as both the Commission and the interveners observe, it must be stated that that claim is not substantiated by any evidence put forward by the applicant, in particular by the email relied on, of 20 February 2007, and must therefore be rejected. Moreover, even if Mr B. did indeed propose candidates for Prysmian’s board of directors, the applicant cannot claim that it was Mr B., and not itself, who selected and appointed those candidates. Lastly, even if the applicant submits that the fact that Mr B. was the CEO of Pirelli Cavi e Sistemi Energia before it was acquired by the GSCP V Funds shows that Prysmian acted independently on the market in accordance with its management’s instructions, it should be pointed out that, as is apparent from recital 781 of the contested decision, Mr B. was the only member of Prysmian’s board of directors who was employed by Pirelli Cavi e Sistemi Energia before the latter was acquired by the GSCP V Funds. In accordance with the case-law, the fact that, when acquiring a company, a company replaces some of the directors constitutes evidence that the acquiring company in fact exercises decisive influence over the conduct of the company that has been acquired (see, to that effect, judgment of 16 September 2013, CEPSA v Commission, T‑497/07, not published, EU:T:2013:438, paragraph 176).
Third, the applicant states that meetings of Prysmian’s board of directors took place on a quarterly basis only, which, in the applicant’s submission, confirms that it was the management team that controlled the management of that company, rather than its board of directors. However, such a claim, relating to the regularity or frequency of the meetings of the board of directors, is incapable of calling in question the fact that the board of directors is the body which decides on the composition and duties of the management team in performing its duties. Moreover, the applicant does not adduce any specific evidence capable of proving that the management, in particular Mr B. as CEO, was absolutely independent from that board in the daily management of the company, as the applicant claims. Consequently, the applicant’s claim must be rejected as unfounded.
In view of the foregoing, it must be held that the power to appoint the members of the board of directors and the power to call general shareholder meetings and to propose the revocation of directors constitute objective factors showing that the applicant was in a position to, and did in fact, exercise decisive influence over the interveners.
(2) The applicant’s actual level of representation on Prysmian’s board of directors
In recitals 761 and 762 of the contested decision, the Commission states that the applicant ensured that it was directly represented on each of Prysmian’s boards of directors, by appointing directors with whom it had links [confidential]. According to the Commission, those directors always represented at least 50% of the various boards of directors of Prysmian. It adds that, in certain cases, directors linked to the applicant had casting votes, which enabled the applicant to maintain actual control over the board’s decisions.
The applicant disputes that assertion by submitting, first, that the directors whom the Commission identified as its employees were, in fact, PIA Employee Directors and that they were employed by a company ‘affiliated’ to the applicant, namely GS Services Ltd. It then claims that the other board directors were independent directors, and that the Commission has failed to show that they breached their independence or fiduciary duties. Lastly, the applicant states that, contrary to the Commission’s finding in that decision, it was never represented by at least 50% of the members of Prysmian’s board of directors.
However, the applicant’s arguments in that regard cannot be upheld. It must be held that the directors whom the applicant calls ‘PIA Employee Directors’, employed by GS Services, were also employees of the applicant, since, as the Commission explains [confidential].
Moreover, as regards the Commission’s finding that, throughout the entire infringement period, the applicant had links with at least 50% of the directors of the successive boards of directors of Prysmian, it is true, as the applicant states, that the highest degree of representation of the PIA Employee Directors on those boards was 43% before the IPO date and approximately 33% after that date. However, the fact remains that, in recitals 761 and 762 of the contested decision, and in the respective footnotes to those recitals, the Commission puts forward evidence which shows — and the applicant has not succeeded in proving the contrary — that the applicant also had links with other members of the boards of directors of Prysmian, in particular through [confidential].
In that regard, it should be borne in mind that the Court has held that the existence of an economic entity formed by the parent company and its subsidiary may be based not only on the formal relationship between the two, but also on informal relationships, consisting inter alia of mere personal links between the legal entities comprising such an economic unit (see, to that effect, judgment of 11 July 2013, Commission v Stichting Administratiekantoor Portielje, C‑440/11 P, EU:C:2013:514, paragraph 68).
Accordingly, when account is taken of both the PIA Employee Directors and the directors with whom the applicant had other types of links, in particular through [confidential], the Commission’s conclusion that the applicant made sure that it was represented by at least 50% of the members of the board of directors during the entire period concerned is well founded. In addition, even though the applicant claims that the directors with whom the applicant had other types of links acted as independent directors, it must be stated that, as is apparent from the applicant’s reply to the Commission’s request for information of 13 March 2013, annexed to the application, such a status is based solely on an assessment made by Prysmian’s own board of directors. The mere fact that that board of directors has evaluated some of its directors as independent, or that it published such an evaluation in its corporate governance reports, as the applicant claims, is not, in itself, capable of calling into question the Commission’s finding that those directors did not in fact cease to have links with the applicant.
It follows that the Commission was entitled to rely, as an objective factor, on the applicant’s actual level of representation on Prysmian’s board of directors in order to show that it was in a position to, and did in fact, exercise decisive influence over the interveners.
(3) Management powers of the applicant’s representatives on the board of directors
In recital 763 of the contested decision, the Commission explains that the applicant also made sure that its representatives on the board of directors were vested with the broadest possible management powers. In particular, the Commission observes, first, that on 15 December 2005 and 16 May 2007, four PIA Employee Directors were appointed as ‘Managing Directors’ of Prysmian, which conferred on them delegated powers relating to the ordinary management of that company, including the signature of day-to-day management acts. Second, the Commission states that, even though, on 16 January 2007, in preparation for the initial public offering, the managing directors’ powers were revoked, two PIA Employee Directors were subsequently assigned to a ‘Strategic Committee’, composed of a total of three members. The Commission acknowledges that that committee had no voting or veto powers, but states that it had a central role in supporting the board of directors in relation to Prysmian’s key strategic and business matters. Lastly, the Commission observes that that committee was dissolved in May 2010, just after the applicant’s complete disposal of its shareholding in Prysmian.
The applicant disputes those assertions of the Commission. It claims that an unbiased review of the evidence relied on in support of those assertions demonstrates that the PIA Employee Directors did not play any role in Prysmian’s commercial policy before the IPO date. Moreover, it claims that the strategic committee did not play a central role in Prysmian’s commercial policy and that it acted merely as an advisory body. The applicant’s submission contains no evidence to show that the PIA Employee Directors exercised, by their membership of that committee, a decisive influence over Prysmian’s commercial policy.
As regards the applicant’s first claim, relating to the period preceding the IPO date, it must be stated, first of all, that the evidence relied on by the Commission in the contested decision, in particular in footnotes 1142 to 1145, demonstrates clearly and unequivocally that three out of four of the persons appointed as Prysmian’s managing directors were PIA Employee Directors.
Next, it is apparent from the annexes to the application that, pursuant to the powers delegated thereto, the PIA Employee Directors were involved in the day-to-day management of Prysmian. In particular, they decided, inter alia, on a request for permission to open a branch in Qatar, on appointments to the boards of directors of Prysmian’s subsidiaries and on Prysmian’s employment issues.
Accordingly, the applicant’s claim that the PIA Employee Directors played no role in the business life of Prysmian before the IPO date must be rejected. Moreover, even though the applicant asserts that, in most cases, the decisions in question had already been taken by Prysmian’s management, it is sufficient to recall that, in accordance with the case-law, the fact that the parent company or its representatives must approve those proposals and therefore has the right to reject them is, in fact, evidence of a decisive influence (judgment of 13 December 2013, HSE v Commission, T‑399/09, not published, EU:T:2013:647, paragraph 84).
As regards the applicant’s second claim, relating to the period following the IPO date and, in particular, the strategic committee, it should be pointed out, first, that the applicant does not dispute that that committee was in fact composed of three members, two of whom were PIA Employee Directors. As regards its duties, it is apparent from the annexes to the application that that committee was formally tasked with examining Prysmian’s budgets and investments, securing its financing and assisting the board of directors in its duties. More specifically, the agenda of its meeting of 16 July 2008 shows that it examined matters of commercial strategy, including investments in Brazil, China, Tunisia, Italy and Russia.
Consequently, even though the strategic committee did not have decision-making powers, as the Commission itself acknowledges in the contested decision, that does not mean, as the applicant claims, that it had no role in the context of Prysmian’s strategic decision-making process.
Next, the applicant submits, nevertheless, that, within the strategic committee, the PIA Employee Directors provided only limited advice by short emails in connection with their experience as investment professionals — and always at the initiative and request of management. However, as the Commission states, those emails constitute evidence that the PIA Employee Directors were systematically contacted regarding strategic decisions, including on potential investments, and that they were actively involved in decisions pertaining to Prysmian’s commercial policy.
Lastly, although the applicant states that it was Mr B., as CEO of Prysmian, and his management team who determined the composition of the strategic committee, it is sufficient to point out that such a claim is not substantiated by the email of 20 February 2007 on which it relies.
It follows that the Commission was entitled to find that, first, the management powers of the PIA Employee Directors within Prysmian’s board of directors, during the period until the IPO date, and subsequently their role within the strategic committee, from that date onwards, constitute additional objective factors capable of showing that the applicant had the ability to, and did in fact, exercise decisive influence over the interveners throughout the entire infringement period.
(4) The important role played by the applicant on the committees established by Prysmian
In recital 764 of the contested decision, the Commission states that the PIA Employee Directors also had an important role on other Prysmian committees established on 15 December 2005, namely the compensation committee and the internal control committee. According to the Commission, the former dealt inter alia with questions of remuneration and, until 28 February 2007, two out of three of its members were PIA Employee Directors; the latter dealt with questions of compliance with the rules in force, in particular in relation to accounting documents, and one of its two members was a PIA Employee Director.
The applicant acknowledges that PIA Employee Directors participated in those committees, but submits that that does not prove that it exercised decisive influence over Prysmian. In addition, the applicant states that, after 28 February 2007, only one PIA Employee Director participated in those committees, specifically in the compensation committee.
As regards the compensation committee, it should be noted that, contrary to the applicant’s submission, in so far as that committee may determine the compensation of the subsidiary’s management, the fact that the PIA Employee Directors formed a majority on that committee, as was the case in respect of the period before the IPO date, is indeed capable of showing that the parent company exercised decisive influence over its subsidiary. However, the Commission cannot use that factor as evidence of decisive influence for the period after that date, since only one of the three members of the committee was a PIA Employee Director.
The Commission’s line of argument is also unfounded in relation to the internal control committee. In so far as, in the present case, that committee performed only tasks such as the review and verification of internal accounting documents and assistance in drawing up balance sheets, it cannot be concluded that that committee enabled the applicant to control the commercial policy of its subsidiary. In addition, it should be pointed out that, as is apparent from recital 764 of the contested decision, no PIA Employee Director sat on that committee after 28 February 2007, so that that circumstance cannot, in any event, provide a basis for a finding that the applicant exercised decisive influence for the period following the IPO date.
It follows that the Commission was not entitled to take into account the PIA Employee Directors’ participation in the compensation and internal control committees as objective factors capable of showing that the applicant was able to, and did in fact, exercise decisive influence over the interveners throughout the entire infringement period.
(5) Receipt of regular updates and monthly reports
In recital 765 of the contested decision, the Commission refers to the receipt of regular updates and monthly reports by PIA Employee Directors throughout the infringement period.
In the applicant’s view, those reports are not relevant to the assessment of whether it exercised decisive influence over the interveners, as they were not produced for the applicant, but were designed to report on the performance of the business to a broad audience. Moreover, the applicant submits that the sole purpose of the reports was to enable the PIA Employee Directors to take cognisance of the investment in Prysmian and did not require any input on their part.
As the Commission observes, the case-law of the Court has already established that the supervisory board of a subsidiary, the majority of whose members were appointed by a parent company, can keep itself regularly informed of developments in that subsidiary’s business by way of reports (see, to that effect, judgment of 13 December 2013, HSE v Commission, T‑399/09, not published, EU:T:2013:647, paragraph 93). Accordingly, the applicant’s claim to the contrary must be rejected.
Moreover, by the monthly reports in question, the PIA Employee Directors were kept regularly informed of developments in Prysmian’s business. As is apparent from the examples cited in footnote 1157 of the contested decision, they received information regarding that company’s power cable business, covering the topics of finances, energy, telecoms, operations, human resources, logistics, purchasing and product development and quality.
Thus, in view also of the applicant’s power to appoint the members of the various boards of directors of Prysmian and of the delegated powers enjoyed by the PIA Employee Directors, in accordance with the considerations set out in paragraphs 110 to 119 above, the receipt of regular updates and monthly reports constitutes an additional factor illustrating that the applicant was regularly informed of the commercial strategy of its subsidiary, which supports the existence of an economic unit between them.
(6) The measures to ensure continuation of decisive control after the IPO date
In recitals 766 to 770 of the contested decision, the Commission asserts that the applicant took measures in order to guarantee that, even after the initial public offering, it would be in a position to exercise decisive control over Prysmian. According to the Commission, this involved the following four measures:
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first of all, on 28 February 2007, in its capacity as sole indirect shareholder, the applicant appointed the board of directors that governed Prysmian until 9 April 2009. In so doing, the applicant was able to avoid a new board of directors being put in place directly after the initial public offering in May 2007:
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next, at Prysmian’s shareholder meeting of 16 January 2007, the applicant changed its by-laws introducing inter alia a slate system for the nomination and appointment of new boards of directors (the Commission explains that the applicant was in a position to nominate at least five of the six directors in the future and thus to keep control over Prysmian despite having a smaller shareholding):
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moreover, on 12 November 2007, 9.9% of Prysmian’s shares were sold to Taihan Electric Wire. In a letter dated 6 November 2007, Taihan Electric Wire committed to Prysmian not to hold an investment of more than 10% overall in Prysmian’s share capital, not to exercise voting rights at Prysmian’s shareholders’ meetings, including through other companies in the Taihan Group, for more than 10% of the shares with voting rights and not to propose any candidate for appointment to the position of director or statutory auditor of Prysmian (according to the Commission, these commitments guaranteed the applicant that Prysmian’s second largest shareholder would be unable to present a slate or nominate any representatives to Prysmian’s board of directors):
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lastly, there are express references to the applicant’s controlling interest after the initial public offering, in particular in the minutes of the meeting of the board of directors of 19 December 2007.
The applicant submits that the Commission has nevertheless failed to show that the applicant formed an economic unit with the interveners within the meaning of the case-law during the period subsequent to the IPO date. First, the applicant submits that the Commission erred in law in so far as it applied parental liability to a level of shareholding which is unprecedented. The applicant then states that the appointment of Prysmian’s board of directors in February 2007 did not secure for the applicant any position of control of Prysmian. Moreover, it states that the implementation of a slate system was in preparation for the initial public offering. In addition, in the applicant’s submission, the investment of Taihan Electric Wire cannot be discounted.
In that regard, first, it is necessary to reject the applicant’s claim that the Commission was wrong to find it jointly and severally liable for payment of the fine imposed on its subsidiaries in respect of a level of shareholding which is, in the applicant’s view, unprecedented. It is sufficient to recall that, according to the case-law, a minority interest may enable a parent company actually to exercise a decisive influence on its subsidiary’s market conduct, if it is allied to rights which are greater than those normally granted to minority shareholders in order to protect their financial interests and which, when considered in the light of a set of consistent legal or economic indicia, are such as to show that a decisive influence is exercised over the subsidiary’s market conduct (judgments of 12 July 2011, Fuji Electric v Commission, T‑132/07, EU:T:2011:344, paragraph 183, and of 9 September 2015, Toshiba v Commission, T‑104/13, EU:T:2015:610, paragraph 97).
Second, with respect to the applicant’s argument that the appointment of the board of directors on 28 February 2007 did not secure any position of control for it, it should be recalled that, as was stated at paragraph 93 above, the board of directors appointed on that date, that is to say before the IPO date, was appointed until 31 December 2009 and it remained unchanged after the IPO date and even after the date on which the infringement ceased. Although, during that period, the applicant no longer had absolute control of the voting rights associated with Prysmian’s shares, the fact that that board continued to have the same composition is evidence that the applicant continued to exercise control over the board of directors after the initial public offering.
Third, as regards the applicant’s claim relating to the slate system, according to which that system was required by the obligations of the Code of Conduct for listed companies, it should be pointed out that the applicant does not challenge the Commission’s conclusion that that system enabled to it ensure, with a smaller shareholding, that it was in a position to nominate at least five of the six directors on Prysmian’s board of directors. Since it is irrelevant whether the system stems from an initiative of the applicant or from a legal requirement arising from the legislation in force, the Commission’s conclusion that that system enabled the applicant to maintain its control over Prysmian’s board of directors after the initial public offering must be upheld. Moreover, even if that system was not used by the applicant during the infringement period, it was not necessary given that, as has already been stated, the board of directors appointed by the applicant on 28 February 2007 remained in place until after the date on which the infringement ceased.
Fourth, as regards the investment of Taihan Electric Wire, made on 12 November 2007, whilst the applicant claims that it did not prevent that company from exercising its rights, the commitment not to propose candidates for the board of directors, which is apparent from clause 2 of the letter of 6 November 2007, annexed to the application, was intended to ensure that that company could not intervene in the process of composing the board of directors. Moreover, contrary to what the applicant claims, that commitment was not conditional on Taihan Electric Wire increasing its shareholding in Prysmian to more than 10%. Accordingly, the Commission was correct to take the view that that commitment resulted in the applicant maintaining control over Prysmian’s board of directors inasmuch as the company’s second largest shareholder relinquished influence over the composition of that board.
Fifth, as regards the express reference to the applicant’s control which emerges, according to the Commission, from the minutes of the meeting of the board of directors of 19 December 2007, it is sufficient to note that that document shows that one of the PIA Employee Directors stated, when assessing the divestment to Taihan Electric Wire, that it was not ‘[confidential]’. Moreover, even though the applicant challenges the probative value of that document, it consists of formal minutes which, as such, are supposed to reproduce the comments that the participants in that board meeting wished to have placed on record, and the applicant has submitted no evidence capable of demonstrating the contrary.
It follows that the Commission correctly established the existence of four measures showing that the applicant maintained control of Prysmian after the IPO date, that is to say, after it no longer held the majority of the voting rights associated with the shares in that company.
(7) Evidence of behaviour typical of an industrial owner
In recital 771 of the contested decision, the Commission states that it is clear from the evidence that even at the end of 2007, at a time when the applicant indirectly held 31.69% of Prysmian’s shares, the applicant favoured, just like an industrial owner, cross-selling between Prysmian and other subsidiaries of the applicant. In footnote 1165 of that decision, it refers to an email exchange between Mr O. and Mr B. on 20 December 2007, to an email from Mr O. of 2 January 2008 and to an email from Mr S. of 30 January 2008.
The applicant disputes the Commission’s assertions by submitting that, by the emails in question, Mr O., as a PIA Employee Director, merely pointed out potential business opportunities for Prysmian, and provided the name of a person to contact at a Norwegian company. In the applicant’s submission, the Commission is wrong to assert that those emails concerned intra-group cross-selling and has failed to show that the exchange of correspondence gave rise to subsequent contact or that that exchange reveals that there was pressure on Prysmian to pursue those opportunities.
As regards the content of the emails in question, it is apparent from the annexes to the defence that, by the emails in question, Mr O. approached Prysmian to inform it that the applicant had recently acquired a company offering television services in Norway and to propose his services for the purposes of establishing contacts with that company for the sale of power cables. Mr O. proposed to proceed in the same manner in relation to a company held by the applicant in the United States.
Contrary to the applicant’s submission, the emails in question show that the undertakings operating on the market considered it appropriate to approach the applicant rather than the Prysmian group directly in relation to the possible sale of power cables, which reveals its status as an interlocutor in relation to that group. Even if, as the applicant claims, those emails do not reveal either an instruction by the applicant to establish contacts or a systematic practice, the Commission did not err in including them in its analysis as a factor capable of demonstrating the applicant’s involvement in Prysmian’s business.
Accordingly, the Commission was entitled to rely on the exchange of emails in question, in particular those exchanged between Mr O. and Mr B. on 20 December 2007, as a factor to show that the applicant exercised decisive influence over Prysmian.
(8) The assessment of all the factors relied on in the contested decision
It is apparent from paragraphs 89 to 142 above that the Commission was entitled to base its conclusion that the applicant exercised decisive influence over the interveners on, first, its power to appoint the members of the various boards of directors of Prysmian, second, its power to call shareholder meetings and to propose the revocation of directors or of entire boards of directors, third, the delegated powers of the PIA Employee Directors on the boards of directors and their participation in the strategic committee, fourth, the receipt of regular updates and monthly reports, fifth, the measures listed by the Commission to ensure continuation of decisive control by the applicant after the initial public offering and, sixth, the evidence that the applicant acted as an industrial owner. Accordingly, it must be held, following an in-depth review, that the Commission was entitled to consider, without making any error, that the applicant exercised decisive influence not only before the IPO date but also during the entire period from 29 July 2005 until 28 January 2009.
The second limb of the first plea must therefore be rejected.
(c)
The third limb, relating to the Commission’s conclusion that the applicant was not a pure financial investor
The applicant maintains that the Commission made a manifest error of assessment in finding that the investment in the Prysmian group made by the GSCP V Funds was not the investment of a pure financial investor. It alleges that those funds’ acquisition of Prysmian was undertaken by professional shareholders, not by managers or strategists. Consequently, no parental liability can be attributed to it.
In particular, the applicant observes that the GSCP V Funds did not have the expertise or resources to determine the conduct on the market of the Prysmian group, that the management of portfolio companies does not fall within the mandate of the PIA, which created those funds, that Prysmian’s existing management team (put in place by the former owner of the company) continued to direct business activities, that the PIA Employee Directors were investment professionals whose role was simply to monitor investments, that there was no incentive for it to control Prysmian, as is demonstrated by the divestments it made shortly after the acquisition, and that the Prysmian group was not perceived externally as being part of the group of which the applicant is the parent company and was not included in that group for accounting purposes.
In addition, the applicant argues that, contrary to what the Commission stated in the contested decision, the measures which it took with regard to the Prysmian group were not identical to those which a holding company adopts with regard to an industrial group.
Lastly, the applicant takes issue with the Commission’s conclusion that the economic advantage which it derived from its investment enabled the Commission to prove that it was not a financial investor.
The Commission and the interveners dispute those arguments.
By the third limb of its first plea, the applicant disputes in particular the Commission’s findings in recitals 773 to 781 of the contested decision, in which the Commission responds to the arguments that the applicant put forward during the administrative procedure in order to establish that its conduct vis-à-vis the Prysmian group was that of a pure financial investor.
According to the case-law, the imputation to the parent company of liability for the infringement committed by its subsidiary is not applicable to pure financial investors, namely the case of an investor who holds shares in a company in order to make a profit, but who refrains from any involvement in its management and in its control (see, to that effect, judgment of 12 December 2012, 1. garantovaná v Commission, T‑392/09, not published, EU:T:2012:674, paragraphs 50 to 52). However, ‘pure financial investor’ does not constitute a legal criterion but is an example of a circumstance in which it is open to a parent company to rebut the presumption of actual exercise of decisive influence (see, to that effect, Opinion of Advocate General Kokott in Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:262, point 75).
As regards, first of all, the applicant’s claims (i) that the GSCP V Funds did not have the expertise or resources to determine the conduct on the market of the Prysmian group, and (ii) that the management of subsidiaries did not fall within the mandate of the PIA, those matters are irrelevant for the purposes of finding whether decisive influence was actually exercised. Moreover, those claims are contradicted by the objective factors and the indicia which were established as well founded in paragraph 143 above. As the Commission observes, the contested decision does not find that the applicant was involved in Prysmian’s commercial management, but that it exercised decisive influence over that company’s business decisions. In accordance with settled case-law, it is unnecessary to restrict the assessment of the exercise of decisive influence to matters relating solely to the subsidiary’s commercial policy on the market stricto sensu (see, to that effect, judgment of 15 July 2015, HIT Groep v Commission, T‑436/10, EU:T:2015:514, paragraph 127 and the case-law cited).
As regards, next, the applicant’s claim that the PIA Employee Directors who sat on the various boards of directors of Prysmian did not have the qualifications or expertise to manage that company’s business, it must be held, again, that such a circumstance is irrelevant for the purposes of finding that a parent company did not exercise decisive influence over its subsidiary. In any event, it is incapable of calling in question the fact that those employee directors were involved in Prysmian’s commercial policy in so far as, as was found in paragraphs 105 and 119 above, they sat on the boards of directors of that company and on its strategic committee and held delegated management powers.
With respect, moreover, to the applicant’s claim that it had no interest in controlling Prysmian, it is also contradicted, inter alia, by the fact that it appointed all the boards of directors of that company during the infringement period and that its appointees sat on the company’s strategic committee after the initial public offering. That claim is also clearly contradicted by the statement of the PIA Employee Director examined in paragraph 136 above.
As regards, lastly, the applicant’s claim that the Prysmian group was not perceived externally as being part of the group of which the applicant is the parent company and was not included in that group for accounting purposes, it must be rejected since it is incapable of rebutting the factors and indicia raised by the Commission in establishing the existence of decisive influence.
It is apparent from the foregoing that, contrary to what the applicant claims, it has not succeeded in showing that its shareholding in the Prysmian group was intended solely as a pure financial investment and that it refrained from any involvement in the management and control of that company.
The third limb of the first plea must therefore be rejected as must, therefore, that plea in its entirety.
2.
The second plea in law, alleging infringement of Article 2 of Regulation No 1/2003, insufficiency of the evidence and breach of the duty to state reasons laid down in Article 296 TFEU
The applicant maintains that the Commission infringed Article 2 of Regulation No 1/2003 and breached its duty to state reasons as provided for in Article 296 TFEU, in that it failed properly to consider the relationship between it and the interveners when finding that the applicant was jointly and severally liable for payment of the fine imposed on its subsidiaries.
The applicant divides the second plea into two limbs. In the first limb, it submits that the evidence the Commission relied on when finding that it was jointly and severally liable for payment of the fine imposed on its subsidiaries is biased and comes from unsubstantiated statements submitted by the interveners in the administrative procedure. In the second limb, it submits that the Commission has failed to state adequate reasons.
(a)
The first limb, alleging infringement of Article 2 of Regulation No 1/2003 and insufficiency of the evidence
The applicant criticises the Commission for basing its conclusions as to its joint and several liability for payment of the fine on mere statements made by the interveners, even though those statements were not, it alleges, precise, consistent or reliable.
In particular, the applicant argues that the statements made by the interveners are unsupported by evidence and that the Commission accepted those statements uncritically. It also observes that the Commission deliberately ignored the evidence which it provided in order to counter the information provided by the interveners. Moreover, the applicant maintains that the statements of the interveners on which the Commission relied are inconsistent with statements which they had made earlier and with evidence provided to the Commission before the statement of objections was issued. The Commission thus breached its duty to consider carefully and impartially the documents furnished by the interveners.
The Commission and the interveners dispute those arguments.
The applicant submits that the conclusions as to its joint and several liability for payment of the fine imposed on its subsidiaries which are set out in the contested decision are not based on sufficient and reliable evidence. In essence, it reiterates in this respect most of the arguments put forward in the first plea: those arguments must be rejected for the same reasons as those set out in the context of that plea.
In the first place, the applicant asserts that the Commission copied and pasted, without critical examination, the interveners’ statements regarding its power to appoint Prysmian’s board of directors, the PIA Employee Directors’ participation in the strategic committee, its behaviour as an industrial owner and the delegated powers enjoyed by the PIA Employee Directors.
As regards, first of all, the power to appoint boards of directors, it should be pointed out that the Commission’s conclusions are based not only on Prysmian’s statements, but also on the information provided by the applicant and on the company’s by-laws, as is apparent from recital 762 of the contested decision and from footnotes 1138 to 1141 of that decision. Moreover, although the applicant claims, again, that the first board of directors was selected by Mr B., as Prysmian’s CEO, and not by the applicant itself, it must be stated that, as was found in paragraph 100 above, that claim is not substantiated by any evidence submitted by the applicant.
As regards, next, the applicant’s participation in the strategic committee, it is apparent from recital 763 and from footnotes 1148 to 1153 of the contested decision that the Commission based its conclusions on the email exchanges between the PIA Employee Directors and the CEO of Prysmian, and on the agenda of the meetings of that committee and the minutes of the board meetings. Therefore, the Commission did not rely exclusively on the interveners’ statements as the basis for its conclusions with regard to that committee, as the applicant claims. Moreover, as was stated in paragraph 115 above, the agenda of the meeting of that committee of 16 July 2008 shows that it examined matters of commercial strategy, including investments in Brazil, China, Tunisia, Italy and Russia, which contradicts the applicant’s assertion that the relevant committee had no role in the context of Prysmian’s strategic decision-making process.
Moreover, the conclusion that the applicant favoured intra-group cross-selling is based, as recital 771 of the contested decision explains, on the emails exchanged between Mr O. and Mr B. on 20 December 2007, on an email from Mr O. of 2 January 2008 and on an email from Mr S. of 30 January 2008. The claim that that finding is based solely on the interveners’ statements must therefore be rejected.
As regards, lastly, the delegated powers of the PIA Employee Directors, it is apparent from paragraphs 112 to 114 above that the evidence relied on by the Commission in the contested decision, in particular in footnotes 1142 to 1145 of that decision, consists of the minutes of the meeting of Prysmian’s board of directors of 15 December 2005. Contrary to what the applicant observes, the Commission did not thus merely base its conclusions on the interveners’ statements. As to the remainder, the Commission’s assertions are confirmed by the annexes to the application, which show that, pursuant to the powers delegated to those Managing Directors, the PIA Employee Directors were involved in the day-to-day management of Prysmian. In particular, they decided, inter alia, on a request for permission to open a branch in Qatar, on appointments to the boards of subsidiaries and on employment issues.
It is apparent from the foregoing that, contrary to the applicant’s submission, the findings made by the Commission are not based exclusively on statements made by the interveners.
In the second place, in so far as the applicant claims that the interveners’ statements are contradictory and that the Commission ignored the evidence which it provided during the administrative procedure, it is sufficient to note that it does not identify precisely what those statements or items of evidence are, so that its claims to that effect must be rejected.
The first limb of the second plea must therefore be rejected.
(b)
The second limb, alleging breach of the duty to state reasons
The applicant submits that the Commission breached its duty to state reasons under Article 296 TFEU. In particular, it criticises the Commission for omitting the detailed information which it provided during the administrative procedure and for failing to support its conclusions adequately, in particular in so far as concerns the application of the presumption of the actual exercise of decisive influence with regard to the period preceding the IPO date, the Commission’s finding that the applicant exerted a decisive influence on the Prysmian group throughout the period of the infringement, and its own argument that the role which it played within Prysmian was that of a pure financial investor.
The Commission and the interveners dispute those claims.
Article 296 TFEU requires all legal acts, including decisions, to state the reasons on which they are based.
According to settled case-law, the statement of reasons required under Article 296 TFEU must be appropriate to the measure in question and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure, in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to carry out its review (see judgment of 29 September 2011, Elf Aquitaine v Commission, C‑521/09 P, EU:C:2011:620, paragraph 147 and the case-law cited).
Thus, it is settled case-law that the purpose of the obligation to state the reasons on which an individual decision is based is, in addition to permitting review by the Courts, to provide the person concerned with sufficient information to know whether the decision may be vitiated by an error enabling its validity to be challenged. It should be borne in mind, however, that the obligation laid down in Article 296 TFEU to state adequate reasons is an essential procedural requirement that must be distinguished from the question whether the reasoning is well founded, which goes to the substantive legality of the measure at issue (see judgment of 29 September 2011, Elf Aquitaine v Commission, C‑521/09 P, EU:C:2011:620, paragraphs 146 and 148 and the case-law cited). Claims and arguments intended to deny that the measure is well founded are thus of no effect in the context of a plea alleging the lack or inadequacy of a statement of reasons (see, to that effect, judgments of 22 March 2001, France v Commission, C‑17/99, EU:C:2001:178, paragraphs 35 to 38, and of 15 June 2005, Corsica Ferries France v Commission, T‑349/03, EU:T:2005:221, paragraphs 52 and 59).
In the present case, contrary to the applicant’s submission, the reasoning of the contested decision is sufficient for the purposes of enabling it to know the reasons which led the Commission to hold it jointly and severally liable for payment of the fine imposed on its subsidiaries for its direct participation in the cartel in question and for the purposes of enabling the Court to carry out its review.
As regards, first of all, the decision to apply the presumption of actual exercise of decisive influence for the period preceding the IPO date, it is apparent from recitals 748 to 754 of the contested decision that the Commission explained that the fact that the applicant indirectly controlled all the voting rights associated with Prysmian’s shares placed it in a similar situation to that of a sole owner of Prysmian. Moreover, the Commission explained, in particular in recitals 751 to 753 of that decision, that the investments made by Apollo and by Prysmian’s management were purely passive and moreover implied relinquishment of the exercise of the voting rights associated with Prysmian’s shares to the applicant. On that basis, the Commission found, in the light of the case-law cited in recitals 697 to 702 of that decision, that it was entitled to hold the applicant jointly and severally liable for payment of the fine imposed on its subsidiaries.
As regards, next, the finding that the applicant exercised decisive influence over the interveners for the period between 29 July 2005 and 28 January 2009, the Commission explained its conclusion that the applicant exercised such influence by relying, in accordance with the case-law, on objective factors relating to the economic, organisational and legal links between the applicant and the interveners. Those factors were described individually and in detail in recitals 758 to 771 of the contested decision and were weighed up as a whole in recitals 772 to 781 of that decision. Moreover, the Commission replied to the main arguments put forward by the applicant in the context of that final weighing up, in particular in recitals 773 to 778 of that decision. Lastly, it should be pointed out that, contrary to what the applicant claims, the Commission’s explanations concerned not only the period preceding the IPO date but also the period following that date, as the measures examined in recitals 766 to 770 of that decision show.
As regards, lastly, the conclusion that the applicant did not behave, vis-à-vis the Prysmian group, like a pure financial investor, the Commission provides the applicant with a clear answer, in particular in recital 779 of the contested decision, in which it states that the exercise of voting rights regarding strategic decisions for the business conduct of the subsidiary, such as the appointment of top management and the approval of business and management plans, is evidence of a clear exercise of decisive influence rather than a purely temporary financial investment.
It follows that the Commission fulfilled its duty to state reasons under Article 296 TFEU, both as regards the application of the presumption of actual exercise of decisive influence and as regards the finding that the applicant exercised decisive influence over the interveners throughout the entire infringement period. It also explained why the applicant could not be regarded as a pure financial investor vis-à-vis the Prysmian group.
The second limb of the second plea must therefore be rejected, as must that plea in its entirety.
3.
The third plea in law, alleging infringement of Article 101 TFEU and Article 23(2) of Regulation No 1/2003, as well as breach of the principles of personal responsibility and of the presumption of innocence
The applicant argues that the contested decision infringes its fundamental rights.
In particular, the applicant submits that the presumption of the actual exercise of decisive influence which the Commission applied with regard to the period preceding the IPO date is contrary to the principle of the presumption of innocence and to Article 6(2) of the Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950, and to Article 48(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’). It adds that the Commission disregarded the evidence which it adduced in order to rebut the presumption of actual exercise of decisive influence.
Moreover, the applicant submits that finding it jointly and severally liable for payment of the fine imposed on its subsidiaries, on account of its being the parent company, is in breach of the principle of personal responsibility, since neither it nor its representatives within those subsidiaries were involved in the infringement referred to in Article 101 TFEU.
The Commission and the interveners dispute those arguments.
In the first place, as regards the principle of personal responsibility and the principle of the presumption of innocence, it should be pointed out that the EU Courts have held on several occasions that the Commission does not infringe those principles by applying the presumption of actual exercise of decisive influence.
It should be recalled, first of all, that, according to the case-law, the fact that the parent company of a group which exercises decisive influence over its subsidiaries can be held jointly and severally liable for their infringements of competition law does not in any way constitute an infringement of the principle of personal responsibility, but is the expression of that very principle, since the parent company and the subsidiaries under its decisive influence are collectively a single undertaking for the purposes of EU competition law and responsible for that undertaking and, if that undertaking intentionally or negligently infringes the competition rules, that gives rise to the collective personal responsibility of all the principals in the group structure (see judgment of 27 September 2012, Nynäs Petroleum and Nynas Belgium v Commission, T‑347/06, EU:T:2012:480, paragraph 40 and the case-law cited: see also, to that effect, Opinion of Advocate General Kokott in Akzo Nobel and Others v Commission, C‑97/08 P, EU:C:2009:262, point 97).
Next, it is settled case-law that the presumption of actual exercise of decisive influence does not infringe the right to be presumed innocent, inasmuch as (i) it does not lead to a presumption of guilt on the part of either one of those companies (see judgment of 26 January 2017, Villeroy & Boch v Commission, C‑625/13 P, EU:C:2017:52, paragraph 149 and the case-law cited) and (ii) the presumption of actual exercise of decisive influence is rebuttable (see judgment of 19 June 2014, FLS Plast v Commission, C‑243/12 P, EU:C:2014:2006, paragraph 27 and the case-law cited).
Lastly, contrary to the applicant’s submission, according to the settled case-law of the Court, the fact that it is difficult to adduce the evidence necessary to rebut a presumption of actual exercise of decisive influence does not in itself mean that that presumption is in fact irrebuttable (see, to that effect, judgment of 16 June 2016, Evonik Degussa and AlzChem v Commission, C‑155/14 P, EU:C:2016:446, paragraph 44 and the case-law cited).
It follows that the applicant’s argument that the presumption of actual exercise of decisive influence is incompatible with the principles of personal responsibility and of the presumption of innocence, as laid down in the Convention for the Protection of Human Rights and Fundamental Freedoms and the Charter, must be rejected.
In the second place, the applicant’s assertion that neither it nor its representatives were involved in the cartel in question cannot succeed in the light of the case-law cited in paragraph 188 above.
In the third place, as regards the applicant’s argument that the Commission failed to provide sufficient reasons to reject the applicant’s rebuttal of the presumption of actual exercise of decisive influence, that argument was already rejected in the context of the second plea, and it must be rejected for the same reasons here.
It follows that, contrary to the applicant’s submission, holding it jointly and severally liable for payment of the fine imposed on its subsidiaries on account of its being the parent company does not infringe the principles of personal responsibility and of the presumption of innocence in the manner claimed by the applicant in this plea.
The third plea must therefore be rejected.
4.
The fourth plea in law, alleging infringement of Article 101 TFEU and Article 23(2) of Regulation No 1/2003, a manifest error of assessment and breach of the principle of legal certainty and the principle that penalties must be specific to the offender
In essence, the applicant maintains that the Commission made a manifest error of assessment and breached the principle of legal certainty and the principle that penalties must be specific to the offender by failing to determine the shares to be paid by those held jointly and severally liable from the perspective of their internal relationship and by confining itself to concluding that they are jointly and severally liable. According to the applicant, such a determination is unnecessary if the companies belong to the same group at the time the decision at issue is adopted. By contrast, if the economic unit formed by the companies no longer exists, as in the present case, the Commission should be compelled to make that determination in that decision.
The Commission disputes those arguments.
The applicant submits that, in so far as it no longer formed a single economic entity with the interveners on the date that the contested decision was adopted, the Commission was required to determine the share of the fine to be paid by each of them from the perspective of their internal relationship.
According to the Court’s case-law, inasmuch as it is merely the manifestation of an ipso jure effect of the concept of an ‘undertaking’, the EU law concept of joint and several liability for payment of a fine concerns only the undertaking itself and not the companies of which it is made up (see judgment of 26 January 2017, Villeroy & Boch v Commission, C‑625/13 P, EU:C:2017:52, paragraph 150 and the case-law cited).
While it follows from Article 23(2) of Regulation No 1/2003 that the Commission is entitled to hold a number of companies jointly and severally liable for payment of a fine in so far as they formed part of the same undertaking, it is not possible to conclude on the basis of either the wording of that provision or the objective of the joint and several liability mechanism that that power to impose penalties extends, beyond the determination of joint and several liability from an external perspective, to the power to determine the shares to be paid by those held jointly and severally liable from the perspective of their internal relationship (see judgment of 26 January 2017, Villeroy & Boch v Commission, C‑625/13 P, EU:C:2017:52, paragraph 151 and the case-law cited).
On the contrary, the mechanism of joint and several liability is intended to constitute an additional legal device available to the Commission to strengthen the effectiveness of the action taken by it for the recovery of fines imposed for infringements of the competition rules, since that mechanism reduces the risk of insolvency for the Commission, as creditor of the debt represented by such fines: that is part of the objective of deterrence pursued generally by competition law (see judgment of 26 January 2017, Villeroy & Boch v Commission, C‑625/13 P, EU:C:2017:52, paragraph 152 and the case-law cited).
The determination, in the context of the internal relationship of those held jointly and severally liable for payment of a fine, of the share each of them is required to pay does not pursue that dual objective. That is a contentious issue, to be resolved at a later stage, and, in principle, the Commission no longer has any interest in the matter where the fine has been paid in full by one or more of those held liable (see judgment of 26 January 2017, Villeroy & Boch v Commission, C‑625/13 P, EU:C:2017:52, paragraph 153 and the case-law cited).
In the present case, it is sufficient to note, in the light of the case-law cited in paragraphs 199 to 202 above, that the Commission was not required to determine the share to be paid by each of the applicant and the interveners from the perspective of their internal relationship. In so far as, as is apparent from the examination carried out in the context of the first plea, the Commission was right to conclude that throughout the entire infringement period the applicant and the interveners constituted a single undertaking for the purposes of competition law, it was entitled to confine itself to determining the amount of the fine that those companies were jointly and severally liable to pay.
Furthermore, the applicant’s argument that on the date that the contested decision was adopted the interveners no longer constituted with it a single entity cannot call into question the finding made in the previous paragraph.
To accept this argument would run counter to the very concept of joint and several liability. In that regard, it must be stated that the joint and several liability mechanism implies, by definition, that the Commission may address either the parent company or the subsidiary without apportioning liability in the manner claimed by the applicant. As the Court has held, there is no ‘order of priority’ when the Commission imposes a fine on one or other of those companies (see judgment of 18 July 2013, Dow Chemical and Others v Commission, C‑499/11 P, EU:C:2013:482, paragraph 49 and the case-law cited).
Moreover, to accept such an argument would be liable to harm the objective of the joint and several liability mechanism, which, according to the case-law cited in paragraph 201 above, is to constitute an additional legal device available to the Commission to strengthen both the effectiveness of the recovery of fines imposed and the objective of deterrence pursued generally by competition law.
In the light of the foregoing, it must be held, following an in-depth review, that the Commission did not err or breach the principle of legal certainty and the principle that penalties must be specific to the offender by failing to determine the share of the fine to be paid by each of the applicant and the interveners from the perspective of their internal relationship.
The fourth plea must therefore be rejected.
5.
The fifth plea in law, alleging infringement of the rights of the defence
The applicant submits that the Commission infringed its rights of defence during the administrative procedure. It divides this plea into three limbs, alleging, first, that the Commission denied it access to documents essential to its defence, second, that the Commission unlawfully delayed access to other essential documents and, third, that the excessive length of the procedure harmed its ability to defend itself.
(a)
The first limb, alleging that the Commission denied the applicant access to evidence essential to its defence
The applicant maintains that, in order to find it liable for the cartel, the Commission relied in the contested decision on several items of inculpatory evidence that it did not communicate to it. These include the document which provides evidence of the scope of the delegated powers of the PIA Employee Directors and the documents which contain evidence of the role of the remuneration and internal control committees.
The Commission disputes those arguments.
According to settled case-law, observance of the rights of the defence is a fundamental right of EU law, enshrined in Article 41(2)(a) of the Charter, which requires observance of the rights of the defence in all proceedings (see judgment of 17 December 2014, Pilkington Group and Others v Commission, T‑72/09, not published, EU:T:2014:1094, paragraph 232 and the case-law cited).
Respect for the rights of the defence requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, to make known its views on the truth and relevance of the facts and circumstances alleged and on the documents used by the Commission to support its claim that there has been an infringement of the Treaty (judgment of 7 January 2004, Aalborg Portland and Others v Commission, C‑204/00 P, C‑205/00 P, C‑211/00 P, C‑213/00 P, C‑217/00 P and C‑219/00 P, EU:C:2004:6, paragraph 66).
In that connection, Article 27(1) of Regulation No 1/2003 provides (i) that the Commission is to give the undertakings or associations of undertakings which are the subject of the proceedings conducted by the Commission the opportunity to be heard on the matters to which the Commission has taken objection and (ii) that the Commission is to base its decisions only on objections on which the parties concerned have been able to comment.
Moreover, it is settled case-law that the failure to communicate a document constitutes a breach of the rights of the defence only if the undertaking concerned shows, first, that the Commission relied on that document to support its objection concerning the existence of an infringement and, second, that the proof necessary for demonstrating the merits of that objection could be adduced only by reference to that document. If there were other documentary evidence of which the parties were aware during the administrative procedure that specifically supported the Commission’s findings, the fact that an incriminating document not communicated to the person concerned was inadmissible as evidence would not affect the validity of the objections upheld in the contested decision. It is thus for the undertaking concerned to show that the result at which the Commission arrived in its decision would have been different if a document which was not communicated to that undertaking and on which the Commission relied to make a finding of infringement against it had to be disallowed as evidence (see judgment of 9 September 2015, Toshiba v Commission, T‑104/13, EU:T:2015:610, paragraph 129 and the case-law cited).
In the present case, although the applicant claims that it did not receive from the Commission either the document relating to the scope of the powers delegated to the PIA Employee Directors or the documents relating to the remuneration and internal control committees, it must be held, as the Commission claims, that such a claim has no basis in fact.
First of all, as the Commission explains, without being challenged by the applicant, the document relating to the scope of the powers delegated to the PIA Employee Directors was disclosed to the applicant on 27 March 2012 and the applicant had access to both a confidential and non-confidential version of that document.
Next, the document relating to the remuneration committee is the confidential version of the interveners’ reply to the statement of objections. On 4 January and 12 March 2012, and on 11 September 2013, the applicant had access to the non-confidential version of that reply, from which the information mentioned by the Commission in respect of the applicant in the contested decision is taken.
Lastly, the document relating to the internal control committee is identical to the document in Annex 15 to the interveners’ reply to a request for information of 20 October 2009, to which the applicant had access, in particular, on 26 January 2012.
It follows that the Commission did not deny access to the documents indicated by the applicant in the application and that it therefore fulfilled its obligations under the case-law cited in paragraph 215 above.
As to the remainder, the applicant submits that it did not have access to other documents in the file, such as documents [confidential] and [confidential]. That claim must be rejected as inadmissible in so far as it was made for the first time before the Court at the stage of the reply and is not based on matters which have come to light in the course of proceedings. In any event, it should be pointed out that, as the Commission observes, document [confidential] was disclosed to the applicant on 8 September 2011 and document [confidential] contains only publicly-accessible information, as footnote 1127 of the contested decision shows.
The first limb of the fifth plea must therefore be rejected.
(b)
The second limb, alleging that the Commission unlawfully delayed access to other documents essential to its defence
The applicant alleges, first of all, that the Commission provided information essential to its defence only at a very late stage in the investigation, that is to say, on 17 May 2013, such that it was unable properly to exercise its rights of defence. The information in question, both inculpatory and exculpatory, included, first, evidence central to the role of the strategic committee, second, evidence concerning the remuneration committee and the internal control committee, third, evidence of what was discussed at the monthly meetings and, fourth, evidence used by the Commission to support its allegation that it had acted as an ‘industrial owner’.
Next, the applicant maintains that the late disclosure of this information did not remedy the breach of its rights of defence, in that the information was not in its possession when it was preparing its reply to the statement of objections or at the hearing held in June 2012. Moreover, according to the applicant, if it had been able to put forward its position on this evidence at an earlier stage, the Commission may have been more receptive to it.
In addition, the applicant asserts that the Commission’s reasoning that late access to the information is justified by the need first to establish the relevance of this evidence before communicating it is unfounded. It states that the majority of the relevant evidence had been available to the Commission more than a year earlier.
Lastly, the applicant requests the Court to order the Commission to produce, in accordance with Article 64(4) of the Rules of Procedure of the General Court of 2 May 1991, for the review of the Court in camera, all relevant documents produced internally by the Commission between 1 March 2012 and 17 May 2013, in particular, correspondence with the Legal Service and the Hearing Officer and minutes of internal meetings of the case team and written instructions within the case team.
The Commission disputes those arguments.
The applicant submits, in essence, that the Commission gave it belated access to documents essential to its defence.
According to the case-law cited in paragraph 213 above, respect for the rights of the defence requires that the undertaking concerned must have been afforded the opportunity during the administrative procedure to make known its views on the truth and relevance of the facts and circumstances alleged.
In the context of this limb, the applicant does not claim, as it did in the first limb, that it did not have access to documents essential to the exercise of its defence against the complaints made against it by the Commission in the contested decision, but criticises the Commission only for disclosing those documents belatedly.
However, it should be pointed out, first, that the documents relied on by the applicant were communicated to it on 17 May 2013, namely approximately 10 months before the adoption of the contested decision. Accordingly, the applicant cannot reasonably claim that it was unable to submit observations on that material because it had insufficient time to examine it. Next, the applicant did in fact take a view on those documents, in particular on 17 June 2013, one month after they had been disclosed. Nothing in its pleadings is capable of showing, as the applicant claims, that the Commission had insufficient time to take its observations into consideration. Lastly, the applicant does not explain precisely what arguments it would have been able to put forward had it not been prevented from doing so by lack of time.
Second, it should be pointed out that, among the documents that the applicant identifies as having been communicated to it belatedly, one concerns the Commission’s conclusions relating to the remuneration committee and the internal control committee of Prysmian. It is apparent from the analysis carried out in the context of the first plea, in paragraphs 120 to 124 above, that that factor cannot be used by the Commission as a basis for its conclusion that the applicant exercised decisive influence over the interveners. Accordingly, the applicant’s criticism regarding the belated disclosure of that document regarding those matters must be rejected as ineffective. As to the remainder, in the light of the relative brevity of the documents in question, namely of the minutes of meetings of Prysmian’s board of directors and of the monthly reports, the applicant cannot claim that it did not have time to examine them in order to prepare its defence before the Commission.
Third, the applicant cannot reasonably claim that the documents communicated on 17 May 2013 constituted the sole basis for the Commission’s line of argument. In that regard, it should be pointed out that the Commission’s conclusions in the contested decision are based on several other documents, which were communicated to the applicant following the adoption of the statement of objections of 30 June 2011.
Fourth, even though the applicant did not have access to those documents for the preparation of its reply to the statement of objections, it should be borne in mind that, in accordance with the case-law, the statement of objections is a preparatory document containing assessments of fact and law which are purely provisional in nature (judgment of 5 December 2013, SNIA v Commission, C‑448/11 P, not published, EU:C:2013:801, paragraph 42 and the case-law cited). There is therefore nothing to prevent documents received as replies to the statement of objections from being used subsequently in the final decision provided that the interested party is afforded the opportunity, as in the present case, to take a view on them.
The second limb of the fifth plea must therefore be rejected as in part ineffective and in part unfounded. As regards, moreover, the measure of organisation of procedure proposed by the applicant, it is sufficient to note that the applicant does not explain how that measure might support its line of argument. Accordingly, the applicant’s request cannot be granted.
(c)
The third limb, alleging the excessive length of the administrative procedure
The applicant maintains that the Commission breached the principle of sound administration, given the excessive length of the administrative procedure. It points out that the investigation was in progress for more than five years, that is to say, from 9 January 2009 to 2 April 2014. It adds that that duration had consequences for its defence, since it did not receive the statement of objections until 30 June 2011, by which time the GSCP V Funds had already divested the last of their investments in Prysmian, in 2010. The applicant also submits that, in the event that the excessive duration of the administrative procedure does not justify the annulment of the contested decision, the Court should nevertheless grant an equitable reduction in the fine.
The Commission disputes those arguments.
According to settled case-law, compliance with the reasonable time requirement in the conduct of administrative procedures relating to competition policy constitutes a general principle of EU law whose observance the EU judicature ensures (see judgment of 19 December 2012, Heineken Nederland and Heineken v Commission, C‑452/11 P, not published, EU:C:2012:829, paragraph 97 and the case-law cited).
The principle that an administrative procedure must be conducted within a reasonable time has been reaffirmed by Article 41(1) of the Charter, under which ‘every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions and bodies of the Union’ (see judgment of 5 June 2012, Imperial Chemical Industries v Commission, T‑214/06, EU:T:2012:275, paragraph 284 and the case-law cited).
Whether the time taken for each step of a procedure is reasonable must be assessed in relation to the individual circumstances of each case, and in particular its context, the conduct of the parties during the procedure, what is at stake for the various undertakings concerned and its complexity (see, to that effect, judgments of 20 April 1999, Limburgse Vinyl Maatschappij and Others v Commission, T‑305/94 to T‑307/94, T‑313/94 to T‑316/94, T‑318/94, T‑325/94, T‑328/94, T‑329/94 and T‑335/94, EU:T:1999:80, paragraph 126).
The Court has also held that, in matters relating to competition policy before the Commission, the administrative procedure may involve an examination in two successive stages, each corresponding to its own internal logic. The first stage, covering the period up to notification of the statement of objections, begins on the date on which the Commission, exercising the powers conferred on it by the EU legislature, takes measures which imply an accusation of an infringement and must enable the Commission to adopt a position on the course which the procedure is to follow. The second stage covers the period from notification of the statement of objections to adoption of the final decision. It must enable the Commission to reach a final decision on the infringement concerned (judgment of 21 September 2006, Nederlandse Federatieve Vereniging voor de Groothandel op Elektrotechnisch Gebied v Commission, C‑105/04 P, EU:C:2006:592, paragraph 38).
Moreover, it is apparent from the case-law that, where the breach of the reasonable time principle has had a possible effect on the outcome of the procedure, that breach may entail the annulment of the contested decision (see, to that effect, judgment of 21 September 2006, Technische Unie v Commission, C‑113/04 P, EU:C:2006:593, paragraph 48 and the case-law cited).
Nevertheless, for the purposes of the application of the competition rules, a failure to act within a reasonable time can constitute a ground for annulment only in cases of decisions finding infringements where it has been proved that the breach of the reasonable-time principle has adversely affected the rights of defence of the undertakings concerned. Except in that specific circumstance, failure to comply with the obligation to adopt a decision within a reasonable time cannot affect the validity of the administrative procedure under Regulation No 1/2003 (judgment of 21 September 2006, Nederlandse Federatieve Vereniging voor de Groothandel op Elektrotechnisch Gebied v Commission, C‑105/04 P, EU:C:2006:592, paragraph 42).
Lastly, as respect for the rights of the defence, a principle whose fundamental nature has been emphasised on many occasions in the case-law of the Court, is of crucial importance in procedures such as that followed in the present case, it is essential to prevent those rights from being irremediably compromised on account of the excessive duration of the investigation phase and to ensure that the duration of that phase does not impede the establishment of evidence designed to refute the existence of conduct susceptible of rendering the undertakings concerned liable. For that reason, examination of any interference with the exercise of the rights of the defence must not be confined to the actual phase in which those rights are fully effective, that is to say, the second phase of the administrative procedure. The assessment of the source of any undermining of the effectiveness of the rights of the defence must extend to the entire procedure and be carried out by reference to its total duration (see judgment of 21 September 2006, Nederlandse Federatieve Vereniging voor de Groothandel op Elektrotechnisch Gebied v Commission, C‑105/04 P, EU:C:2006:592, paragraph 50 and the case-law cited).
In the present case, as regards the first phase of the administrative procedure, a period of 29 months elapsed from the notification to the interveners of the inspection decision in January 2009 until the receipt of the statement of objections in June 2011. The second phase of the administrative procedure, from the receipt of the statement of objections to the adoption of the contested decision in April 2014, covered a period of 33 months.
In that regard, it must be held that the duration of the first phase of the administrative procedure and the duration of the second phase of that procedure are not excessive in the light of the steps that the Commission took to complete the investigation and adopt the contested decision.
First of all, as the Commission observes, the investigation related to a cartel of global scope, with a high number of participants, which lasted for almost 10 years during which the Commission was required to elicit the vast amounts of evidence contained in the file including all the evidence collected during the inspections and received from the leniency applicants. Moreover, during that investigation, the Commission sent the participants in the sector concerned requests for information in accordance with Article 18 of Regulation No 1/2003 and with point 12 of the Leniency Notice.
Next, the volume of evidence led the Commission to adopt a decision, in its English version, of 287 pages, Annex 1 of which contains the complete references to all the evidence collected during the investigation phase. The breadth and scope of the cartel and the linguistic difficulties are also noteworthy. It should be borne in mind that the contested decision had 26 addressees from a wide range of countries; a large number of those addressees participated in the cartel under various legal forms and were restructured during and after the cartel period. In addition the decision, drafted in English, had to be translated in full into German, French and Italian.
Lastly, it is apparent from the background to the dispute set out in paragraphs 3 to 10 above that in the context of the administrative procedure the Commission adopted a whole series of steps, which justify the duration of each phase of that procedure and the appropriateness for the purpose of the investigation was not specifically challenged by the applicant.
Accordingly, the duration of the two phases of the administrative procedure was reasonable in order to enable the Commission to assess thoroughly the evidence and arguments raised by the parties concerned by the investigation.
It follows that the applicant cannot reasonably claim that the duration of the administrative procedure before the Commission was excessive and that the Commission infringed the reasonable-time principle.
In any event, were it to be found that the overall duration of the administrative procedure was excessive and that the reasonable-time principle was infringed, such a finding would be insufficient, in itself, in the light of the case-law cited in paragraphs 242 to 244 above, to conclude that the contested decision should be annulled.
In that regard, the applicant claims that the excessive duration of the administrative procedure ‘impacted on [its] ability to defend itself’, in particular in so far as, at the time that it was informed that it was being investigated, namely on the date on which the statement of objections was adopted, on 30 June 2011, it had already divested the last of its shares in the interveners and, therefore, it had limited access to the relevant evidence. In that regard, it is sufficient to recall that, according to settled case-law, by virtue of a general duty of care attaching to any undertaking or association of undertakings, the applicant is required to ensure the proper maintenance of records in its books or files of information enabling details of its activities to be retrieved, in order, in particular, to make the necessary evidence available in the event of legal or administrative proceedings (see, to that effect, judgment of 16 June 2011, Heineken Nederland and Heineken v Commission, T‑240/07,EU:T:2011:284, paragraph 301 and the case-law cited). That obligation also applies to the divestment of a subsidiary, as was held in the judgment of 27 June 2012, Bolloré v Commission (T‑372/10, EU:T:2012:325, paragraph 152).
As regards the applicant’s request to the Court to grant an equitable reduction of the fine imposed on it in the event that the duration of the administrative procedure does not justify annulment of the contested decision, it must be regarded as being raised in support of its claim for the reduction of that amount, which will be examined in paragraph 261 below.
The third limb of the fifth plea must be rejected, as must that plea in its entirety.
In the light of the foregoing, it must be held that the applicant has not succeeded in proving that the Commission committed irregularities justifying annulment of the contested decision in so far as the decision concerns it.
The applicant’s claims for annulment must therefore be rejected.
B. The claim for reduction of the fine imposed on the applicant
The applicant calls upon the Court to reduce the fine imposed on it so as to take account of the errors which the Commission made when calculating that amount. Similarly, the applicant requests the Court to grant an equitable reduction of the fine in the event that the duration of the administrative procedure does not justify annulment of the contested decision. Lastly, it requests the Court to grant it the benefit of any reduction in the fine granted to the interveners following the action brought against that decision in Case T‑475/14, Prysmian and Prysmian Cavi e Sistemi v Commission.
Before considering the applicant’s various claims for a reduction of the fine imposed on it, it should be borne in mind that the review of legality is supplemented by the unlimited jurisdiction which Article 31 of Regulation No 1/2003 has conferred on the Courts of the European Union, in accordance with Article 261 TFEU. That jurisdiction empowers the competent Court, in addition to carrying out a review of legality of the penalty, to substitute its own appraisal for the Commission’s and, consequently, to cancel, reduce or increase the fine or penalty payment imposed. However, it must be pointed out that the exercise of unlimited jurisdiction does not amount to a review of the Court’s own motion, and that proceedings before the Courts of the European Union are inter partes. With the exception of pleas involving matters of public policy which the Courts are required to raise of their own motion, such as the failure to state reasons for a contested decision, it is for the applicant to raise pleas in law against that decision and to adduce evidence in support of those pleas (judgment of 8 December 2011, KME Germany and Others v Commission, C‑389/10 P, EU:C:2011:816, paragraphs 130 and 131).
1.
The claim for reduction of the amount of the fine imposed on account of errors by the Commission when calculating that amount
As regards, in the first place, the applicant’s claim that the amount of the fine imposed on it should be reduced so as to take account of the errors which the Commission made when calculating that amount, it should be pointed out (i) that the pleas raised by the applicant in support of the claims for annulment have been rejected and (ii) that there are no factors which, in the present case, would justify a reduction of that amount. It follows that this claim must be rejected in its entirety.
2.
The claim for reduction of the fine on account of the excessive duration of the administrative procedure
As regards, in the second place, the applicant’s claim that an equitable reduction of the fine imposed on it should be granted on account of the excessive duration of the administrative procedure, it is sufficient to recall that, although an infringement by the Commission of the reasonable-time principle can justify the annulment of a decision taken by it following an administrative procedure based on Article 101 or 102 TFEU inasmuch as it also entails an infringement of the rights of defence of the undertaking concerned, an infringement of that principle, if established, cannot lead to a reduction of the fine imposed (see judgment of 26 January 2017, Villeroy & Boch v Commission, C‑644/13 P, EU:C:2017:59, paragraph 79 and the case-law cited).
In any event, as is apparent from paragraph 251 above, the duration of the administrative procedure was held not to be excessive in the present case. It follows that this claim cannot succeed.
3.
The claim for reduction of the amount of the fine in order to benefit from any reduction of that amount granted to the interveners following the action brought against the contested decision in Case T‑475/14
As regards, in the third and last place, the applicant’s request to benefit from any reduction of the fine granted by the Court to the interveners following the action brought against the contested decision in Case T‑475/14, Prysmian and Prysmian Cavi e Sistemi v Commission, it should be recalled that the applicant was not held liable for the cartel in question on account of its direct participation in the cartel’s activities. In accordance with Article 1 of that decision, it was only held liable for the infringement as the parent company of the interveners.
In a situation in which the parent company’s liability results exclusively from the direct participation of its subsidiary in the infringement and the two companies have brought parallel actions having the same object, the Court may, without ruling ultra petita, take account of the annulment of the finding that the subsidiary committed an infringement for a certain period and make a corresponding reduction in the amount of the fine imposed on the parent company jointly and severally with its subsidiary.
In that respect, first, in order to hold an economic unit liable, it is necessary to prove that at least one entity has committed an infringement of the EU competition rules and that that fact be noted in a decision which has become definitive and, secondly, that the reason for which it was found that the subsidiary had not acted unlawfully is irrelevant.
It is in that context that it is necessary to refer to the wholly derivative nature of the liability incurred by the parent company solely because of a subsidiary’s direct participation in the infringement. In that situation, the parent company’s liability arises from its subsidiary’s unlawful conduct, which is attributed to the parent company in view of the economic unit formed by those companies. Consequently, the parent company’s liability necessarily depends on the facts constituting the infringement committed by its subsidiary and to which its liability is inextricably linked.
For the same reasons, it must be specified that, in a situation in which no factor individually reflects the conduct for which the parent company is held liable, the reduction of the amount of the fine imposed on the subsidiary jointly and severally with its parent company must, in principle, where the necessary procedural requirements are satisfied, be extended to the parent company.
In the present case, both the applicant and the interveners brought an action against the contested decision and those actions have, in part, the same objective, namely, principally, to annul the fine provided for in Article 2(f) of that decision so far as it concerns them, and, in the alternative, to reduce the amount of that fine which was jointly and severally imposed on them.
In those circumstances, the applicant is entitled to benefit in the same way from any annulment of the contested decision as the interveners in the context of the action brought in Case T‑475/14.
However, by today’s judgment in Case T‑475/14, Prysmian and Prysmian Cavi e Sistemi v Commission, the Court has dismissed the action in the case giving rise to that judgment, namely both the claims for annulment made by the interveners and their claims for a reduction of the fines imposed on them.
Accordingly the applicant’s request to benefit from any reduction granted to the interveners following the action brought against the contested decision in Case T‑475/14, Prysmian and Prysmian Cavi e Sistemi v Commission, cannot succeed and, therefore, the claims seeking a reduction in the amount of the fine imposed on the applicant must be rejected as a whole.
In the light of all the foregoing, this action must be dismissed.
IV. Costs
Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
Since the applicant has been unsuccessful in all its pleas and the Commission has applied for costs, the applicant must be ordered to pay all the costs.
According to Article 138(3) of the Rules of Procedure, the Court may order an intervener other than those referred to in Article 138(1) and (2) of those rules to bear his own costs. In the circumstances of the present case, Prysmian and PrysmianCS must be ordered to bear their own costs.
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby:
1.
Dismisses the action;
2.
Orders The Goldman Sachs Group, Inc. to bear its own costs and to pay those of the European Commission;
3.
Orders Prysmian SpA and Prysmian Cavi e Sistemi Srl to bear their own costs.
Collins
Kancheva
Barents
Delivered in open court in Luxembourg on 12 July 2018.
E. Coulon
Registrar
A.M. Collins
President
Table of contents
I. Background to the dispute
A. The applicant and the sector concerned
B. Administrative procedure
C. Contested decision
1. The infringement at issue
2. The applicant’s liability
3. The fine imposed
II. Procedure and forms of order sought
III. Law
A. The claims for annulment
1. The first plea in law, alleging infringement of Article 101 TFEU and of Article 23(2) of Regulation No 1/2003, an error of law and a manifest error of assessment
(a) The first limb, relating to the application of the presumption of actual exercise of decisive influence for the period between 29 July 2005 and 3 May 2007
(1) The first complaint, relating to the application of the presumption of actual exercise of decisive influence for the period between 29 July 2005 au 3 May 2007
(2) The second complaint, relating to the rebuttal of the presumption of actual exercise of decisive influence
(b) The second limb, concerning the Commission’s conclusions regarding the period between 29 July 2005 and 28 January 2009
(1) The power to appoint the members of the various boards of directors of Prysmian and the power to call shareholder meetings and to propose the revocation of directors or of entire boards of directors
(2) The applicant’s actual level of representation on Prysmian’s board of directors
(3) Management powers of the applicant’s representatives on the board of directors
(4) The important role played by the applicant on the committees established by Prysmian
(5) Receipt of regular updates and monthly reports
(6) The measures to ensure continuation of decisive control after the IPO date
(7) Evidence of behaviour typical of an industrial owner
(8) The assessment of all the factors relied on in the contested decision
(c) The third limb, relating to the Commission’s conclusion that the applicant was not a pure financial investor
2. The second plea in law, alleging infringement of Article 2 of Regulation No 1/2003, insufficiency of the evidence and breach of the duty to state reasons laid down in Article 296 TFEU
(a) The first limb, alleging infringement of Article 2 of Regulation No 1/2003 and insufficiency of the evidence
(b) The second limb, alleging breach of the duty to state reasons
3. The third plea in law, alleging infringement of Article 101 TFEU and Article 23(2) of Regulation No 1/2003, as well as breach of the principles of personal responsibility and of the presumption of innocence
4. The fourth plea in law, alleging infringement of Article 101 TFEU and Article 23(2) of Regulation No 1/2003, a manifest error of assessment and breach of the principle of legal certainty and the principle that penalties must be specific to the offender
5. The fifth plea in law, alleging infringement of the rights of the defence
(a) The first limb, alleging that the Commission denied the applicant access to evidence essential to its defence
(b) The second limb, alleging that the Commission unlawfully delayed access to other documents essential to its defence
(c) The third limb, alleging the excessive length of the administrative procedure
B. The claim for reduction of the fine imposed on the applicant
1. The claim for reduction of the amount of the fine imposed on account of errors by the Commission when calculating that amount
2. The claim for reduction of the fine on account of the excessive duration of the administrative procedure
3. The claim for reduction of the amount of the fine in order to benefit from any reduction of that amount granted to the interveners following the action brought against the contested decision in Case T‑475/14
IV. Costs
( *1 ) Language of the case: English.
( ) Confidential information omitted. |
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 12 November 2015 ( )
Joined Cases C‑191/14 and C‑192/14
Borealis Polyolefine GmbH and OMV Refining & Marketing GmbH
v
Bundesminister für Land- und Forstwirtschaft, Umwelt und Wasserwirtschaft
(Request for a preliminary ruling from the Landesverwaltungsgericht Niederösterreich (Austria))
Case C‑295/14
DOW Benelux BV and Others
v
Staatssecretaris van Infrastructuur en Milieu
(Request for a preliminary ruling from the Raad van State (Netherlands))
and
Joined Cases C‑389/14, C‑391/14 to C‑393/14
Esso Italiana Srl and Others
v
Comitato nazionale per la gestione della direttiva 2003/87/CE e per il supporto nella gestione delle attività di progetto del protocollo di Kyoto,
Ministero dell’Ambiente e della Tutela del Territorio e del Mare,
Ministero dell’Economia e delle Finanze,
Presidenza del Consiglio dei Ministri
(Request for a preliminary ruling from the Tribunale Amministrativo Regionale per il Lazio (Italy))
‛Environmental law — Scheme for greenhouse gas emission allowance trading — Method for allocating allowances — Free allocation of allowances — Uniform cross-sectoral correction factor — Calculation — Waste gases — Cogeneration — Activities newly added from 2008 and 2013 onwards — Statement of reasons — Comitology — Property — Individual concern — Limitation of the effects of annulment’
Table of contents
I - Introduction
II - Legal context
A — Directive 2003/87
B — Decision 2011/278
C — Decision 2013/448
III - National proceedings and the requests for a preliminary ruling
A — The questions in Cases C‑191/14 (Borealis Polyolefine) and C‑192/14 (OMV Refining & Marketing)
B — The questions in Case C‑295/14 (DOW Benelux)
C — The questions in Cases C‑389/14, C‑391/14, C‑392/14 and C‑393/14 (Esso Italiana)
D — Procedure before the Court of Justice
IV — Legal assessment
A — The legal classification of the correction factor
1. The recognised need of industrial installations as calculated by the Member States
2. The industry ceiling calculated by the Commission
a) Article 10a(5)(a) of Directive 2003/87
b) Article 10a(5)(b) of Directive 2003/87
3. The correction factor determined
4. The objectives of Directive 2003/87 in relation to the correction factor
B — The taking into account of electricity generation from waste gases and of the industrial use of heating from high-efficiency cogeneration installations
1. Electricity generation from waste gases
2. Cogeneration installations
C — The data used for the industry ceiling so far as concerns the sectors to be included for the first time as from 2008 or 2013
1. The implementing provisions
2. The quality of the data
a) The expansion from 2013 onwards
i) The failure to take account of new activities in the data submitted by some Member States
ii) The taking into account of new activities in the data submitted by other Member States
b) The expansion from 2008 onwards
D — The statement of reasons for the determination of the correction factor
1. The need to give reasons for the determination of the correction factor in Decision 2013/448
2. The data used by the Commission
3. The explanatory paper prepared by the Directorate-General for Climate Action
4. The need for a back-calculation
5. Conclusion with respect to the statement of reasons for the determination of the correction factor
E — The fundamental right to property (sixth question in Borealis Polyolefine and second question in Esso Italiana)
F — Procedure for the adoption of Decision 2013/448
G — The possibility of direct recourse to the EU judicature
H — The consequences of the illegality of Decision 2013/448
V — Conclusion
I – Introduction
1.
The emission allowance trading scheme laid down in Directive 2003/87 ( ) continues to make transitional provision for allocating greenhouse gas emission rights, or ‘allowances’, free of charge to many industrial installations. However, the directive contains a complicated regime that limits the quantity of allowances to be allocated free of charge by means of a correction factor based on a comprehensive examination of the historical emissions and recognised need of the installations in question.
2.
In this Opinion, I shall be analysing requests for a preliminary ruling from Austria, the Netherlands and Italy concerning the determination of that correction factor. Those requests are based on actions brought by undertakings which have objected to certain aspects of the way in which that correction factor is calculated with a view, ultimately, to obtaining a greater quantity of emission rights free of charge. In addition to those cases, the Court has pending before it a number of other requests for a preliminary ruling from Italy, Finland, Sweden, Spain and Germany, made in pursuit of the same aim, which raise largely similar questions. ( )
3.
The question central to these cases is whether the Commission correctly took account of certain activities when calculating the correction factor. Those activities are the use of ‘waste gases’ as fuel, the use of heating from cogeneration, and industrial activities that were subject to the scheme under Directive 2003/87 only from 2008 or 2013 onwards. In addition, those undertakings seek full access to all the data which the Commission used to make the calculation in order to be able to review whether there are further grounds for objection to it.
4.
It also falls to be clarified whether the Commission was right to refrain from applying a particular ‘comitology’ procedure, whether the undertakings’ fundamental right to property has been infringed, whether the undertakings should have brought actions directly before the EU judicature rather than before the national courts, and what the legal consequences would be if their objections were upheld in whole or in part.
II – Legal context
A – Directive 2003/87
5.
The proceedings concern decisions adopted by the Commission on the basis of Directive 2003/87 establishing a scheme for greenhouse gas emission allowance trading within the Community. Most of the provisions relevant to the present cases were inserted into the aforementioned directive by Amending Directive 2009/29. ( )
6.
Among the definitions given in Article 3 of Directive 2003/87, attention should be drawn to the following two:
‘For the purposes of this Directive the following definitions shall apply:
(e)
“installation” means a stationary technical unit where one or more activities listed in Annex I are carried out and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions and pollution;
…
(u)
“electricity generator” means an installation that, on or after 1 January 2005, has produced electricity for sale to third parties, and in which no activity listed in Annex I is carried out other than the “combustion of fuels”.’
7.
Article 9 of Directive 2003/87 governs the quantity of available emission rights and their annual reduction:
‘The Community-wide quantity of allowances issued each year starting in 2013 shall decrease in a linear manner beginning from the mid-point of the period from 2008 to 2012. The quantity shall decrease by a linear factor of 1.74% compared to the average annual total quantity of allowances issued by Member States in accordance with the Commission Decisions on their national allocation plans for the period from 2008 to 2012. The Community-wide quantity of allowances will be increased as a result of Croatia’s accession only by the quantity of allowances that Croatia shall auction pursuant to Article 10(1).
The Commission shall, by 30 June 2010, publish the absolute Community-wide quantity of allowances for 2013, based on the total quantities of allowances issued or to be issued by the Member States in accordance with the Commission Decisions on their national allocation plans for the period from 2008 to 2012.
…’
8.
Article 9a(2) of the directive governs how emissions from installations included in the scheme for the first time in 2013 are to be determined for the purposes of the allocation of emission rights:
‘In respect of installations carrying out activities listed in Annex I, which are only included in the Community scheme from 2013 onwards, Member States shall ensure that the operators of such installations submit to the relevant competent authority duly substantiated and independently verified emissions data in order for them to be taken into account for the adjustment of the Community-wide quantity of allowances to be issued.
Any such data shall be submitted, by 30 April 2010, to the relevant competent authority in accordance with the provisions adopted pursuant to Article 14(1).
If the data submitted are duly substantiated, the competent authority shall notify the Commission thereof by 30 June 2010 and the quantity of allowances to be issued, adjusted by the linear factor referred to in Article 9, shall be adjusted accordingly. In the case of installations emitting greenhouse gases other than CO2, the competent authority may notify a lower amount of emissions according to the emission reduction potential of those installations.’
9.
Article 10a(1) and (2) of Directive 2003/87 governs the determination of the ‘benchmarks’ for the various activities:
‘1. By 31 December 2010, the Commission shall adopt Community-wide and fully-harmonised implementing measures for the allocation of the allowances referred to in paragraphs 4, 5, 7 and 12, including any necessary provisions for a harmonised application of paragraph 19.
Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3).
The measures referred to in the first subparagraph shall, to the extent feasible, determine Community-wide ex-ante benchmarks so as to ensure that allocation takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass and capture and storage of CO2, where such facilities are available, and shall not provide incentives to increase emissions. No free allocation shall be made in respect of any electricity production, except for cases falling within Article 10c and electricity produced from waste gases.
…
2. In defining the principles for setting ex-ante benchmarks in individual sectors or subsectors, the starting point shall be the average performance of the 10% most efficient installations in a sector or subsector in the Community in the years 2007-2008 …’
10.
Article 10a(3) of Directive 2003/87 excludes, inter alia, the free allocation of allowances for electricity generation:
‘Subject to paragraphs 4 and 8, and notwithstanding Article 10c, no free allocation shall be given to electricity generators, to installations for the capture of CO2, to pipelines for transport of CO2 or to CO2 storage sites.’
11.
Article 10a(4) of Directive 2003/87, however, contains special provisions applicable to cogeneration:
‘Free allocation shall be given to district heating as well as to high efficiency cogeneration, … for economically justifiable demand, in respect of the production of heating or cooling. In each year subsequent to 2013, the total allocation to such installations in respect of the production of that heat shall be adjusted by the linear factor referred to in Article 9.’
12.
Article 10a(5) of Directive 2003/87 concerns the determination of a correction factor for the allocation of allowances:
‘The maximum annual amount of allowances that is the basis for calculating allocations to installations which are not covered by paragraph 3 and are not new entrants shall not exceed the sum of:
(a)
the annual Community-wide total quantity, as determined pursuant to Article 9, multiplied by the share of emissions from installations not covered by paragraph 3 in the total average verified emissions, in the period from 2005 to 2007, from installations covered by the Community scheme in the period from 2008 to 2012; and
(b)
the total average annual verified emissions from installations in the period from 2005 to 2007 which are only included in the Community scheme from 2013 onwards and are not covered by paragraph 3, adjusted by the linear factor, as referred to in Article 9.
A uniform cross-sectoral correction factor shall be applied if necessary.’
B – Decision 2011/278
13.
Article 10 of Decision 2011/278 ( ) governs the free allocation of allowances. In accordance with paragraph 2, Member States must first calculate the preliminary quantity of allowances to be allocated to the individual industrial installations on the basis of historical emissions and the product benchmarks previously identified by the Commission. The results are to be notified to the Commission pursuant to Article 15(2)(e).
14.
In accordance with Article 15(3) of Decision 2011/278, the Commission is to calculate the correction factor provided for in Article 10a(5) of Directive 2003/87 on the basis of the information thus communicated by the Member States:
‘Upon receipt of the list referred to in paragraph 1 of this Article, the Commission shall assess the inclusion of each installation in the list and the related preliminary total annual amounts of emission allowances allocated free of charge.
After notification by all Member States of the preliminary total annual amounts of emission allowances allocated free of charge over the period from 2013 to 2020, the Commission shall determine the uniform cross-sectoral correction factor as referred to in Article 10a(5) of Directive 2003/87/EC. It shall be determined by comparing the sum of the preliminary total annual amounts of emission allowances allocated free of charge to installations that are not electricity generators in each year over the period from 2013 to 2020 without application of the factors referred to in Annex VI with the annual amount of allowances that is calculated in accordance with Article 10a(5) of Directive 2003/87/EC for installations that are not electricity generator or new entrants, taking into account the relevant share of the annual Union-wide total quantity, as determined pursuant to Article 9 of that Directive, and the relevant amount of emissions which are only included in the Union scheme from 2013 onwards.’
15.
In accordance with Article 10(9) of Decision 2011/278, the final total annual amount of emission allowances to be allocated free of charge to each individual industrial installation is arrived at by multiplying the preliminary final total annual amount by the correction factor.
16.
So far as concerns the taking into account of cogeneration in the determination of benchmarks, recital 21 of Decision 2011/278 is of particular interest:
‘Where measurable heat is exchanged between two or more installations, the free allocation of emission allowances should be based on the heat consumption of an installation and take account of the risk of carbon leakage. Thus, to ensure that the number of free emission allowances to be allocated is independent from the heat supply structure, emission allowances should be allocated to the heat consumer.’
17.
Recital 32 of Decision 2011/278 explains how account is taken of waste gases in the setting of product benchmarks:
‘It is also appropriate that the product benchmarks take account of the efficient energy recovery of waste gases and emissions related to their use. To this end, for the determination of the benchmark values for products of which the production generates waste gases, the carbon content of these waste gases has been taken into account to a large extent. Where waste gases are exported from the production process outside the system boundaries of the relevant product benchmark and combusted for the production of heat outside the system boundaries of a benchmarked process as defined in Annex I, related emissions should be taken into account by means of allocating additional emission allowances on the basis of the heat or fuel benchmark. In the light of the general principle that no emission allowances should be allocated for free in respect of any electricity production, to avoid undue distortions of competition on the markets for electricity supplied to industrial installations and taking into account the inherent carbon price in electricity, it is appropriate that, where waste gases are exported from the production process outside the system boundaries of the relevant product benchmark and combusted for the production of electricity, no additional allowances are allocated beyond the share of the carbon content of the waste gas accounted for in the relevant product benchmark.’
C – Decision 2013/448
18.
Article 4 of Decision 2013/448 ( ) concerns the correction factor for the years 2013 to 2020:
‘The uniform cross-sectoral correction factor referred to in Article 10a(5) of Directive 2003/87/EC and determined in accordance with Article 15(3) of Decision 2011/278/EU is set out in Annex II to this Decision.’
19.
Under Annex II to Decision 2013/448, the correction factor for 2013 was 94.272151%. Over the subsequent years, that level was reduced to 82.438204% for the year 2020.
20.
In recital 25, the Commission explains how it arrived at those figures:
‘The limit set by Article 10a(5) of Directive 2003/87/EC is 809315756 allowances in 2013. In order to derive this limit, the Commission first collected from Member States and the EEA-EFTA countries information on whether installations qualify as an electricity generator or other installation covered by Article 10a(3) of Directive 2003/87/EC. The Commission then determined the share of emissions in the period from 2005 to 2007 from the installations not covered by that provision, but included in the EU ETS [European Union Emissions Trading Scheme] in the period from 2008 to 2012. The Commission then applied this share of 34.78289436% to the quantity determined on the basis of Article 9 of Directive 2003/87/EC (1976784044 allowances). To the result of this calculation, the Commission then added 121733050 allowances, based on the average annual verified emissions in the period from 2005 to 2007 of relevant installations taking into account the revised scope of the EU ETS as of 2013. In this respect, the Commission used information provided by Member States and the EEA-EFTA countries for the adjustment of the cap. Where annual verified emissions for the period 2005-2007 were not available, the Commission extrapolated, to the extent possible, the relevant emission figures from verified emissions in later years by applying the factor of 1.74% in reverse direction. The Commission consulted and obtained confirmation from Member States’ authorities on information and data used in this respect. The limit set by Article 10a(5) of Directive 2003/87/EC compared to the sum of the preliminary annual amounts of free allocation without application of the factors referred to in Annex VI to Decision 2011/278/EU gives the annual cross-sectoral correction factor as set out in Annex II to this Decision.’
III – National proceedings and the requests for a preliminary ruling
21.
In 2012, Austria, the Netherlands and Italy (provisionally) calculated the greenhouse gas emission allowances to be allocated free of charge to the applicants in the main proceedings and notified these to the Commission.
22.
On 5 September 2013, the Commission adopted Decision 2013/448, in which it determined the uniform cross-sectoral correction factor.
23.
On the basis of that correction factor, the aforementioned three Member States allocated to the applicants an amount of emission allowances that was reduced by comparison with the preliminary calculation.
24.
Against that reduced allocation the parties to the main proceedings brought the actions which have led to the present requests for a preliminary ruling.
A – The questions in Cases C‑191/14 (Borealis Polyolefine) and C‑192/14 (OMV Refining & Marketing)
25.
The Landesverwaltungsgericht Niederösterreich (Regional Administrative Court, Lower Austria) submits the following questions to the Court of Justice:
‘(1)
Is Decision 2013/448 invalid and does it infringe Article 10a(5) of Directive 2003/87 in so far as it excludes from the basis of calculation pursuant to subparagraphs (a) and (b) of Article 10a(5) of that directive emissions associated with waste gases produced by installations falling within Annex I to Directive 2003/87 and heat used by installations falling within Annex I to Directive 2003/87 and which comes from combined heat and power installations, for which a free allocation is granted pursuant to Article 10a(1) and (4) of Directive 2003/87 and Decision 2011/278?
(2)
Is Decision 2013/448 invalid and does it infringe Article 3e and 3u of Directive 2003/87, alone and/or in conjunction with Article 10a(5) of Directive 2003/87, in so far as it provides that CO2 emissions associated with waste gases — which are produced by installations falling within Annex I to Directive 2003/87 — and heat used in installations falling within Annex I to Directive 2003/87 and which was acquired by combined heat and power installations are emissions from ‘electricity generators’?
(3)
Is Decision 2013/448 invalid and does it infringe the objectives of Directive 2003/87 in so far as it creates an asymmetry by excluding emissions associated with the combustion of waste gases and with heat produced in cogeneration from the basis of calculation in subparagraphs (a) and (b) of Article 10a(5), whereas free allocation with regard to them is due in accordance with Article 10a(1) and (4) of Directive 2003/87 and Decision 2011/278?
(4)
Is Decision 2011/278 invalid and does it infringe Article 290 TFEU and Article 10a(5) of Directive 2003/87 in so far as Article 15(3) of that decision amends subparagraphs (a) and (b) of Article 10a(5) of Directive 2003/87 to the effect that it replaces the reference to ‘installations which are not covered by paragraph 3’ by the reference to ‘installations that are not electricity generators’?
(5)
Is Decision 2013/448 invalid and does it infringe Article 23(3) of Directive 2003/87 in so far as that decision was not adopted on the basis of the regulatory procedure with scrutiny which is laid down in Article 5a of Council Decision 1999/468 and Article 12 of Regulation No 182/2011?
(6)
Is Article 17 of the European Charter of Fundamental Rights to be understood as precluding the retention of free allocations on the basis of the wrongful calculation of a cross-sectoral correction factor?
(7)
Is Article 10a(5) of Directive 2003/87, on its own and/or in conjunction with Article 15(3) of Decision 2011/278, to be understood as precluding the application of a provision of national law which provides for the application of the wrongfully calculated uniform cross-sectoral correction factor, as determined in Article 4 of Decision 2013/448 and in Annex II thereto, to the free allocations in a Member State?
(8)
Is Decision 2013/448 invalid and does it infringe Article 10a(5) of Directive 2003/87 in so far as it includes only emissions from installations which were contained in the Community scheme from 2008, with the result that it excludes those emissions which are associated with activities which were contained in the Community scheme from 2008 (in the amended Annex I to Directive 2003/87) if those activities took place in installations which were already contained in the Community scheme prior to 2008?
(9)
Is Decision 2013/448 invalid and does it infringe Article 10a(5) of Directive 2003/87 in so far as it includes only emissions from installations which were contained in the Community scheme from 2013, with the result that it excludes those emissions which are associated with activities which were contained in the Community scheme from 2013 (in the amended Annex I to Directive 2003/87) if those activities took place in installations which were already contained in the Community scheme prior to 2013?’
B – The questions in Case C‑295/14 (DOW Benelux)
26.
The questions referred by the Netherlands Raad van State (Council of State) read as follows:
‘(1)
Must the fourth paragraph of Article 263 TFEU be interpreted as meaning that operators of installations to which, as from the beginning of 2013, the emissions-trading rules laid down in Directive 2003/87 have been applicable, with the exception of operators of the installations referred to in Article 10a(3) of that directive and of newcomers, could undoubtedly have brought an action before the General Court seeking the annulment of Decision 2013/448, in so far as the uniform cross-sectoral correction factor is determined by that decision?
(2)
Is Decision 2013/448, in so far as the uniform cross-sectoral correction factor is determined thereby, invalid because that decision was not adopted in accordance with the regulatory procedure with scrutiny referred to in Article 10a(1) of Directive 2003/87?
(3)
Is Article 15 of Commission Decision 2011/278 contrary to Article 10a(5) of Directive 2003/87 because the former article precludes emissions from electricity generators from being taken into account in the determination of the uniform cross-sectoral correction factor? If so, what are the consequences of that conflict for Decision 2013/448?
(4)
Is Decision 2013/448, in so far as the uniform cross-sectoral correction factor is determined thereby, invalid because that decision is based on, inter alia, data submitted pursuant to Article 9a(2) of Directive 2003/87 without the provisions to be adopted pursuant to Article 14(1), referred to in Article 9a(2), having been established?
(5)
Is Decision 2013/448, in so far as the uniform cross-sectoral correction factor is determined thereby, contrary to, in particular, Article 296 TFEU or Article 41 of the Charter of Fundamental Rights of the European Union on the ground that the quantities of emissions and emission allowances which determined the calculation of the correction factor are set out only partially in that decision?
(6)
Is Decision 2013/448, in so far as the uniform cross-sectoral correction factor is determined thereby, contrary to, in particular, Article 296 TFEU or Article 41 of the Charter of Fundamental Rights of the European Union on the ground that that correction factor was determined on the basis of data of which the operators of the installations involved in emissions trading could not have become aware?’
C – The questions in Cases C‑389/14 and C‑391/14 to C‑393/14 (Esso Italiana)
27.
Finally, the Italian Tribunale Amministrativo Regionale per il Lazio (Regional Administrative Court, Lazio) submits the following questions to the Court of Justice:
‘(1)
Is Decision 2013/448 invalid for not having taken into account, in the calculation of the allowances to be allocated free of charge, the percentage of emissions associated with waste gas combustion — or steel processing gas — or of emissions associated with the heat produced by cogeneration, thereby infringing Article 290 TFEU and Article 10a(1),(4) and (5) of Directive 2003/87, going beyond the limits of the powers conferred by that directive and at variance with its objectives (to encourage more energy-efficient techniques and to protect the needs of economic development and employment)?
(2)
Is Decision 2013/448 invalid, in the light of Article 6 TEU, on grounds of its inconsistency with Article 1 of the Additional Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (‘the ECHR’) and Article 17 of the ECHR, owing to undue failure to respect the applicant companies’ legitimate expectation of remaining in possession of a good consisting of the number of the allowances allocated to them on a preliminary basis and to which they are entitled on the basis of Directive 2003/87, thereby depriving those companies of the economic benefit associated with that good?
(3)
Furthermore, is Decision 2013/448 invalid as regards its definition of the cross-sectoral correction factor, given that the decision infringes the second paragraph of Article 296 TFEU and Article 41 of the Charter of Fundamental Rights of the European Union owing to its failure to provide an adequate statement of reasons?
(4)
Is Decision 2013/448 invalid as regards its definition of the cross-sectoral correction factor, given that the decision infringes Article 10a(5) of Directive 2003/87, fails to respect the principle of proportionality enshrined in Article 5(4) TEU and is also vitiated by failure to carry out a proper inquiry and error of assessment, in the light of the fact that the calculation of the maximum number of allowances to be allocated free of charge (relevant for the purposes of defining a uniform cross-sectoral correction factor) did not take into account the effects of the changes in the interpretation of the term ‘combustion plant’ between the first phase (2005 to 2007) and the second phase (2008 to 2012) of the implementation of Directive 2003/87?
(5)
Is Decision 2013/448 invalid as regards its definition of the cross-sectoral correction factor, on grounds of infringement of Articles 10a(5) and 9a(2) of Directive 2003/87, and also on account of the failure to carry out a proper inquiry and error of assessment, in view of the fact that the calculation of the maximum number of allowances to be allocated free of charge (relevant for the purposes of defining a uniform cross-sectoral correction factor) was made on the basis of data, provided by the Member States, which are mutually inconsistent because they are based on different interpretations of Article 9a(2) of Directive 2003/87?
(6)
Is Decision 2013/448 invalid as regards its definition of the cross-sectoral correction factor, on grounds of infringement of the procedural rules under Articles 10a(1) and 23(3) of Directive 2003/87?’
D – Procedure before the Court of Justice
28.
Written observations have been submitted by Borealis Polyolefine and Others in the Austrian proceedings, by Dow Benelux, Esso Nederland and Others, Akzo Nobel Chemicals and Others and Yara Sluiskil and Others in the Netherlands proceedings, and by Esso Italiana, Eni and Linde Gas Italia in the Italian proceedings, as parties to those respective sets of proceedings. Written observations have also been submitted by Germany, the Netherlands, Spain (in the Italian proceedings only) and the Commission.
29.
While the Court has joined the two Austrian and the four Italian requests for a preliminary ruling respectively, it has thus far not otherwise formally joined the cases at issue here. It none the less organised a joint hearing on 3 September 2015. With the exception of Linde, all the aforementioned parties to the proceedings as well as Luchini and Others and Buzzi Unicem, as parties to the Italian proceedings, took part in that hearing.
30.
I shall deal with all of the aforementioned cases in a single Opinion and would suggest that the Court adopt the same approach by joining the cases for the purposes of the judgment.
IV – Legal assessment
31.
The purpose of the questions raised by the requests for a preliminary ruling is to call into question the uniform cross-sectoral correction factor (‘the correction factor’) provided for in Article 10a(5) of Directive 2003/87, which the Commission determined in Article 4 of, and Annex II to, Decision 2013/448.
32.
In order to understand those questions, it first needs to be explained how that correction factor is calculated and how significant it is within the scheme of Directive 2003/87 (see Section A). Then, I shall consider the questions concerned with the failure to take adequate account of particular sources of emissions (see Sections B and C), thereafter the statement of reasons for the determination of the correction factor (see Section D), followed by the fundamental right to property (see Section E) and the procedure applied in the decision (see Section F). So as not to interrupt the presentation of an area in which the law is highly complex, it is only subsequently that I shall submit that the applicants in the main proceedings were under no obligation to raise their objections directly before the EU judicature (see Section G) and set out the consequences that should follow from the examination of the decision (see Section H).
A – The legal classification of the correction factor
33.
Article 1 of Directive 2003/87 states that that directive establishes a scheme for greenhouse gas emission allowance trading in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.
34.
Installations subject to the scheme must acquire emission rights, or ‘allowances’, in order to emit greenhouse gases. In practice, these rights are almost exclusively concerned with the emission of CO2. Articles 9 and 9a of Directive 2003/87 limit the total quantity of available allowances and provide for that quantity to be decreased by 1.74% each year from 2010 onwards. According to recital 13 of Directive 2009/29, the decrease should help reduce climate-damaging emissions by 20% below 1990 levels by 2020.
35.
Since 2013, only a portion of those allowances have been allocated free of charge, the remainder having been auctioned. A distinction is drawn between electricity generators, who, with few exceptions, do not receive free allowances, ( ) and industrial installations, which receive either all ( ) or at least a portion ( ) of the allowances they require free of charge.
36.
The questions raised in the present cases are directly concerned only with the situation of industrial installations eligible for a free allocation of allowances, but not with that of electricity generators. This is because the correction factor at issue has the effect of reducing the emission allowances allocated free of charge to industrial installations.
37.
The correction factor is determined using a mechanism whereby the Member States, on the one hand, and the Commission, on the other, calculate how many allowances are to be allocated in total to all existing industrial installations. In so doing, the two sides apply different methods of calculation. The lower of the two values determines how many allowances are ultimately allocated free of charge.
38.
If the Member States’ figure had been lower, no correction would have been required. The Member States would have been able to allocate allowances free of charge on the basis of their initial figure.
39.
As it turned out, however, the Commission’s figure was lower. This gave rise to the situation provided for in the second subparagraph of Article 10a(5) of Directive 2003/87, inasmuch as a uniform cross-sectoral correction factor had to be applied. This amounted to approximately 94.3% in the first year, dropping to around 80.4% by 2020. This means that only the percentage of the preliminary quantity of allowances to be allocated free of charge can ultimately be allocated.
1. The recognised need of industrial installations as calculated by the Member States
40.
The figure mentioned at the beginning of Article 10a(5) of Directive 2003/87, that is to say the quantity of allowances that serves as the basis for calculating (future) free annual allocations to industrial installations, is determined by the Member States. That quantity is to some extent calculated roots upwards, that is to say on the basis of the historical activity of each individual installation and benchmarks which the Commission laid down for the activity in question in Decision 2011/278. The benchmarks equate to a specific quantity of CO2 emissions which the Commission recognises as being necessary for the production of a particular amount of the relevant product. I shall henceforth refer to that value as the recognised need.
41.
In accordance with the first subparagraph of Article 10a(2) of Directive 2003/87, the starting point for the benchmarks is the average performance of the 10% most efficient installations in the sector or subsector in question in the European Union. Furthermore, in accordance with the third subparagraph of Article 10a(1), those benchmarks are to ensure that allocation takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of, inter alia, high-efficiency cogeneration and the efficient energy recovery of waste gases, and are not to provide incentives to increase emissions. The Commission is tasked with achieving that objective when setting benchmarks for the various activities.
42.
The benchmarks set by the Commission for industrial installations include in particular emissions from the use as fuel of waste gases occurring as a result of certain production processes (see Section B, point 1), and take into account the industrial use of heat produced by cogeneration installations (see Section B, point 2). Moreover, they are applied to all industrial installations currently subject to the scheme laid down in Directive 2003/87, including, therefore, installations covered by that scheme only from 2008 (see Section C, point 2, part (b)) or 2013 (see Section C, point 2, part (a)) onwards.
43.
The Member States determine the recognised need of all industrial installations within their territory, as established on the basis of those benchmarks, by multiplying the benchmarks for the activity in question by the historical activity level of the sub-installations concerned, in accordance with Article 10 of Decision 2011/278. Article 11(1) of Directive 2003/87 provides that they are to notify those data to the Commission by 30 September 2011. The Commission adds together the figures notified to it, so as to determine the total recognised need of all industrial installations within the European Union.
2. The industry ceiling calculated by the Commission
44.
The Commission calculates the second figure, the ‘industry ceiling’, to some extent from a bird’s eye perspective by determining, on the basis of historical emissions data, what share of the total quantity of emission allowances available is to be allocated to industrial installations as a whole. That industry ceiling consists of two partial amounts which are governed by Article 10a(5)(a) and (b) of Directive 2003/87.
a) Article 10a(5)(a) of Directive 2003/87
45.
In accordance with Article 10a(5)(a) of Directive 2003/87, the starting point for the first partial amount is the average annual total quantity of allowances, as provided for in the first paragraph of Article 9, that were allocated in the second allocation period from 2008 to 2012, that is to say the historical need of all installations subject to the scheme laid down in the directive during that period. That total quantity includes both groups, namely electricity generators and industrial installations.
46.
The quantity of those allowances was determined by the individual Member States. However, the version of Directive 2003/87 applicable at that time did not prescribe a specific method to be used in making that determination. ( )
47.
The average quantity for the European Union as a whole for the years 2008 to 2012, as determined on the basis of those national allocations, is decreased each year ( ) by a linear factor of 1.74% from the mid-point of that period, that is to say from 2010, in order to calculate the relevant annual total quantity applicable in future.
48.
In accordance with Article 10a(5)(a) of Directive 2003/87, however, only those installations not covered by Article 10a(3) can be taken into account in the calculation of the industry ceiling. In practice, therefore, allowances allocated to electricity generators up until 2012 are disregarded. The Commission calculates that number of allowances by reference to the average quantity of allowances allocated to industrial installations in the years 2005 to 2007.
49.
Allowances allocated to electricity generators in the past for emissions from the use of waste gases as fuel (see Section B, point 1) or the generation of industrially-produced heating in cogeneration installations (see Section B, point 2) do not therefore form part of the industry ceiling. Moreover, the reference to the number of allowances allocated to industrial installations in the period 2005 to 2007 also makes it impossible to take account of industrial installations which were subject to Directive 2003/87 only from 2008 onwards (see Section C, point 2, part (b)). These include certain combustion installations and installations within the territory of the EEA States. None the less, all such emissions are taken into account in the industrial benchmarks.
b) Article 10a(5)(b) of Directive 2003/87
50.
The second partial amount referred to in Article 10a(5)(b) of Directive 2003/87 covers installations which have been subject to the scheme laid down in the Directive only since 2013. Since then, for example, the scheme has also applied to emissions from the production of aluminium and from certain sectors of the chemicals industry.
51.
These installations are included on the basis of the total annual verified emissions which they generated on average in the years 2005 to 2007. That figure, too, is decreased each year by the aforementioned linear factor of 1.74% and no account is taken of electricity generators.
52.
This raises an issue inasmuch as the same emissions data were not used for all Member States. In the case of some Member States, the data used were confined to emissions from installations which had been included in the scheme only since 2013. In the case of other Member States, however, the data used also covered emissions from activities new to the scheme which are carried out at installations that were previously included in the scheme on account of other activities (see Section C, point 2, part (a)).
3. The correction factor determined
53.
At first sight, one would expect recognised need based on the most efficient installations, as calculated by the Member States, to be necessarily lower than the historical allocations to all installations, including the less efficient ones, that form the basis of the figure calculated by the Commission. ( ) Thus, the only striking feature likely to emerge from a comparison of the two figures would be the annual linear reduction of the industry ceiling by 1.74%. There should be no need for a correction factor until the ‘advantage’ achieved by taking the most efficient installations as basis of measurement has been offset by the reductions applied.
54.
In fact, however, the result of the comparison between the figure arrived at by the Member States and that calculated by the Commission gives the impression that the recognised need that formed the basis of Decision 2013/448 was of a greater magnitude than the historical allocations. After all, from the very start, the correction factor has a more pronounced impact than the linear reductions. In the first year, 2013, the correction factor of 94.272151% reduces the free allocation by 5.727849%. The linear reduction applied up to that point for the years 2011 to 2013 amounts to only 5.2%. That effect none the less dissipates to some extent over time. In the final year, 2020, a correction factor of 82.438204% is applied, thus giving rise to a reduction of 17.561796%. This is only slightly higher than the accumulated linear reduction of 17.4% over those ten years.
55.
For that reason, the applicants in the main proceedings consider the correction to be too high. They put this down in particular to the fact that certain activities were wrongly taken into account in the determination of recognised need ( ) but not taken into account in the determination of the industry ceiling. ( ) They also seek access to the data necessary to be able to carry out a comprehensive review of the calculation of the correction factor (see Section D).
4. The objectives of Directive 2003/87 in relation to the correction factor
56.
In response to that argument, it must be conceded that an ‘asymmetrical’ ( ) taking into account of certain activities is at odds with one of the objectives of the correction factor. It is true that those objectives were not expressly stated. In the light of the context within which it sits in the directive, the correction factor none the less serves a dual purpose.
57.
First, it gives effect to the linear reduction factor of 1.74%. Its purpose in this regard is unaffected by the asymmetry complained of. The reduction factor could, however, have been achieved without the complicated comparison between the recognised need and the industry ceiling.
58.
More important, therefore, is the correction factor’s second function: to ensure that the free allocations based on the product benchmarks do not tip the balance between industrial activities and electricity generation that existed under the former allocation scheme in favour of industry.
59.
That balance is important. For, if industrial activities as a share of the total quantity of available allowances were to increase, the quantity of allowances available for auction would dwindle accordingly. If the quantity of those allowances were not sufficient to satisfy the overall need that must be met through auctioning, there would be a risk of disproportionate price rises. This would place a burden primarily on the electricity industry and on electricity consumers. However, it would also affect certain industrial sectors that have to buy some of the allowances they require.
60.
Shifts in that historical balance do occur, however, where, as a result of a new method of calculation, activities that used to be classified as electricity generation or were not taken into account at all are now attributed to industry.
61.
As Linde, for example, explains, such an asymmetrical need for correction is also at odds with the objective laid down in Directive 2003/87 of avoiding ‘carbon leakage’. That term describes the process whereby activities that cause greenhouse gas emissions are relocated to third countries. An exodus of this kind would not only be economically disadvantageous; it would also undermine the overarching goal of reducing greenhouse gas emissions globally.
62.
For that reason, in order to avoid carbon leakage, Article 10a(12) of Directive 2003/87 provides that installations in sectors or subsectors which are exposed to a significant risk of carbon leakage are to be allocated allowances free of charge at 100% of their need as recognised by reference to the corresponding benchmarks. However, an unduly high correction factor may ultimately mean that they receive less than 100% of the allowances they require, and, therefore, that the scheme laid down in Directive 2003/87 creates an incentive for the relocation of such activities.
63.
On the other hand, the asymmetrical taking into account of the use of waste gases is consistent with the overarching objective of Directive 2003/87 to reduce climate-damaging emissions. Because it reduces the quantity of allowances allocated free of charge, it provides a greater incentive to reduce CO2 emissions. It therefore contributes to preserving and protecting the environment, to combating climate change and to ensuring a high level of protection, as required by Article 191 TFEU.
64.
In the light of the foregoing, it is necessary to examine more closely the four areas in which the applicant undertakings complain of such shifts in the balance between industry and electricity generation, that is to say the taking into account of waste gases and cogeneration installations (see Section B) and the taking into account of activities and installations which have been subject to the scheme laid down in Directive 2003/87 only since 2013 or 2008 (see Section C).
B – The taking into account of electricity generation from waste gases and of the industrial use of heating from high-efficiency cogeneration installations
65.
The first to fourth questions in Borealis Polyolefine, the third question in Dow Benelux and the first question in Esso Italiana concern the taking into account of electricity generation from waste gases (see point 1) and of the industrial use of heating from high-efficiency cogeneration installations (see point 2) in the calculation of the correction factor. Both activities are today classified as industrial activities, even though they were previously taken into account under the heading of electricity generation.
1. Electricity generation from waste gases
66.
Waste gases are produced as part of certain industrial production processes, such as in the manufacture of coke and steel, and can be used as fuel, in particular for electricity generation. From the point of view of the sustainable management of resources, this makes much more sense than discharging those gases or flaring them off to no useful purpose.
67.
Their use as such presumably explains why the first sentence of the third subparagraph of Article 10a(1) of Directive 2003/87 includes promoting the use of waste gases among the incentives to reduce greenhouse gas emissions and employ energy efficient techniques. It is probably also the reason why the second sentence of that provision creates an exception to the exclusion of electricity generation from the free allocation of allowances for electricity produced from waste gases.
68.
As the Commission explains, when it set the product benchmarks, it therefore took into account the fact that, in some sectors, waste gases are combusted to generate electricity. It states that this led in particular to an increase in the product benchmark for coke, hot metal and sintered ore, and therefore to an increase in the recognised need in those sectors.
69.
The Commission acknowledges that only some of the associated emissions were included in the industry ceiling, that is to say, only to the extent that the waste gases were combusted in industrial installations. To the extent that the waste gases were combusted by an electricity generator within the meaning of Article 10[a](3) of Directive 2003/87, however, they were left out of account in the calculation of the industry ceiling. Since the ceiling is lower by that amount, the fact that the waste gases are taken into account in the determination of the benchmarks increases the correction factor accordingly.
70.
It must therefore be examined whether the asymmetrical taking into account of the use of waste gases is compatible with Directive 2003/87.
71.
It must be pointed out, in this regard, that the asymmetry has its basis in the wording of Article 10a(1), (3) and (5) of Directive 2003/87. In accordance with paragraphs (3) and (5), electricity generators, and therefore the generation of electricity from waste gases too, are not to be taken into account in the calculation of the industry ceiling. The third subparagraph of paragraph (1), on the other hand, supports the inference that the Commission was to take into account electricity generation from waste gases in the determination of the product benchmarks forming the basis for determining the recognised need of industrial installations.
72.
Moreover, the applicants in the main proceedings cannot successfully counter the foregoing submission with the argument that the reference in Article 10a(5) of Directive 2003/87 to ‘installations which are not covered by paragraph 3’ must not be understood as meaning that emissions from electricity generators are not to be taken into account. They take the view that that reference is to installations which are eligible for the free allocation of allowances. There is, however, no basis for that view in the legislation.
73.
In particular, contrary to the argument put forward by Buzzi Unicem, it is not a precondition for the application of Article 10a(3) of Directive 2003/87 that no free allocation be given for electricity generation. Rather, the exclusion of free allocation is the legal consequence of that provision, to which other provisions permit exceptions.
74.
As I have indicated above, ( ) it is true that that asymmetry is not really in line with the objective pursued by the correction factor of maintaining the historical balance between industrial installations and electricity generation. It also increases the incentive to relocate emission-heavy activities. At the same time, however, it serves the environmental objectives of Directive 2003/87.
75.
In such a situation of conflicting objectives and structured considerations, one would have hoped that the legislature would expressly indicate its intentions. It did so, for example, in another provision of Directive 2003/87, namely the third sentence of the first paragraph of Article 9, which was inserted into the directive on the occasion of Croatia’s accession. In accordance with that provision, the quantity of allowances in the European Union is to be increased as a result of Croatia’s accession only by the quantity of allowances that Croatia must auction pursuant to Article 10(1). Since the allowances allocated free of charge by Croatia are not therefore taken into account, this inevitably leads to a reduction in the allowances available throughout the European Union and to a need for correction as provided for in Article 10a(5).
76.
So far as waste gases are concerned, however, there is no evidence of a similarly clear provision in this regard in the directive or of a corresponding reference in its preamble or drafting history. The indications are, in fact, that the legislature simply overlooked the issue when drafting Amending Directive 2009/29. After all, the reference to waste gases was included in that legislation only at a relatively late stage, in the course of the tripartite dialogue on the adoption of Directive 2009/29 at first reading. Waste gases were mentioned for the first time in an amendment proposed by the Parliament ( ) which, within the space of a few weeks, appeared in the interinstitutional compromise on the adoption of Directive 2009/29. ( ) In this regard, a number of MEPs bemoaned the great haste with which the directive had been adopted. ( )
77.
Nor, on the other hand, did the legislature expressly indicate that preference should in any event be given to the undistorted guarantee of the balance between industrial installations and electricity generators and to easing the burden on industrial installations.
78.
Consequently, the conflict of objectives connected with the asymmetrical taking into account of electricity generation from waste gases is no justification for interpreting Directive 2003/87 in a manner not supported by its wording so as to avoid that asymmetry.
79.
Moreover, there is no need to address the question of whether the Commission could none the less have removed the asymmetry associated with the taking into account of waste gases by means of implementing legislation. It is true that Article 10a(1) of Directive 2003/87 empowers it to adopt, in relation to Article 10a(5), implementing measures to amend non-essential elements of the directive by supplementing it. However, in the light of the conflicting objectives, it was in any event under no obligation to exercise that power in order to remove the asymmetry.
80.
It must therefore be concluded that the examination of the questions concerning electricity generation from waste gases has not revealed anything that would call into question the legality of the way in which the correction factor was determined in Decision 2013/448.
2. Cogeneration installations
81.
Cogeneration promises a more comprehensive use of the energy derived from fuels. If use is made only of the power generated, for example, to generate electricity, the heat produced is pointlessly lost. So, in cogeneration installations, the heat emitted is harnessed and made available for other activities. Some of that heat is also used to generate cooling.
82.
The questions concerning the taking into account of cogeneration installations are concerned only with those installations that satisfy the definition of an electricity generator in Article 3(u) of Directive 2003/87. Electricity generators are installations that produce electricity for sale to third parties, and in which no activity listed in Annex I is carried out other than the ‘combustion of fuels’.
83.
Although, during the written procedure, the parties to the proceedings were still in disagreement as to how such electricity cogeneration installations were to be taken into account in the calculation of the correction factor, they reached agreement on the matter following a question put to them at the hearing.
84.
Of interest in this regard is the situation where an electricity cogeneration installation supplies heating or cooling to industrial customers. As is clear in particular from recital 21 of Decision 2011/278, that situation is taken into account in the industrial consumer benchmark. The recognised need of that installation is therefore increased, but the associated emissions are not included in the industry ceiling because they derive from cogeneration installations, and therefore from electricity generators. The industrially-deployed heat from cogeneration installations therefore increases the correction factor and leads to further asymmetry.
85.
The factors to be taken into consideration here are essentially the same as those looked at in the context of electricity generation from waste gases.
86.
That asymmetry has its basis in Article 10a(1), (3) and (5) of Directive 2003/87. On the one hand, in accordance with paragraphs 3 and 5, electricity generators, and electricity cogeneration installations too, therefore, are left out of account in the determination of the industry ceiling. On the other hand, the first sentence of the third subparagraph of paragraph 1 provides that the product benchmarks are to provide incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account, inter alia, of high efficiency cogeneration.
87.
The integration of heating consumption into the industrial product benchmarks provided for by the Commission in Decision 2011/278 is consistent with that objective and makes it easier in practice to deal with heating usage by industry when it comes to the free allocation of allowances. Such usage is made easier to handle because installations which generate heat themselves and installations which obtain heating from cogeneration installations are treated in the same way. This makes it unnecessary to verify how much heating individual installations obtain and from which sources for the purposes of allocating allowances to those installations. It also has the effect of promoting the reduction of greenhouse gas emissions to the extent that, when procuring heating from cogeneration installations, industrial installations save allowances which they can sell.
88.
At first sight, the first sentence of Article 10a(4) of Directive 2003/87 appears to say something different, to the effect that allowances are to be allocated to high efficiency cogeneration, for economically justifiable demand, in respect of the production of heating or cooling. However, the possibility of such direct allocation does not preclude account being taken of consumption in the product benchmarks, but above all permits cogeneration installations to be allocated allowances for the production of heating or cooling which they do not supply to customers forming part of the scheme laid down in the directive. Such customers include, for example, private households.
89.
It is for this reason that the benchmarks for the industrial use of heating from cogeneration installations fall within the framework of the implementing powers exercised by the Commission in accordance with Article 10a(1) of Directive 2003/87.
90.
Furthermore, the same applies here as in the context of the taking into account of waste gases. It is true that there are conflicting objectives and no clear guidance from the legislature. However, this does not compel an interpretation of Directive 2003/87 which precludes such asymmetry. Moreover, the Commission was under no obligation to remove that asymmetry when exercising its implementing powers.
91.
Consequently, the examination of the questions concerning the taking into account of cogeneration has also revealed nothing that would call into question the legality of the way in which the correction factor was determined in Decision 2013/448.
C – The data used for the industry ceiling so far as concerns the sectors to be included for the first time as from 2008 or 2013
92.
All three national courts raise doubts about the data used for the industry ceiling so far as concerns the sectors to be included for the first time as from 2013 onwards. While the Raad van State, by its fourth question, asks whether the implementing provisions necessary for the provision of the data already existed (see Section 1), the questions put by the other two courts concern the quality and scope of the data communicated and used (see Section 2(a)). Those two courts also raise doubts as to whether due account was taken of installations and activities that were included for the first time in 2008 (see Section 2(b)).
1. The implementing provisions
93.
By its fourth question, the Raad van State wishes to ascertain whether the determination of the correction factor is unlawful because, among other things, it is based on data submitted for the purposes of implementing Article 9a(2) of Directive 2003/87, even though the provisions referred to there, to be adopted pursuant to Article 14(1), were not in place.
94.
Only on second glance does it become clear what bearing Article 9a(2) of Directive 2003/87 has on the correction factor at issue. That provision specifies how the average total annual verified emissions in the years 2005 to 2007, which are to be added to the industry ceiling in accordance with Article 10(5)(b), are to be determined in the case of installations which are included in the scheme only from 2013 and are not electricity generators.
95.
In the case of those installations, the first subparagraph of Article 9a(2) of Directive 2003/87 requires operators to submit to the relevant competent authority duly substantiated and independently verified emissions data in order for them to be taken into account for the adjustment of the industry ceiling.
96.
In this regard, the second subparagraph of Article 9a(2) of Directive 2003/87 provides that those data are to be submitted in accordance with the provisions adopted pursuant to Article 14(1).
97.
The Raad van State assumes that the provisions in question are those contained in Regulation (EU) No 601/2012, ( ) although they had not yet been adopted at the time when the aforementioned data were submitted to the Commission. After all, in accordance with the second subparagraph of Article 9a(2) of Directive 2003/87, the data had to be submitted by 30 April 2010.
98.
As Germany rightly contends, the submission of the data in 2010 could none the less be based on uniform provisions which had been laid down in Decision 2007/589. ( ) Those provisions were required by the version of Article 14(1) of Directive 2003/87 in force prior to Amending Directive 2009/29.
99.
It must also be assumed that the second subparagraph of Article 9a(2) of Directive 2003/87 refers to the provisions of Decision 2007/589. After all, that subparagraph required the data to be submitted at a point in time prior to the deadline for the adoption of the new implementing provisions contained in Regulation No 601/2012. In its new version, Article 14(1) of Directive 2003/87 laid down a deadline for the adoption of the new implementing provisions of no later than 31 December 2011.
100.
Furthermore, there is nothing in the relevant provisions to indicate that, so far as concerns the determination of the correction factor, the necessary data must be established and submitted again on the basis of Regulation No 601/2012.
101.
The question thus raised by the Raad van State has therefore revealed nothing that would call into question the legality of the way in which the correction factor was determined in Article 4 of, and Annex II to, Decision 2013/448.
2. The quality of the data
102.
In this context, the requests for a preliminary ruling from Italy and Austria also cast doubt on the quality and scope of the data submitted by the Member States. These questions are based on the fact that the scheme laid down in Directive 2003/87 was further extended both between the first phase (2005 to 2007) and the second phase (2008 to 2012) (see Section b) and by the third phase (2013 to 2020) (see Section a).
a) The expansion from 2013 onwards
i) The failure to take account of new activities in the data submitted by some Member States
103.
In its ninth question, the Landesverwaltungsgericht Niederösterreich assumes that the data on emissions from installations which, prior to 2013, were subject only in part to the scheme laid down in Directive 2003/87 were not fully taken into account in the determination of the industry ceiling, that is to say that they were taken into account only to the extent that those installations had been subject to the scheme previously.
104.
That, in essence, is also the assumption which underpins the fifth question referred by the Tribunale Amministrativo Regionale per il Lazio, which, ostensibly, is concerned with the Member States’ different interpretations of Article 9a(2) of Directive 2003/87. After all, those differences relate specifically to whether the data to be submitted by the Member States must relate only to installations subject to the scheme for the first time from 2013 onwards, or must also cover activities newly subject to the scheme which are carried on in installations that were already included in the scheme on account of other activities.
105.
Article 10a(5)(b) and the first sentence of the third subparagraph of Article 9a(2) of Directive 2003/87 do not provide a clear answer to those questions as they do not deal with emissions from newly included activities carried on at installations already covered by the scheme. Both provisions refer only to the verified emissions from installations included in the scheme for the first time from 2013 onwards.
106.
If, however, emissions subject to the scheme only from 2013 onwards which are the result of activities carried on at installations already covered by that scheme are not taken into account in the determination of the industry ceiling, this will inevitably increase the need to apply a correction, since those activities are taken into account in the calculation of recognised need.
107.
Much as with the taking into account of electricity generation from waste gases ( ) and heating from cogeneration installations, ( ) therefore, the wording of the relevant provision causes emissions to be taken into account in an asymmetrical manner. This situation too is characterised by the familiar conflicting objectives and a lack of clear guidance from the legislature.
108.
In this instance too, therefore, a different interpretation of Article 10a(5)(b) of Directive 2003/87 is not required and the Commission was under no obligation to redress the asymmetry in the implementing rules.
109.
It must therefore be concluded that the examination of the questions concerning installations and activities subject to the scheme laid down in Directive 2003/87 only since 2013 has not shown that the fact that account was not taken of new activities carried on in installations already covered by the scheme in the data submitted by certain Member States for the purposes of establishing the industry ceiling calls into question the legality of the way in which the correction factor was determined in Article 4 of, and Annex II to, Decision 2013/448.
ii) The taking into account of new activities in the data submitted by other Member States
110.
The foregoing examination has shown, however, that the fact that account was taken of new activities carried on in installations already covered by the scheme in the data submitted by other Member States for the purposes of establishing the industry ceiling does call into question the legality of the way in which the correction factor was determined in Article 4 of, and Annex II to, Decision 2013/448, since Article 10a(5)(b) of Directive 2003/87 provides that account is to be taken only of new installations.
111.
Contrary to the argument advanced by Germany, there is also no discretion in the interpretation of Article 10a(5)(b) of Directive 2003/87 that would allow some Member States to take into account only installations newly subject to the scheme, while other Member States also include new activities carried on in installations already covered by that scheme. Member States’ authorities may well enjoy a measure of discretion in the assessment of the data communicated by operators, but there is simply no legal basis for taking account of new activities carried on in installations already covered by the scheme.
112.
The point is rightly made by the Commission — and Germany — that Directive 2003/87 does not allow it to alter the information supplied by the Member States. It does not follow from this, however, that the correction factor may be determined on the basis of data which the applicable provisions preclude from being taken into account. Rather, the Commission must at least investigate any doubts as to the quality of the data and, if necessary, ensure that the Member States make the necessary corrections as soon as possible. This is part and parcel of the task assigned to it under Article 17(1) TEU of overseeing the application of EU law.
113.
Moreover, no other inference can be drawn from the judgment in Commission v Estonia. That judgment concerned the previously applicable version of Directive 2003/87, which afforded the Member States considerably greater discretion than the law in force now. What is more, even in that case, the Court did not rule out a review of legality. ( )
114.
Nor does the need to determine the correction factor at a particular time do anything to alter the position. If the data to be used cannot be ascertained in good time, the Commission must, if necessary, determine a preliminary correction factor which it may adjust at a later date.
115.
It must thus be concluded that Article 10(a)(5)(b) of Directive 2003/87 permits account to be taken only of emissions from installations newly subject to the scheme from 2013 onwards, but not of activities newly included in the scheme that are carried on in installations already covered by it.
116.
It has none the less been argued in the course of the present proceedings that France, Belgium, Germany, Italy and Spain at least have also submitted data on emissions from activities newly subject to the scheme that are carried on in installations already covered by the scheme on account of other activities. What is more, the Commission used that data in its calculation of the industry ceiling.
117.
The Commission thus established an unduly high industry ceiling in so far as, in its calculation, it took account of emissions from activities newly subject to the scheme since 2013 that were carried on in installations already covered by that scheme. To that extent, the correction factor was determined in an unlawful manner and Article 4 of, and Annex II to, Decision 2013/448 are invalid.
118.
It is important to make the further point that that principle should apply not only in the context of establishing the correction factor but also when it comes to determining the total quantity of allowances available under Article 9a(2). In that event, the asymmetry would give rise not to fewer free allocations but to a reduced quantity of available allowances and, therefore, to a reduction in climate-damaging emissions. This would be even more clearly consistent with the overarching environmental objectives pursued by Directive 2003/87 and Article 191 TFEU than the restriction of free allocations. However, since none of the questions in the present proceedings concerns the total quantity available, the Court is under no obligation to give a ruling in this regard.
b) The expansion from 2008 onwards
119.
By its fourth question, the Tribunale Amministrativo Regionale per il Lazio also wishes to ascertain whether the calculation of the industry ceiling is erroneous because the expansion of the scheme that took place between the first phase (2005 to 2007) and the second phase (2008 to 2012) of implementation of Directive 2003/87 was not taken into account in the determination of the industry ceiling. This includes the alleged error which the Landesverwaltungsgericht Niederösterreich raises for examination in its eighth question. It assumes that the data on emissions from installations which, prior to 2008, were subject to the scheme laid down in Directive 2003/87 only in part were not fully taken into account, that is to say only to the extent that they had been subject to the scheme beforehand.
120.
The amendments made during the second allocation period were the result of clarifications by the Commission, with regard to the meaning of ‘combustion installation’, on the basis of which some Member States were compelled to include a number of other installations. ( ) In addition, Norway, Iceland and Liechtenstein joined the scheme.
121.
When calculating historical emissions for the purposes of determining the industry ceiling, the Commission relied on the European Union Emissions Register. ( ) However, that register did not contain data on emissions from installations that were included in the scheme for the first time in the second allocation period.
122.
As the Commission correctly submits, this is consistent with Article 10a(5)(a) of Directive 2003/87, which provides that only the average verified emissions for the years 2005 to 2007 may be used for the calculation of the industry ceiling. Moreover, so far as concerns the activities included from 2008 onwards, there is no provision comparable to Article 9a(2) that would require the Member States to submit verified data on emissions from those activities too. Consequently, emissions that were included only from 2008 onwards were not verified and for that reason could not be taken into account.
123.
To this extent too, therefore, the wording of the relevant provisions leads to emissions being taken into account in an asymmetrical manner. Consequently, the same considerations apply here as in the context of the asymmetries examined previously.
124.
Examination of these questions has therefore revealed nothing that would call into question the validity of the way in which the correction factor was determined in Decision 2013/448.
D – The statement of reasons for the determination of the correction factor
125.
The Raad van State (fifth and sixth questions) and the Tribunale Amministrativo Regionale per il Lazio (third question) also present the Court with doubts as to the statement of reasons for the determination of the correction factor.
126.
Those questions have to do with the proposition that the statement of reasons for Decision 2013/448, that is to say, in essence, recital 25 of that decision, does not contain all the data necessary to convey an understanding of how the correction factor is calculated. They are concerned in particular with the contentions that certain figures can be inferred only indirectly from the information provided in the statement of reasons (see Section 4), and that an explanatory document published subsequently by the Directorate-General for Climate Action, although containing important additional information, first of all, does not form part of the statement of reasons (see Section 3) and, secondly, still lacks a considerable amount of important information (see Section 2). In order to answer those questions, it is necessary, first of all, to clarify the requirements applicable to a statement of reasons (see Section 1).
1. The need to give reasons for the determination of the correction factor in Decision 2013/448
127.
It is common knowledge that the statement of reasons required by the second paragraph of Article 296 TFEU must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the persons concerned to ascertain the reasons for it and to enable the competent Court of the European Union to exercise its power of review. ( )
128.
The Court has expanded on the foregoing inasmuch as it has held that, in addition to permitting review by the Courts, the purpose of the reasons given for individual decisions is to provide the person concerned with sufficient information to know whether the decision may be vitiated by an error enabling its validity to be challenged. ( )
129.
In the case of measures of general application, however, the statement of reasons may be confined to indicating the general situation which led to its adoption and the general objectives which it is intended to achieve; it must clearly disclose only the essential objective pursued by the measure in question. ( ) In those circumstances, it would be excessive to require a specific statement of reasons for each of the technical choices made by the institution. ( )
130.
The determination of the correction factor at issue is without any doubt not an individual decision but a measure of general application and, at the same time, a technical choice made by the Commission. It might therefore be assumed that the requirements applicable to the statement of reasons are limited.
131.
That assumption would, however, be incorrect.
132.
The limited requirements applicable to the statement of reasons for measures of general application are explained by the discretion which the legislature regularly enjoys in the formulation of such measures. Since that discretion is open to judicial review only within narrow limits, the statement of reasons need only contain the elements necessary to support such limited review.
133.
When it determined the correction factor in Decision 2013/448, however, the Commission was not exercising powers conferring such discretion. The method of calculation and the data to be used are set out in Directive 2003/87 and Decision 2011/278. Any judicial review therefore extends in essence to whether that method was correctly applied and whether the correct data were used. The statement of reasons must therefore contain the data necessary to make such a review possible.
2. The data used by the Commission
134.
The foregoing itself provides a key component of the answer to the sixth question referred by the Raad van State, that is to say whether the statement of reasons must include all the data necessary to make it possible to conduct a detailed review of the calculation of the correction factor.
135.
The statement of reasons for Decision 2013/448 must indeed refer specifically to those data, since the Court would otherwise be unable to review whether the Commission used the correct data when calculating the correction factor and properly applied the method of calculation. By the same token, the persons concerned also need those data in order to be able to pursue the corresponding legal remedies — before the Courts of the European Union or the national courts.
136.
The statement of reasons for the determination of the correction factor that is set out in recital 25 of Decision 2013/448 clearly does not satisfy those requirements, since it does not contain all the data which the Commission used to calculate the correction factor. In this regard, the Raad van State draws particular attention to three factors.
137.
First, in order to be able to review the determination of the proportion of emissions in the period 2005 to 2007 that were attributable to installations which are not electricity generators, it would be necessary to know which installations the Commission regards as electricity generators.
138.
Secondly, the calculation of the total amount of emissions from installations which have been subject to the rules on emission trading only since 2013 is understandable only on sight of the related data submitted by the Member States to the Commission on the basis of Article 9a(2) of Directive 2003/87.
139.
Thirdly, the non-adjusted allocation is verifiable only via access to the lists, communicated by the Member States, containing the preliminary total annual amounts of emission allowances allocated free of charge.
140.
To my mind, however, it is not essential for those data to be incorporated in full into the statement of reasons for the measure, since the statement would then become very extensive. The Court has thus recognised that the degree of precision of the statement of reasons for a decision must be weighed against practical realities and the time and technical facilities available for making it. ( ) It would therefore have been enough to make available the possibility of viewing the raw data and to include a reference to that effect in the statement of reasons.
141.
This did not happen, however. Not only that, the Commission even refused to grant access to the data after having been asked for sight of it. In so doing, it undermined the comprehensive legal protection attendant upon the calculation of the correction factor.
142.
However, the Commission and Germany rely on the fact that those data contained business secrets.
143.
It must be conceded, in that regard, that the protection of confidential information and business secrets must be adjusted so as to reconcile it with the requirements of effective legal protection and the rights of defence of the parties to the dispute. ( )
144.
As a rule, this means that the body responsible for the review, usually a court, must have at its disposal all the information required in order to decide in full knowledge of the facts. This includes confidential information and business secrets. On the other hand, it must be possible to withhold that information from one party if the opposing party convinces the review body that there is an overriding interest in ensuring that that information is treated confidentially. ( )
145.
In the present case, however, it is doubtful whether there is an overriding interest in ensuring that the necessary data is treated confidentially. After all, Article 17 of Directive 2003/87 provides that decisions relating to the allocation of allowances and the reports of emissions required under the greenhouse gas emissions permits and held by the competent authority are to be made available to the public in accordance with the Environmental Information Directive. ( ) Article 15a of Directive 2003/87 says much the same.
146.
As the second paragraph of Article 15a of Directive 2003/87 provides, the foregoing does not preclude the protection of business secrets which none the less exist, but the reasons given for protecting such a secret must be subject to stringent requirements, since the obligation to preserve that secret cannot be given so wide an interpretation that the obligation to provide a statement of reasons is deprived of its essential content, thus making it difficult for a party to prepare its defence. ( )
147.
It should be borne in mind in particular that, in accordance with the fourth sentence of Article 4(2) of the Environmental Information Directive and the first sentence of Article 6(1) of the Åarhus Regulation, ( ) access to information relating to emissions into the environment cannot be refused on the basis of business or trade secrets.
148.
Contrary to the view expressed by the Commission, not even the judgment in Ville de Lyon operates to alter that position. It is true that that judgment too concerned access to specific information on the application of Directive 2003/87. However, that information was subject to a specific scheme which, in derogation from the Environmental Information Directive, precluded such access. ( ) On the other hand, there is nothing to indicate that the information of interest in the present case is subject to a specific scheme making it impossible for the principle laid down in the Environmental Information Directive and the Aarhus Regulation to be transposed to the obligation to state reasons.
149.
It seems at least reasonable to assume that much, if not perhaps all, of the relevant information in the present case concerns emissions into the environment. This would point to the need for a careful examination to determine which of the data used do not concern emissions into the environment and must at the same time be treated confidentially as business secrets. In addition to the aforementioned factors, the Commission would also have to look, in that examination, at whether the interest in the protection of information originally to be recognised as business secrets has since ceased to exist on account of the passage of time. ( ) All the other data necessary to review the way in which the correction factor was determined should be available to the general public, and also, therefore, to the undertakings concerned.
150.
In the present proceedings, it is impossible to come to a definitive decision on which data used to calculate the correction factor must be treated confidentially for overriding reasons. Thus, at the hearing, Germany explained that the data relating to the total annual emissions from installations are public, whereas data relating to particular parts of installations are regarded as business secrets because they permit the inference of conclusions with respect to production. The extent to which the latter data are necessary in order to make it possible to review the calculation of the correction factor and the question whether they should in fact be treated confidentially in this instance are not matters that form part of the subject matter of the present proceedings.
151.
The fact none the less remains that the determination of the correction factor in Article 4 of, and Annex II to, Decision 2013/448 is insufficiently reasoned and therefore invalid. It falls to the Commission to adopt a new decision containing a sufficient statement of reasons and, in so doing, to examine to what extent the confidential treatment of the raw data is justified. Any difference of opinion in this regard must, if necessary, form the subject of new proceedings.
3. The explanatory paper prepared by the Directorate-General for Climate Action
152.
It is also important to make clear that, irrespective of its content, the explanatory paper produced by the Directorate-General for Climate Action on 22 October 2013, ( ) to which reference is made in the third question referred by the Tribunale Amministrativo Regionale per il Lazio, was not capable of remedying the aforementioned inadequacy of the statement of reasons.
153.
The question raised by the Tribunale Amministrativo is based on the correct view that the statement of reasons for an EU measure must appear in the measure itself and be adopted by the author of the measure. ( )
154.
It is true that the scope of the obligation to state reasons may be restricted where the relevant information is known to the persons concerned. ( ) However, such knowledge may limit the obligation to state reasons at most where the persons concerned were able to gain access to that information at the same time as the decision. The document in question, however, is dated 22 October 2013, whereas Decision 2013/448 was adopted on 5 September 2013 and was published two days later.
155.
However, information supplied later is capable only of supplementing a statement of reasons which is in and of itself sufficient, but cannot remedy any inadequacy in the statement of reasons. It must also be borne in mind, in the present case, that that information was not published by the Commission as the author of Decision 2013/448, but merely by one of its departments. The fact that the Commission has not made a single direct reference to that document in the present proceedings, and, since its publication, has even contradicted it so far as concerns the taking into account of cogeneration installations, shows that that document does not have the same status as the statement of reasons for a measure.
4. The need for a back-calculation
156.
Lastly, the Raad van State asks whether the fact that only some of the quantities of emissions and emission allowances that are crucial to the calculation of the correction factor were indicated in the decision is compatible with the obligation to state reasons. That question is based on the fact that certain initial values can be determined only by back-calculating from the figures given, in accordance with the calculation rules.
157.
This does not constitute an inadequacy in the statement of reasons, however, since the scope of the obligation to state reasons is to be determined with reference to the context of the measure and the whole body of legal rules governing the matter in question. ( ) Provided that that context makes it possible, with reasonable effort, to ascertain further reliable information on the basis of the details given in a statement of reasons, the obligation to state reasons is discharged. As I have already explained, however, this is not a means of determining all the necessary data.
5. Conclusion with respect to the statement of reasons for the determination of the correction factor
158.
The determination of the correction factor in Article 4 of, and Annex II to, Decision 2013/448 does not adequately state the reasons on which it is based and is therefore invalid.
E – The fundamental right to property (sixth question in Borealis Polyolefine and second question in Esso Italiana)
159.
The requests for a preliminary ruling from Austria and the requests from Italy all raise the question of whether the fact that the preliminary quantity of emission allowances to be allocated free of charge was reduced by virtue of the correction factor is compatible with the fundamental right to property.
160.
The Tribunale Amministrativo Regionale per il Lazio refers in this regard to Article 1(1) of the First Additional Protocol to the ECHR and to Article 17 of the ECHR, which prohibits the abuse of rights and freedoms. However, since the ECHR is not directly binding on the European Union, ( ) regard must be had to the corresponding provisions of the Charter of Fundamental Rights, that is to say Articles 17 and 54, and to the associated general principles of EU law.
161.
However, it is unclear to what extent an abuse of fundamental rights within the meaning of Article 54 of the Charter might exist.
162.
My examination must therefore be confined to the right to property protected under Article 17 of the Charter and the associated general legal principle. The protection granted by Article 17 does not apply to mere commercial interests or opportunities, the uncertainties of which are part of the very essence of economic activity, but applies to rights with an asset value creating an established legal position under the legal system, enabling the holder to exercise those rights autonomously and for his benefit. ( )
163.
However, the foregoing does not apply in the case of the preliminary calculation of the number of free emission allowances provided for in Article 10 of Decision 2011/278. That calculation was not capable of creating an established legal position because Article 10a(5) of Directive 2003/87 provides for the possibility of its being reduced.
164.
What is more, the foregoing is not altered by the references made by the Tribunale Amministrativo Regionale per il Lazio to the case-law of the ECtHR to the effect that the protection of property under Article 1(1) of the First Additional Protocol to the ECHR can also include the legitimate expectation of acquiring an asset. ( ) It is true that, in accordance with Article 52(3) of the Charter, the meaning and scope of Article 17 of the Charter is the same as that of the right to property under the ECHR as interpreted by the ECtHR. ( ) However, the fact that provision is made for a correction factor to reduce the preliminary calculation precludes any legitimate expectation. ( )
165.
The correction factor does not therefore infringe the fundamental right to property.
F – Procedure for the adoption of Decision 2013/448
166.
By the fifth question referred in Borealis Polyolefine, the second question referred in Dow Benelux and the sixth question referred in Esso Italiana, the national courts each wish to ascertain, in essence, whether the determination of the correction factor is invalid because the Commission did not adopt Decision 2013/448 on the basis of the regulatory procedure with scrutiny provided for in Article 5a of Decision 1999/468.
167.
The background to those questions is the fact that, although Article 10a(1) of Directive 2003/87 empowers the Commission to adopt implementing measures, it must, when doing so, apply the regulatory procedure with scrutiny. The purpose of that procedure is to provide a means of monitoring the Commission in its exercise of quasi-legislative powers. The monitoring process consists, on the one hand, of submission of the measures to a regulatory committee composed of representatives of the Member States and, on the other hand, of the possibility of subsequent intervention by the Parliament and the Council.
168.
The Commission adopted Decision 2011/278 under that procedure and, in Article 15(3) of that decision, laid down the detailed rules for the calculation of the correction factor provided for in Article 10a(5) of Directive 2003/87. The quantitative determination of the correction factor, on the other hand, manifested itself in the adoption, without the application of a separate procedure, of Article 4 of, and Annex II to, Decision 2013/448.
169.
The direct legal basis for the adoption of Article 4 of, and Annex II to, Decision 2013/448 is Article 15(3) of Decision 2011/278, in accordance with which the Commission is to determine the correction factor. Although Article 15(3) of Decision 2011/278 is not explicitly referred to as the legal basis in the preamble to Decision 2013/448, it is none the less expressly mentioned as the legal basis for Decision 2013/448 in Article 4 of that decision. ( )
170.
Article 15(3) of Decision 2011/278 did not, however, lay down any specific rules relating to the procedure for determining the correction factor. In principle, therefore, the Commission was empowered simply to adopt Article 4 of Decision 2013/448.
171.
A number of parties to the proceedings contend, however, that, in Article 15(3) of Decision 2011/278, the Commission unlawfully conferred on itself the power to determine the correction factor or at least circumvented the regulatory procedure with scrutiny.
172.
It must be considered, first of all, whether, in Article 15(3) of Decision 2011/278, the Commission was entitled to provide itself with a legal basis for the adoption of Article 4 of Decision 2013/448.
173.
In accordance with the first subparagraph of Article 10a(1) of Directive 2003/87, the Commission is to adopt implementing measures for the free allocation of allowances. Decision 2011/278 is one such implementing measure. Since the power to determine the correction factor provided for in Article 15(3) also has the object of implementation, the creation of such a legal basis for that power is, in principle, an appropriate subject for the provisions contained in implementing measures of that kind.
174.
Articles 290 TFEU and 291 TFEU may, however, impose limits on the content of such implementing measures.
175.
In accordance with Article 290(1) TFEU, a legislative act may delegate to the Commission the power to adopt non-legislative acts of general application to supplement or amend certain non-essential elements of the legislative act. This is known as ‘delegated legislation’.
176.
Article 291(2) TFEU, on the other hand, provides that, where uniform conditions for implementing legally binding Union acts are needed, those acts confer implementing powers on the Commission (or, in specific cases, on the Council).
177.
The classification of Decision 2013/448 under one of those two categories is made more difficult by the fact that the Commission refers to it neither as a delegated act nor as an implementing measure, even though Article 290(3) TFEU and Article 291(4) TFEU require it to be so designated. None the less, I do not consider that procedural error to be serious enough in the present case to justify the repeal of that decision, since it is sufficiently clear from the context in which it was adopted and its content that it is an implementing measure. ( )
178.
The proposition that it was the Commission’s intention to adopt an implementing measure is supported not least by the fact that Decision 2013/448 is based on Decision 2011/278. After all, in accordance with Article 290(1) TFEU, a delegated act may be based only on a legislative act. In accordance with Article 289 TFEU, the delegated acts referred to are legal acts adopted on the basis of the Treaties by the Parliament and the Council, but not legal acts adopted by the Commission. Article 291(2) TFEU, on the other hand, provides that implementing powers may be conferred simply by ‘legally binding acts’, and therefore also by legal acts adopted by the Commission such as Decision 2011/278.
179.
The content of Article 4 of, and Annex II to, Decision 2013/448 confirms its classification as an implementing measure.
180.
When exercising implementing powers within the meaning of Article 291 TFEU, the institution concerned must provide further detail in relation to the content of the basic act, in order to ensure that it is implemented under uniform conditions in all the Member States. ( ) The further detail remains within the bounds of what is permissible, provided that the provisions of the implementing measure (i) comply with the essential general aims pursued by the basic act and (ii) are necessary or appropriate for the implementation of that act. ( ) However, the implementing measure may neither amend nor supplement the basic act, even in relation to its non-essential elements. ( ) The Commission may be so empowered only under Article 290 TFEU.
181.
The determination of the correction factor via the adoption of Article 4 of, and Annex II to, Decision 2013/448 did not have the effect of amending either Decision 2011/78 or Directive 2003/87. There was no interference with the text of those acts. Indeed, their prescriptive content remained unchanged. ( ) Nor have those acts been supplemented. After all, the Commission did not establish the correction factor in Decision 2013/448. It had already been laid down in Directive 2003/87 and was elaborated upon in Decision 2011/278.
182.
The quantitative determination of the correction factor is the result rather of the application of the calculation mechanism already laid down for that purpose and thus implements Article 10a(5) of Directive 2003/87 and Article 15(3) of Decision 2011/278. Since the need for an EU-wide uniform determination in this context must also be recognised as a point of common ground, the adoption of Article 4 of, and Annex II to, Decision 2013/448 constitutes an implementing measure falling within the scope of Article 291(2) TFEU.
183.
Article 291(3) TFEU provides that, so far as concerns implementing measures adopted by the Commission, the Parliament and the Council are to lay down in advance the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers.
184.
Those rules and general principles are laid down in Regulation (EU) No 182/2011. ( ) That regulation does not, however, lay down any mandatory procedural requirements, since, in accordance with Article 1, such rules and principles are to apply (only) where a legally binding Union act requires that the adoption of implementing acts by the Commission be subject to the control of Member States.
185.
The Commission was therefore entitled, in Article 15(3) of Decision 2011/278, to grant itself the power to determine the correction factor without providing for a further control procedure.
186.
Since the determination of the correction factor in Article 4 of, and Annex II to, Decision 2013/448 is an implementing measure within the meaning of Article 291 TFEU, the objection that the regulatory procedure with scrutiny was circumvented can also be easily dealt with.
187.
After all, the second subparagraph of Article 10a(1) of Directive 2003/87 requires that that procedure be applied only to measures designed to amend non-essential elements of that directive by supplementing it. As the foregoing submissions show, however, the determination of the correction factor is not such a measure.
188.
The examination of the questions concerning the failure to apply the regulatory procedure with scrutiny has not therefore revealed anything that would call into question the legality of the determination of the correction factor in Article 4 of, and Annex II to, Decision 2013/448.
G – The possibility of direct recourse to the EU judicature
189.
By its first question, the Raad van State asks whether operators of existing industrial installations to which the rules on emission trading laid down in Directive 2003/87 have applied since 2013 could beyond doubt have brought before the General Court an action for the annulment of the correction factor laid down in Decision 2013/448.
190.
That question relates to the settled case-law to the effect that the recognition of a party’s right to plead the invalidity of an act of the Union before national courts presupposes that that party did not have the right to bring, under Article 263 TFEU, a direct action for the annulment of that act before the EU judicature. ( ) Were it to be accepted that a party who beyond doubt had standing to institute proceedings under the fourth paragraph of Article 263 TFEU for the annulment of an act of the Union could, after the expiry of the time limit for bringing proceedings laid down in the sixth paragraph of Article 263 TFEU, challenge before the national courts the validity of that act, that would amount to enabling the person concerned to circumvent the fact that that act is final as against him once the time limit for his bringing an action has expired. ( )
191.
Consequently, the relevance of the questions examined above concerning the validity of the determination of the correction factor in Decision 2013/448 would be in doubt if the applicants in the main proceedings could have brought actions before the EU judicature and had beyond doubt had standing to bring such actions. I shall show, however, that that is not the case.
192.
In accordance with the fourth paragraph of Article 263 TFEU, any natural or legal person may institute proceedings against an act addressed to that person (first scenario) or which is of direct and individual concern to that person (second scenario), and against a regulatory act which is of direct concern to them and does not entail implementing measures (third scenario).
193.
The applicants in the main proceedings do not have standing to bring an action under the first or third scenarios provided for in the fourth paragraph of Article 263 TFEU. Decision 2013/448 is addressed not to them but, pursuant to Article 5 thereof, to the Member States. Moreover, the correction factor laid down in Article 4 of that decision requires the adoption of implementing measures by the Member States, that is to say with a view to adjusting the preliminary calculation of the quantity of allowances to be allocated free of charge.
194.
The applicants could therefore have standing to bring an action for the annulment of Decision 2013/448 before the EU judicature only under the second scenario provided for in the fourth paragraph of Article 263 TFEU. This presupposes that the decision is of direct and individual concern to them.
195.
Persons other than those to whom a decision is addressed may claim to be individually concerned only if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed by such a decision. ( )
196.
It is true that the correction factor is of potential concern to anyone, since it is also applicable to installations which are new entrants to the emission allowance trading scheme. However, the fact that a provision is, by its nature and scope, a provision of general application inasmuch as it applies to the economic operators concerned in general, does not of itself prevent that provision from being of individual concern to some. ( )
197.
In the present case, there is a definable group of persons to whom the correction factor is of concern, that is to say the existing industrial installations. They are the subject of a preliminary calculation of the quantity of emission allowances to be allocated to them free of charge which is then reduced in accordance with the correction factor. Furthermore, Article 4 of Directive 2003/87 provides that all installations covered by the trading scheme require a permit for the release of greenhouse gas emissions.
198.
The case-law on the question of whether the members of such a definable group are individually concerned is not very clear, however.
199.
On the one hand, the Court has held that, where a decision affects a group of persons who were identified or identifiable when that measure was adopted by reason of criteria specific to the members of the group, those persons might be individually concerned by that measure inasmuch as they form part of a limited class of traders. ( ) That can be the case particularly when the decision alters rights acquired by the individual prior to its adoption. ( )
200.
Contrary to the view taken by the Netherlands, however, the owners of the installations concerned did not acquire any emission rights prior to the decision on the correction factor, since the earlier calculation of allowances under Articles 10(2) and 15(2)(e) of Decision 2011/278 was provisional. ( ) Rather, as the Commission rightly submits, the rights enjoyed by the undertakings could not be determined until the correction factor had been calculated. In this regard, the situation here differs from the situation at issue in judgments such as that in Codorniu, which concerned a provision affecting existing trade mark rights, ( ) or that in Infront, which concerned existing rights to televise sporting events. ( )
201.
It is appropriate, therefore, to look at the opposing body of case-law. In this, the Court held that the fact that it is possible to determine more or less precisely the number, or even the identity, of the persons to whom a measure applies by no means implies that that measure must be regarded as being of individual concern to those persons where it is established that that application takes effect by virtue of an objective legal or factual situation defined by the measure in question itself. ( ) The General Court understands this to mean that, where the class of persons concerned results from the very nature of the system established by the contested legislation, the person concerned cannot be distinguished individually by belonging to that class. ( )
202.
It was for that reason that the Court recently held in a very similar case that the measure at issue was not of individual concern. That case concerned the fixing of an allocation coefficient to be applied to applications in the sugar market which had been submitted over the course of a particular period. Although the number of applicants was thus definitively determined, ( ) the coefficient was calculated solely on the basis of the available quantity and the requested quantity and did not take into account the content of individual applications or the specific situation of applicants. ( )
203.
The situation is exactly the same in the present case: the correction factor is calculated on the basis of the information provided by the Member States with respect to the recognised need of industrial installations and in accordance with the benchmarks and the industry ceiling, with no account being taken of the situation of the individual installations. In accordance with the Court’s case-law, therefore, it must be concluded that, despite the existence of a definable group of economic operators, the measure at issue here is not of individual concern. Consequently, the applicants did not have standing to bring an action before the EU judicature.
204.
Whether or not the Court shares that view, the foregoing analysis demonstrates that any standing to bring an action before the EU judicature would not in any event have existed beyond doubt. It would not therefore preclude the questions concerning the validity of the correction factor.
205.
Consequently, the answer to the first question in Dow Benelux must be that operators of installations to which the rules on emission trading laid down in Directive 2003/87 have applied since 2013, with the exception of operators of installations within the meaning of Article 10a(3) of that directive and of new entrants, could not beyond doubt have brought before the General Court, under the fourth paragraph of Article 263 TFEU, an action for the annulment of Decision 2013/448 in so far as that decision determines the correction factor.
H – The consequences of the illegality of Decision 2013/448
206.
By its seventh question, the Landesverwaltungsgericht Niederösterreich wishes to ascertain whether the finding that the correction factor is invalid precludes its application. It therefore asks whether, in the event that the correction factor is annulled by the Court, the installations will receive the quantity of allowances to be allocated free of charge as it was provisionally calculated and without any reduction.
207.
This question arises because I have submitted above that Article 4 of, and Annex II to, Decision 2013/448 are invalid. A judgment to that effect by the Court would have retroactive effect in the same way as a judgment ordering the annulment of a measure. ( ) A finding of invalidity would also be sufficient reason for any national court to regard the act concerned as void for the purposes of measures to be pronounced by it. ( )
208.
It might therefore be assumed that, if the correction factor is annulled, a final, unreduced allocation based on the preliminary calculation will have to be made. This would mean that, for the years 2013 to 2015, installations would each receive between 6% and 10% more free allowances per year. It is not inconceivable that the allocation of additional allowances in this way would necessitate a corresponding increase in the quantity of allowances available generally, at least so far as previous years are concerned, since any allowances not allocated free of charge have probably already been auctioned. In the years to come, there would be an even greater quantity of additional free allowances, although the latter could be deducted from the quantity of allowances for auction.
209.
The allocation of additional free allowances in this way would clearly be inappropriate. After all, in accordance with the answers to the questions referred for a preliminary ruling which I have proposed here, the quantity of allowances allocated free of charge had proved to be too high, not too low. ( )
210.
Germany rebuts the foregoing understanding of the consequences of the invalidity of the correction factor with the further argument that the determination of the correction factor is a precondition for the establishment of a definitive allocation. In those circumstances, the annulment of the correction factor would call into question the legal basis of previous definitive allocations and preclude future definitive allocations. This could seriously impair the functional viability of the scheme.
211.
Ultimately, however, the effect of the absence of a correction factor should be immaterial. After all, it must be recalled that, where the Court rules, in proceedings under Article 267 TFEU, that a measure adopted by an EU authority is invalid, the competent EU institutions are required to take the necessary measures to remedy the illegality. The obligation laid down in Article 266 TFEU in the case of a judgment annulling a measure applies in such a situation by analogy. ( )
212.
The annulment of the correction factor would therefore be only temporary. The Commission would have to recalculate it immediately, in the light of the judgment on the present requests for a preliminary ruling.
213.
For the avoidance of legal uncertainty up until such time as the Commission adopts a new decision, the Court should therefore, as the Commission contends in the alternative, make provision for transitional arrangements at the same time as annulling the correction factor. Where it is justified by overriding considerations of legal certainty, the second paragraph of Article 264 TFEU, which is also applicable by analogy to a request under Article 267 TFEU for a preliminary ruling on the validity of a measure adopted by the EU institutions, confers on the Court a discretion to decide, in each particular case, which specific effects of such a measure must be regarded as definitive. ( )
214.
For that reason, it is therefore imperative that the effects of the previous correction factor be maintained at least until it has been recalculated.
215.
The Court should also rule that, for the most part, allowances which have already been allocated and those that continue to be allocated up until such time as the correction factor is recalculated do not have to be amended on the basis of the new correction factor.
216.
Such a limitation of the effects of a judgment is possible where, first, there is a risk of serious economic repercussions owing in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force and where, secondly, it appears that individuals and national authorities had been led to adopt practices which did not comply with EU legislation by reason of objective, significant uncertainty regarding the implications of EU provisions, to which the conduct of other Member States or the Commission of the European Communities may even have contributed. ( )
217.
Those conditions are met in the present case. A retroactive reduction would be prejudicial to the legitimate expectation on the part of many installation operators that the final allocations are definitive. Moreover, during the period between the judgment given by the Court of Justice and the adoption of a new correction factor, they would be exposed to an unjustified cost risk if the future free allocations were to be subject to reductions.
218.
However, if the Court does restrict the temporal application of the correctly calculated correction factor in this way, the Commission will have to determine that correction factor as soon as possible. The Court should therefore set a time limit for its determination. One year seems appropriate here.
V – Conclusion
219.
I therefore propose that the Court should:
(1)
join Cases C‑191/14 and C‑192/14, C‑295/14 and C‑389/14, and C‑391/14 to C‑393/14 for the purposes of judgment;
(2)
find that operators of installations to which the rules of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, in the version of the Treaty on the Accession of Croatia, have applied since 2013, with the exception of operators of installations within the meaning of Article 10a(3) of that directive and of new entrants, could not beyond doubt have brought before the General Court of the European Union, under the fourth paragraph of Article 263 TFEU, an action for the annulment of Commission Decision 2013/448/EU of 5 September 2013 concerning national implementation measures for the transitional free allocation of greenhouse gas emission allowances in accordance with Article 11(3) of Directive 2003/87/EC of the European Parliament and of the Council in so far as that decision determines the uniform cross-sectoral correction factor;
(3)
annul Article 4 of, and Annex II to, Decision 2013/448;
(4)
order that the effects of Article 4 of, and Annex II to, Decision 2013/448 be maintained until the Commission, within an appropriate time limit not exceeding one year, has adopted a new decision pursuant to Article 10a(5) of Directive 2003/87 and Article 15(3) of Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council. That new decision may not be applied to allocations predating its adoption.
( ) Original language: German.
( ) Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32), in the version of the Treaty on the Accession of Croatia (OJ 2012 L 112, p. 21).
( ) Cases C‑502/14 (Buzzi Unicem SpA and Others, OJ 2015 C 26, p. 13); C‑506/14 (Yara Suomi Oy and Others, OJ 2015 C 34, p. 9); C‑180/15 (Borealis AB and Others v Naturvårdsverket, OJ 2015 C 205, p. 21); C‑369/15 to C‑373/15 (Siderúrgica Sevillana and Others, OJ 2015, C 311, p. 35); and C‑456/15 (BASF), C‑457/15 (Vattenfall Europe), C‑460/15 (Schaefer Kalk) and C‑461/15 (EON Kraftwerke).
( ) Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 (OJ 2009 L 140, p. 63).
( ) Commission Decision 2011/278/EU of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council (OJ 2011 L 130, p. 1).
( ) Commission Decision 2013/448/EU of 5 September 2013 concerning national implementation measures for the transitional free allocation of greenhouse gas emission allowances in accordance with Article 11(3) of Directive 2003/87/EC (OJ 2013 L 240, p. 27).
( ) Second sentence of the third subparagraph of Article 10a(1), Article 10a(3) and the third subparagraph of Article 10a(7) of Directive 2003/87.
( ) In accordance with Article 10a(12) of Directive 2003/87, these are installations in sectors or subsectors which are exposed to a significant risk of ‘carbon leakage’.
( ) In accordance with Article 10a(11) of Directive 2003/87, they are initially to receive 80% of the allowances they require free of charge. That percentage is to be decreased on a linear basis to 30% by 2020 and to 0% by 2027.
( ) Judgment in Commission v Estonia (C‑505/09 P, EU:C:2012:179, paragraph 52).
( ) For further clarification, see recital 13 of Commission Decision 2010/384/EU of 9 July 2010 on the Community-wide quantity of allowances to be issued under the EU Emission Trading Scheme for 2013 (OJ 2010 L 175, p. 36).
( ) According to Esso Nederland and Others and contrary to the Commission’s submissions in the present cases, this assumption was also made by the Commission in 2010.
( ) See point 42 above.
( ) See points 49 and 52 above.
( ) European Commission’s Directorate-General for Climate Action, ‘Calculations for the determination of the cross-sectoral correction factor in the EU ETS in 2013 to 2020’ of 22 October 2013, at p. 4 of Annex I to Borealis Polyolefine’s pleadings, also available, as at 12 August 2015, on the Commission’s website at http://ec.europa.eu/clima/policies/ets/cap/allocation/docs/cross_sectoral_correction_factor_en.pdf.
( ) See point 56 et seq. above.
( ) 48th proposal for an amendment (Council Document 14764/08 of 24 October 2008, p. 80).
( ) Adopted by the Parliament on 17 December 2008 (see Council Document 17146/08 of 14 January 2010), confirmed by the Council on 4 April 2009.
( ) Council Document 17146/08 of 14 January 2010, p. 5.
( ) Commission Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87 (OJ 2012 L 181, p. 30).
( ) Commission Decision of 18 July 2007 establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87 (Monitoring Guidelines) (OJ 2007 L 229, p. 1).
( ) See point 71 et seq. above.
( ) See point 86 et seq. above.
( ) Judgment in Commission v Estonia (C‑505/09 P, EU:C:2012:179, paragraph 54).
( ) Communication from the Commission of 22 December 2005 entitled ‘Further guidance on allocation plans for the 2008 to 2012 trading period of the EU Emission Trading Scheme’, COM(2005) 703 final, paragraph 36 and Annex 8.
( ) Paper produced by DG Climate Action (cited in footnote 15, p. 2).
( ) See, for example, the judgments in Régie Networks (C‑333/07, EU:C:2008:764, paragraph 63); AJD Tuna (C‑221/09, EU:C:2011:153, paragraph 58); and Banco Privado Português and Massa Insolvente do Banco Privado Português (C‑667/13, EU:C:2015:151, paragraph 44).
( ) Judgments in SISMA v Commission (32/86, EU:C:1987:187, paragraph 8); Corus UK v Commission (C‑199/99 P, EU:C:2003:531, paragraph 145); Ziegler v Commission (C‑439/11 P, EU:C:2013:513, paragraph 115); and Dole Food and Dole Fresh Fruit Europe v Commission (C‑286/13 P, EU:C:2015:184, paragraph 93).
( ) Judgments in AJD Tuna (C‑221/09, EU:C:2011:153, paragraph 59) and Inuit Tapiriit Kanatami and Others v Commission (C‑398/13 P, EU:C:2015:535, paragraph 29).
( ) Judgments in Eridania zuccherifici nazionali and Others (250/84, EU:C:1986:22, paragraph 38); Italy v Council and Commission (C‑100/99, EU:C:2001:383, paragraph 64); British American Tobacco (Investments) and Imperial Tobacco (C‑491/01, EU:C:2002:741, paragraph 166); Arnold André (C‑434/02, EU:C:2004:800, paragraph 62); Alliance for Natural Health and Others (C‑154/04 and C‑155/04, EU:C:2005:449, paragraph 134); AJD Tuna (C‑221/09, EU:C:2011:153, paragraph 59); and Estonia v Parliament and Council (C‑508/13, EU:C:2015:403, paragraph 60).
( ) Judgment in Delacre and Others v Commission (C‑350/88, EU:C:1990:71, paragraph 16).
( ) Judgments in Mobistar (C‑438/04, EU:C:2006:463, paragraph 40) and Varec (C‑450/06, EU:C:2008:91, paragraph 52).
( ) Judgments in Varec (C‑450/06, EU:C:2008:91, paragraphs 53 and 54) and, in relation to security-related information, Commission and Others v Kadi (C‑584/10 P, C‑593/10 P and C‑595/10 P, EU:C:2013:518, paragraphs 117 to 129).
( ) Directive 2003/4/EC of the European Parliament and of the Council of 28 January 2003 on public access to environmental information and repealing Council Directive 90/313/EEC (OJ 2003 L 41, p. 26).
( ) Judgment in Netherlands and Leeuwarder Papierwarenfabriek v Commission (296/82 and 318/82, EU:C:1985:113, paragraph 27).
( ) Regulation (EC) No 1367/2006 of the European Parliament and of the Council of 6 September 2006 on the application of the provisions of the Aarhus Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters to Community institutions and bodies (OJ 2006 L 264, p. 13).
( ) Judgment in Ville de Lyon (C‑524/09, EU:C:2010:822, paragraph 40).
( ) See Article 4(7) of Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (OJ 2001 L 145, p. 43) and the judgment in Internationaler Hilfsfonds v Commission (C‑362/08 P, EU:C:2010:40, paragraphs 56 and 57).
( ) Cited in footnote 15.
( ) Judgments in Commission v Parliament and Council (C‑378/00, EU:C:2003:42, paragraph 66) and Etimine (C‑15/10, EU:C:2011:504, paragraph 113).
( ) See, by way of illustration, the judgment in Krupp Stahl v Commission (275/80 and 24/81, EU:C:1981:247, paragraph 13).
( ) See, for example, the judgments in Arnold André (C‑434/02, EU:C:2004:800, paragraph 62) and Gauweiler and Others (C‑62/14, EU:C:2015:400, paragraph 70).
( ) Judgments in Kamberaj (C‑571/10, EU:C:2012:233, paragraph 60) and Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraph 44) and Opinion 2/13 (EU:C:2014:2454, paragraph 179).
( ) Judgment in Sky Österreich (C‑283/11, EU:C:2013:28, paragraph 34).
( ) See, for example, the judgments of the ECtHR in Kopecký v. Slovakia [GC], no. 44912/98, § 35, ECHR 2004-IX and Gáll v. Hungary, no. 49570/11, §§ 33 and 34, 25 June 2013.
( ) See to that effect the judgments in Centre public d’action sociale d’Ottignies-Louvain-La-Neuve v Moussa Abdida (C‑562/13, EU:C:2014:2453, paragraph 47) and Minister for Justice and Equality v Francis Lanigan (C‑237/15 PPU, EU:C:2015:474, paragraphs 56 and 57).
( ) See the judgment of the ECtHR in Maurice v. France [GC], no. 11810/03, §§ 65 and 66, ECHR 2005-IX.
( ) The requirements governing the identification of the legal basis in the statement of reasons are therefore also met; see the judgments in Commission v Council (45/86, EU:C:1987:163, paragraph 9, and Commission v Council (C‑370/07, EU:C:2009:590, paragraph 56).
( ) See, by analogy, the Court’s case-law concerning reference to the legal basis as part of the obligation to state reasons in the judgments in Commission v Council (45/86, EU:C:1987:163, paragraph 9) and Commission v Council (C‑370/07, EU:C:2009:590, paragraph 56).
( ) See the judgments in Commission v Parliament and Council (C‑427/12, EU:C:2014:170, paragraph 39); Parliament v Commission (C‑65/13, EU:C:2014:2289, paragraph 43); and Commission v Parliament and Council (C‑88/14, EU:C:2015:499, paragraph 30).
( ) See the judgment in Parliament v Commission (C‑65/13, EU:C:2014:2289, paragraph 46).
( ) See the judgments in Parliament v Commission (C‑65/13, EU:C:2014:2289, paragraph 45) and Commission v Parliament and Council (C‑88/14, EU:C:2015:499, paragraph 31).
( ) See also the judgment in Commission v Parliament and Council (C‑88/14, EU:C:2015:499, paragraph 44).
( ) Regulation of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (OJ 2011 L 55, p. 13).
( ) Judgments in TWD Textilwerke Deggendorf (C‑188/92, EU:C:1994:90, paragraph 23); Pringle (C‑370/12, EU:C:2012:756, paragraph 41); and Banco Privado Português and Massa Insolvente do Banco Privado Português (C‑667/13, EU:C:2015:151, paragraph 28).
( ) Judgments in TWD Textilwerke Deggendorf (C‑188/92, EU:C:1994:90, paragraphs 18 and 24); Pringle (C‑370/12, EU:C:2012:756, paragraph 41); and Banco Privado Português and Massa Insolvente do Banco Privado Português (C‑667/13, EU:C:2015:151, paragraph 28).
( ) Judgments in Plaumann v Commission (25/62, EU:C:1963:17, 238); Sahlstedt and Others v Commission (C‑362/06 P, EU:C:2009:243, paragraph 26); Stichting Woonpunt and Others v Commission (C‑132/12 P, EU:C:2014:100, paragraph 57); and T & L Sugars and Sidul Açúcares v Commission (C‑456/13 P, EU:C:2015:284, paragraph 63).
( ) Judgment in Sahlstedt and Others v Commission (C‑362/06 P, EU:C:2009:243, paragraph 29).
( ) Judgment in Sahlstedt and Others v Commission (C‑362/06 P, EU:C:2009:243, paragraph 30).
( ) Judgment in Stichting Woonpunt and Others v Commission (C‑132/12 P, EU:C:2014:100, paragraph 59).
( ) See point 163 above.
( ) Judgment in Codorniu v Council (C‑309/89, EU:C:1994:197, paragraphs 21 and 22).
( ) Judgment in Commission v Infront WM (C‑125/06 P, EU:C:2008:159, paragraphs 73 to 77).
( ) Judgments in Sahlstedt and Others v Commission (C‑362/06 P, EU:C:2009:243, paragraph 31); Stichting Woonpunt and Others v Commission (C‑132/12 P, EU:C:2014:100, paragraph 58); and T & L Sugars and Sidul Açúcares v Commission (C‑456/13 P, EU:C:2015:284, paragraph 64).
( ) Judgment in T & L Sugars and Sidul Açúcares v Commission (T‑279/11, EU:T:2013:299, paragraph 84).
( ) For further clarification, see the judgment in T & L Sugars and Sidul Açúcares v Commission (T‑279/11, EU:T:2013:299, paragraph 81).
( ) Judgment in T & L Sugars and Sidul Açúcares v Commission (C‑456/13 P, EU:C:2015:284, paragraphs 65 and 66).
( ) Judgments in Roquette Frères (C‑228/92, EU:C:1994:168, paragraph 17) and Centre d’exportation du livre françaiset ministre de la Culture et de la Communication (C‑199/06, EU:C:2008:79, paragraphs 61 and 63).
( ) Judgment in International Chemical Corporation (66/80, EU:C:1981:102, paragraph 13) and order in Fratelli Martini and Cargill (C‑421/06, EU:C:2007:662, paragraph 54).
( ) See above, point 110 et seq.
( ) Judgments in FIAMM and Others v Council and Commission (C‑120/06 P and C‑121/06 P, EU:C:2008:476, paragraph 123) and Régie Networks (C‑333/07, EU:C:2008:764, paragraph 124).
( ) Judgments in Parliament v Council (C‑22/96, EU:C:1998:258, paragraph 42) and Régie Networks (C‑333/07, EU:C:2008:764, paragraph 121).
( ) Judgments in Bidar (C‑209/03, EU:C:2005:169, paragraph 69) and Richards (C‑423/04, EU:C:2006:256, paragraph 42). |
OPINION OF ADVOCATE GENERAL
MENGOZZI
delivered on 17 September 2015 ( )
Case C‑205/14
European Commission
v
Portuguese Republic
‛Failure of a Member State to fulfil obligations — Air transport — Regulation (EEC) 95/93 — Allocation of slots in Community airports — Article 4(2)(b) — Independence of the coordinator — Concept of ‘interested part’ — Airport managing body — Functional separation — System of financing’
1.
In this matter, the European Commission has brought an action before the Court, pursuant to the second paragraph of Article 258 TFEU, seeking a declaration that, by failing to ensure that the slot coordinator is functionally and financially independent, the Portuguese Republic has failed to fulfil its obligations under Article 4(2) of Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports. ( )
2.
When an airport located within the territory of a Member State is congested, that is, when its capacity is insufficient, to such an extent that significant delays cannot be avoided, Article 3(5) of Regulation 95/93 requires that Member State to designate it as a ‘coordinated’ airport. According to Article 2(g) of Regulation No 95/93, a coordinated airport is one at which air carriers can only land and take off in a slot which has been allocated to them, a slot being defined as a permission to use the full range of airport infrastructure necessary for landing and taking off at a precise date and time.
3.
The Member State responsible for a coordinated airport appoints a natural or legal person to perform the function of ‘coordinator’. According to Article 4(5) and 6 of Regulation No 95/93, the coordinator allocates slots to air carriers and satisfies itself, in conjunction with the managing body of the airport, that air carriers’ activities are in accordance with the slots allocated to them. Article 4(2) of Regulation 95/93 requires the Member State to ensure that the coordinator is independent.
4.
In the present case, the Commission alleges that the Portuguese Republic has failed to ensure that the coordinator is independent. While the Court has already considered the independence of other national authorities responsible for implementation of EU law in the Member States, such as the authority responsible for the management of railway infrastructure, ( ) or data protection, ( ) it has never considered that of the coordinator of an airport. It is thus called on to explain the circumstances in which the coordinator of an airport can be considered to be independent.
I – The legal framework
A – EU law
5.
The second recital of Regulation No 95/93 states that ‘the allocation of slots at congested airports should be based on neutral, transparent and non-discriminatory rules’.
6.
The fifth recital of Regulation No 95/93 states that ‘the Member State responsible for the coordinated airport should ensure the appointment of a coordinator whose neutrality should be unquestioned’.
7.
In its original version, Article 4(2) of Regulation No 95/93 provided that ‘a Member State shall ensure that the coordinator carries out his duties under this Regulation in an independent manner’.
8.
Regulation No 95/93 was amended by Regulation (EC) No 793/2004 of the European Parliament and of the Council of 21 April 2004 amending Regulation No 95/93. ( ) For simplicity’s sake, I shall refer to Regulation No 95/93 as amended by Regulation No 793/2004 as ‘Regulation No 95/93, as amended’.
9.
Article 4(2)(b) of Regulation No 95/93, as amended, provides that the Member State responsible for a schedules facilitated or coordinated airport shall ensure ‘the independence of the coordinator at a coordinated airport by separating the coordinator functionally from any single interested party. The system of financing the coordinators’ activities shall be such as to guarantee the coordinator’s independent status’. The sixth recital of Regulation No 793/2004 justifies that amendment in the following terms:
‘… At coordinated airports the coordinator plays a central role in the coordinating process. Therefore, coordinators should be in a fully independent position and their responsibilities should be specified in detail.’
10.
The Communication from the Commission of 30 April 2008 to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the application of Regulation No 95/93, as amended ( ) (‘the 2008 Communication’) provides more detail as to the scope of Article 4(2)(b) of Regulation No 95/93, as amended. The fourth and fifth subparagraphs of paragraph 1 of the 2008 Communication state that:
‘The Commission is of the view that functional separation means inter alia that the coordinator should act autonomously from, not be instructed by, and not have a duty to report back to the airport managing body, a service provider nor any air carrier operating from the airport concerned.
The Commission further considers that the system of financing the coordinator’s activities should be set up in such a way that the coordinator is financially autonomous from any single party directly affected by — or having an interest in — its activities. The coordinator should therefore keep separate accounts and budgets and not rely for the financing of his activities only on the airport managing body, a service provider nor a single air carrier.’
B – Portuguese law
11.
Article 3(1) of Decree-law No 109/2008 of 26 June 2008 ( ) designates the airports of Lisbon, Porto and Madeira (Portugal) as coordinated. Article 3(2) thereof designates the airport of Faro (Portugal) as coordinated, but only for the period from the last Sunday in March to the last Saturday in October.
12.
Article 1(2) of Decree-law No 109/2008 appoints Aeroportos de Portugal, S.A. (‘the ANA’) as national coordinator.
13.
Article 5 of Decree-law No 109/2008 concerns the independence of the coordinator. According to that provision:
‘1. In carrying out its functions as national facilitator and coordinator in respect of the allocation of slots, the ANA, shall ensure that this activity is independent of its activity as an airport manager, by means of appropriate separation.
2. For the purposes of the preceding paragraph, [the ANA] shall ensure such independence, at a functional level at minimum, and shall keep specific accounts relating to slot coordination activities, which shall be completely separate from the accounts relating to other activities.’
14.
Article 11 of Decree-law No 109/2008 provides for a charge to be introduced, payable to the ANA, in respect of the allocation of slots. Under that article:
‘1. The supply of the services of coordination and allocation of slots shall be subject, in consideration of the use of those services, to a slot-allocation charge, levied at the same time as the landing and take-off charges, per movement, and set by order of the minister responsible for civil aviation.
…
3. The charge referred to in paragraph 1 constitutes revenue of the ANA.’
II – Pre-litigation procedure
15.
The ANA was created as a public undertaking in 1979. It was subsequently converted into a limited company by Decree-law No 404/98 of 18 December 1998, and was granted a forty-year franchise to provide supporting public airport services for civil aviation at the airports of Lisbon, Porto, Madeira and Faro. By resolution of the Council of Ministers dated 28 December 2012, ( ) the ANA was privatised. The State transferred the entirety of its share capital to Vinci-Concessions SAS.
16.
Following its appointment, by Decree-law No 109/2008, as coordinator of the airports of Lisbon, Porto, Madeira and Faro, the ANA created an internal department responsible for their coordination, the Divisão de Coordenação Nacional de Slots (‘DCNS’).
17.
The Commission had doubts as to whether the DCNS, which performed the function of coordinator in those 4 airports, was independent of the ANA, of which it is a department and which is the managing body of those same airports. It therefore requested information from the Portuguese Republic in this regard, on 19 July 2010, 4 October 2010 and 14 April 2011. The Portuguese Republic responded to those requests on 28 August 2010, 28 October 2010 and 28 April 2011, respectively.
18.
By letter of 30 April 2012, the Commission sent a letter of formal notice to the Portuguese Republic, asserting that it had infringed its obligations under Article 4(2) of Regulation No 95/93, as amended. According to the Commission, functional separation within the meaning of subparagraph (b) of that provision did not exist between the DCNS and the ANA, the former being a department of the latter. Furthermore, the financing of the DCNS was not such as to guarantee its independent status. Such independence could only be ensured by means of a budget and accounts specific to the DCNS, whereas the DCNS was financed entirely by ANA, the slot allocation charge provided for by Article 11 of Decree No 109/2008 never having come into being.
19.
By letter of 19 July 2012, the Portuguese Republic submitted observations on the letter of formal notice.
20.
On 25 January 2013, the Commission sent the Portuguese Republic a reasoned opinion, on the basis of breach of Article 4(2) of Regulation 95/93, as amended. Inasmuch as the staff assigned to the DCNS came from the ANA, and the DCNS did not seem to have its own premises, functional separation did not, according to the Commission, exist between the DCNS and the ANA. As to the financial independence of the DCNS, the Commission reiterated that in the absence of a slot allocation charge, the expenses of the DCNS had to date been borne in their entirety by the ANA.
21.
By letter of 27 March 2013, the Portuguese Republic submitted its observations on the letter of formal notice.
22.
As it was not satisfied with the Portuguese Republic’s arguments, the Commission brought the present action.
III – The action brought by the Commission
23.
The Commission alleges that the Portuguese Republic has failed to fulfil its obligations under Article 4(2) of Regulation No 95/93, as amended, in that it has not ensured the functional and financial independence of the coordinator.
24.
The Commission maintains that Article 4(2)(b) of Regulation No 95/93, as amended, should be interpreted broadly, in the light of the fifth recital of that regulation, according to which the ‘neutrality’ of the coordinator should be ‘unquestioned’, and in the light of its objective, as defined in the second recital of that regulation, that is, for slots to be allocated on the basis of ‘neutral, transparent and non-discriminatory rules’. The Commission relies on the amendment of Article 4(2) of Regulation No 95/93 by Regulation No 793/2004, an amendment which emphasises, according to recital 6 of Regulation No 793/2004, that the coordinator should be ‘fully independent’, and therefore replaces the simple requirement that ‘the coordinator carries out his duties under this Regulation in an independent manner’ with the current wording of Article 4.
25.
As to the functional separation of the coordinator from any interested party, provided for by Article 4(2)(b) of Regulation No 95/93, as amended, the Commission maintains that the concept of interested party should be interpreted broadly, and includes not only air carriers but also service providers, public bodies of the Member States and the managing body of the airports at issue. It emphasises, amongst other things, that the managing body of an airport may have a commercial interest in that airport becoming a hub for a given air carrier, and that it is therefore indispensable for the coordinator to be independent of that body. In the present case, the DCNS appears to have the same staff and the same premises as the ANA. Thus, according to the Commission, it is not functionally separate from the ANA. It is also said that the Portuguese Republic, by stating in its response to the letter of formal notice that, following the privatisation of the ANA, it intended to put a new entity in place which would be responsible for the coordination of slots, and that the formation of that entity would make it possible to ensure that the coordinator was fully independent, has itself acknowledged that, at present, the coordinator is not functionally independent.
26.
As to the system of financing the coordinator, it is said that this cannot be independent, as required by Article 4(2)(b) of Regulation No 95/93, as amended, unless the coordinator keeps separate accounts, manages a separate budget and is not financed by one or more interested parties. In the present case, it is said that the DCNS is financed entirely by the ANA, which also approves its budget. Thus, according to the Commission, the DCNS is not financially independent of the ANA.
27.
The Commission requests the Court to:
—
declare that, by failing to ensure the independence of the coordinator, the Portuguese Republic has failed to fulfil its obligations under Article 4(2) of Regulation No 95/93, as amended, and
—
order the Portuguese Republic to pay the costs.
IV – The proceedings before the Court
28.
In its defence, the Portuguese Republic maintains that the DCNS meets the requirements of Article 4(2) of Regulation No 95/93, as amended.
29.
The Portuguese Republic claims that the ANA cannot be regarded as an interested party from which the DCNS should be separated. Given that Regulation No 95/93, as amended, does not define ‘interested party’, it is only on the basis of a case-by-case examination that a party can be classified as interested. In classifying the ANA as an interested party simply on the basis of its status as managing body of the airports, however, the Commission is said to have failed to carry out any such examination. Furthermore, the ANA’s interests are said to lie in receiving as much as possible in airport charges, and thus in as many air carriers as possible being allocated slots, not in a particular air carrier receiving advantageous treatment from the DCNS. It would be otherwise if the ANA held shares in an air carrier, which, it is said, is not the case.
30.
On the assumption that the ANA is to be regarded as an interested party, it is said that the Portuguese Republic has nevertheless complied with Article 4(2)(b) of Regulation 95/93, as amended. This provision is said not to require the coordinator to be a distinct legal entity from the airport manager, but only to require functional separation. It is said that in fact there is functional separation between the DCNS and the ANA, on the basis that the DCNS alone manages the coordination of slots, without receiving instructions from the ANA and without its decisions being subject to approval by the ANA’s board of directors, and that it keeps separate accounts and has its own staff.
31.
As to the system of financing being such as to guarantee the independent status of the coordinator, under Article 4(2)(b), this is said not to be a requirement the breach of which leads automatically to an infringement of the provision. Rather, it is said that it should be seen as one of the factors, and indeed a secondary one, to be taken into account in determining whether the coordinator is independent. Thus it cannot be concluded from the fact that the slot allocation charge was not introduced that the DCNS is not independent.
32.
The Portuguese Republic contends that the Court should:
—
declare that the coordinator meets the requirement of functional independence laid down in Article 4(2)(b) of Regulation No 95/93, as amended;
—
declare that the Portuguese Republic has complied with its obligations under the applicable EU law;
—
dismiss the action as unfounded; and
—
order the Commission to pay the costs.
33.
In its reply, the Commission maintains that the ANA should be regarded as an interested party within the meaning of Article 4(2)(b) on the basis that it is the managing body of the airports, without the need to establish that, in this particular case, it has an interest in slots being allocated to one particular air carrier rather than another. According to the Commission, the managing body of an airport may have an interest in slots being allocated to its contractual partners, such as the tenants of airport units, or to particular air carriers. In this regard, it observes that it is strange that the DCNS continued to perform the function of coordinator after the privatisation of the ANA, when that function was not assigned to the ANA under the public service franchise, and the ANA is thus performing it free of charge.
34.
According to the Commission, the DCNS and the ANA are not functionally separate. As the DCNS is a department of the ANA, its report and annual accounts are subject to the scrutiny of the board of directors of the ANA, in accordance with Articles 405 and 406 of the Portuguese Commercial Companies Code. It is said that only a ‘Chinese wall’ between the DCNS and the ANA could guarantee the independent status of the DCNS.
35.
The fact that the DCNS keeps separate accounts is said not to establish that it is financed in such a way as to guarantee its independent status. Any department of a commercial company may keep separate accounts, which are subsequently integrated into the accounts of the company. In this case, according to the Commission, the ANA pays the expenses of the DCNS and collects the debts due to it, and its profit and loss account for the financial year includes the DCNS’s balance for the financial year.
36.
Finally, the Commission asserts that the heads of claim by which the Portuguese Republic asks the Court to declare that the DCNS meets the requirement of functional independence, and that the Portuguese Republic has complied with its obligations under EU law, are inadmissible counterclaims, because, amongst other reasons, the Treaty on the Functioning of the European Union does not provide for an action for a declaration from the Court to the effect that EU law has been complied with.
37.
In its rejoinder, the Portuguese Republic maintains that the 2008 Communication, which requires, amongst other things, that the coordinator is not financed entirely by the managing body of the airport, adds to the text of Regulation No 95/93, as amended, and that Commission communications are not binding on the Member States. As to the concept of interested party, the Portuguese Republic reiterates that, in the absence of an examination of the particular facts of the case, the Commission has gone no further than to demonstrate that the ANA, in its capacity as managing body of the airports, is capable of being an interested party, and has not demonstrated that it actually is an interested party. The Portuguese Republic emphasises that the allocation of slots is an activity of a technical nature, which is not put before the board of directors of the ANA. It continues to pursue the two heads of claim which the Commission asserts to be inadmissible.
V – Assessment
38.
Before turning to the substance of the action, I will consider the Portuguese Republic’s first two heads of claim, which are said by the Commission to be inadmissible.
A – Admissibility of the Portuguese Republic’s first two heads of claim
39.
The Portuguese Republic seeks not only the dismissal of the action and an order for the Commission to pay the costs, but also, first, a declaration that ‘in Portugal, the current coordinator ensures that the requirements relating to functional independence, laid down in Article 4(2)(b) of Regulation No 95/93, as amended, are met’, and secondly, a declaration that ‘the Portuguese Republic has fulfilled its obligations under the applicable EU law’. In its rejoinder, the Portuguese Republic indicates that what is intended by this head of claim is to ask the Court to declare that the Portuguese Republic has fulfilled its obligations under Regulation No 95/93, as amended.
40.
The Commission maintains that these counterclaims are inadmissible.
41.
In this regard, I would point out that Article 259 TFEU enables a Member State to bring an action before the Court seeking a declaration that another Member State has failed to fulfil its obligations under EU law; it does not enable a Member State to bring an action before the Court seeking a declaration that that same Member State has not failed to fulfil its obligations.
42.
Furthermore, I note that none of the provisions of the Treaty on the Functioning of the European Union empowers the Court to adopt a position by means of a positive declaration. If the Court were to dismiss the present action, it would be recognising that the Portuguese Republic has complied with its obligations under Article 4(2) of Regulation 93/95, as amended; but the Portuguese Republic cannot bring an application for that purpose.
43.
Furthermore, it is irrelevant whether the application brought by the Portuguese Republic relates to whether the action taken by the coordinator complies with Regulation No 95/93, as amended, or whether the action taken by the Portuguese Republic so complies. A failure to fulfil obligations is attributed to the Member State even where it is caused by one of its organs, ( ) be it the national legislature, the national courts or, as here, the coordinator, which is given a statutory function (the allocation of slots).
44.
Accordingly, the Portuguese Republic’s first and second heads of Claim must be declared inadmissible.
B – The substantive issues
45.
Article 4(2)(b) of Regulation No 95/93, as amended, provides that the coordinator is to be ‘separat[ed] ... functionally from any single interested party’. Accordingly, in order to establish that the Portuguese Republic has failed to fulfil its obligations under Article 4(2) of Regulation No 95/93, as amended, the Commission must demonstrate, first, that the ANA is an interested party, and secondly, that the DCNS is not functionally separate from the ANA. I shall address the two questions in turn. In dealing with functional separation, I will consider whether the requirement that the ‘system of financing the coordinators’ activities shall be such as to guarantee the coordinator’s independent status’, laid down in the second sentence of Article 4(2)(b), should be regarded as a separate condition, distinct from that of functional separation, or whether independent financing is no more than an indicator of functional separation.
1. The concept of ‘interested party’
46.
In my view it is difficult to deny that the managing body of an airport can be classified as an interested party.
47.
Article 4(2)(b) of Regulation No 95/93, as amended, provides that the coordinator must be functionally separated from ‘any’ interested party. It therefore seems to me that it is not only parties with a direct interest in the allocation of slots, or in other words the air carriers to which they are allocated, which can be classified as interested parties, but also parties with an indirect interest, such as the managing body of the coordinated airport.
48.
There is support for this approach in Article 4(8) of Regulation No 95/93, as amended, which provides for the coordinator to make available ‘to interested parties, in particular to members ... of the coordination committee’, information relating to requested, allocated and available slots. The managing body is a member of the coordination committee, ( ) and must therefore be regarded as an interested party.
49.
I note, furthermore, that the Portuguese Republic does not deny that the managing body can be classified as an interested party.
50.
The difficulty in this regard is in determining the burden of proof which lies on the Commission. The Commission maintains that the simple fact that a managing body of an airport has that status is a sufficient basis for classifying it as an interested party, whereas the Portuguese Republic asserts that it does not follow from the fact that the managing body of an airport has that status that it is to be classified as an interested party, and that whether it has an interest in the allocation of slots must be established on a case-by-case basis.
51.
In order to determine whether the managing body is presumed to be an interested party, or whether the Commission is required to demonstrate that, on the particular facts of the case, the managing body has an interest in the allocation of slots, I will first consider what economic interest a managing body may have in the allocation of slots, and then the conclusions which can be drawn from this with regard to proof of such an interest.
(a) The interest a managing body may have in the allocation of slots
52.
First, the managing body may, it seems to me, have an interest in a particular air carrier being given advantageous treatment in the allocation of slots because it holds shares in that carrier.
53.
Secondly, the managing body may have an interest in the air carriers which pay it the highest airport charges being given advantageous treatment in the allocation of slots. Airport charges, which the Portuguese Republic refers to without stating their purpose, are, according to the definition given by Directive 2009/12/EC of the European Parliament and of the Council of 11 March 2009 on airport charges, ( ) charges paid by air carriers to the managing body for the use of services which only the managing body can provide, more specifically the use of airport facilities and the provision of services related, amongst other things, to landing and take-off of aircrafts. ( ) While Directive 2009/12 prohibits the managing body from imposing discriminatory charges, it permits it to vary the quality and scope of particular services, and to differentiate the level of airport charges according to the quality and scope of such services. ( ) The managing body may thus have an interest in the air carrier to which it provides the highest level of service, for example the provision of an entire terminal, ( ) and from which it consequently receives the highest airport charges, receiving advantageous treatment in the allocation of slots.
54.
In this regard, the Portuguese Republic’s argument that the interest of the managing body lies in the highest possible number of air carriers being allocated slots, because it would thus receive more by way of airport charges, does not seem to me to be convincing. This argument does not take account of the differentiation of services, and thus charges, described in the last paragraph.
55.
Thirdly, the managing body may not content itself with managing the airport infrastructure, but may engage in other activities, for example on the downstream market for the supply of groundhandling services. Groundhandling services, which are to be distinguished from services paid for through the airport charges referred to in point 53 above, ( ) include, according to the definition given by Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling market at Community airports, ( ) checking passengers’ tickets and passports, loading and moving baggage, cleaning the aircraft, and refuelling. ( ) Groundhandling services can be supplied to air carriers either by the managing body or by independent suppliers. An air carrier may also provide such services to itself. Consequently, if the managing body is active on the market for the supply of groundhandling services, it will have air carriers as clients or competitors. ( ) It may therefore have an interest in an air carrier which is an important client being given advantageous treatment in the allocation of slots or, conversely, in an air carrier which is a competing supplier of groundhandling services being given disadvantageous treatment in the allocation of slots. ( )
56.
Fourthly, the managing body, where it is a public or state-owned undertaking, may be tempted to give advantageous treatment to the national air carrier in the allocation of slots. ( ) In such a situation, the managing body is pursuing the interest of a third party, the national carrier, rather than its own interest, but is no less capable of influencing the coordinator. ( )
57.
We have seen above that the managing body may have an interest in the allocation of slots. Is it, as a managing body, to be presumed to have such an interest, or is the Commission required, in an action for failure to fulfil obligations, to prove that it does?
(b) Proof of the managing body’s interest
58.
In my view, the answer to the question posed in the last paragraph should be that the managing body should, as such, be regarded as an interested party, without the need to examine whether, in the particular case, it has an interest in the allocation of slots.
59.
It seems to me that it might be difficult to prove that a managing body had an interest in the allocation of slots. In order to establish that the managing body, in a particular case, had an interest in the allocation of slots, the Commission would have to show that it actually had a shareholding in an air carrier using the coordinated airport, that it let an entire terminal to an air carrier, or that it was active on the market for groundhandling services. Where the managing body holds the entirety of the shares in an air carrier, it seems obvious that it should be regarded as an interested party; but should it be so regarded if it only has, say, a one-fifth shareholding in that carrier? Where the managing body lets a terminal to an air carrier, it seems obvious that it should be regarded as an interested party; but should it be so regarded if it only lets certain parts of a terminal to that carrier, or if, while being active on the market for groundhandling services, it has only a modest market share? Demonstrating that a managing body has an interest in the allocation of slots would involve carrying out an analysis of the market for airport infrastructure and the downstream markets.
60.
Furthermore, in a situation where the managing body does not itself derive any benefit from the allocation of slots, but limits itself to giving advantageous treatment to a national carrier with which it is not connected, ( ) I find it difficult to see how the Commission could demonstrate that the managing body itself had an interest in the allocation of slots. Such a situation could therefore escape Article 4(2)(b) of Regulation No 95/93, as amended, when, as we have seen, it is capable of giving rise to abuse.
61.
Accordingly, to require the Commission to demonstrate that the managing body is an interested party could lead to situations where the managing body’s interest in the allocation of slots is limited (for example, where it has a limited share in the market for groundhandling services) or simply lies in the future (where it plans to let an entire terminal to an air carrier) escaping scrutiny as to whether the coordinator is functionally separate. It seems to me that only systematic verification that the coordinator and the managing body are functionally separate can meet the objective of Regulation No 95/93, which is for slots to be allocated in accordance with ‘neutral, transparent and non-discriminatory rules’, ( ) entailing that the ‘neutrality [of the coordinator] is unquestioned’. ( ) A fortiori, it is the only approach which can meet the objective of Regulation No 793/2004, which is to reinforce the coordinator’s independence by placing it in ‘a fully independent position’. ( )
62.
In this regard, I would refer to the judgment in Commission v Germany ( ) which, although given in another field — that of processing of personal data — seems to me to be relevant. Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data ( ) provides, in Article 28(1), for the Member States to put public authorities in place with responsibility for monitoring the application, within their territories, of the provisions transposing the directive, and lays down that those authorities are to ‘act with complete independence in exercising the functions entrusted to them’. In Commission v Germany, the Court ruled on German legislation which subjected the authority to the scrutiny of the State, or more specifically the relevant Land. It observed that the government of the Land‘may have an interest in not complying with the provisions with regard to the protection of personal data’ because it processes such data itself, or because it has an interest in having access to personal data held by third parties, particularly for taxation or law enforcement purposes, or because it has an interest in companies which are economically important to the Land not being troubled by the supervisory authorities. ( ) It concluded from this that the fact that the supervisory authority was subject to Land scrutiny meant that it did not act with complete independence in exercising the functions entrusted to it, as required by Article 28(1) of Directive 95/46. ( )
63.
In other words, in a situation which is similar to that with which we are concerned, although Directive 95/46 does not specify the parties from which the supervisory authorities must be independent any more than Regulation No 95/93, as amended, defines ‘interested party’, the Court has held, not on the basis that the Land does have an interest in influencing the supervisory authority, but that it may have such an interest, that this hinders the authority in acting independently. This outcome is all the more remarkable for the fact that Advocate General Mazák had reached the opposite conclusion in his Opinion, considering that the Commission ought to have proved that the system of scrutiny was a failure, or that there was a consistent practice on the part of the Land which hindered the supervisory function in performing its tasks independently. ( )
64.
In the present case I propose to adopt reasoning similar to that of the Court in its judgment in Commission v Germany. It is sufficient in my opinion that a party may have an interest in the allocation of slots in order for the Member State concerned to be required to ensure that the coordinator is functionally separated from that party. As regards the managing body, it has been shown above that it may have various interests in the allocation of slots. Those interests arise from its status as managing body, just as the interests of the Land set out by the Court in Commission v Germany ( ) arise from its status as an economic operator and as a tax and law enforcement authority.
65.
Accordingly, in my opinion it follows from the mere fact that a party is the managing body of the coordinated airport that it is to be classified as an interested party.
66.
In the present case, Article 5(1) of Decree-law No 109/2008 appoints the ANA as the managing body of the four coordinated airports at issue. It is thus of no relevance that the Commission’s arguments relate to the classification of managing bodies in general as interested parties, and not to the classification of the managing body at issue in the present case, the ANA, as an interested party. ( ) The ANA is to be regarded, simply on the basis of its status as managing body, as an interested party within the meaning of Article 4(2)(b) of Regulation No 95/93, as amended.
67.
Accordingly, in order to establish that the Portuguese Republic has failed to fulfil its obligations under Article 4(2)(b) of Regulation No 95/93, as amended, the Commission must demonstrate that it has not ensured that the DCNS is functionally separated from the ANA.
2. Functional separation of the coordinator’s activities
68.
It will be recalled that Article 4(2)(b) of Regulation No 95/93 requires the Member State responsible for a coordinated airport to ensure that the coordinator is independent by separating it functionally from any interested party, and that the system of financing the activities of coordinators is such as to guarantee its independent status.
69.
The ‘functional separation’ between the coordinator and interested parties which is referred to in Article 4(2)(b) of Regulation No 95/93 must, in my view, be understood as a separation of functions, that is, of activities. Moreover, the second sentence of Article 4(2)(b) of Regulation No 95/93, as amended, refers expressly to the ‘activities’ of the coordinator, in requiring a system of financing ‘the activities of coordinators’ which is such as to guarantee their independent status. Similarly, before its amendment by Regulation No 793/2004, Article 4(2) of Regulation No 95/93 referred to the ‘duties’ of the coordinator. It provided for the coordinator to ‘[carry] out his duties under this Regulation in an independent manner’. Accordingly, Article 4(2)(b) of Regulation No 95/93, as amended, requires Member States to ensure that the activities of the coordinator, as defined in that Regulation and including, in particular, allocating slots to air carriers and monitoring compliance with those slots on the part of the air carriers, ( ) are separated from the activities of interested parties. In particular, the activities of the coordinator must be separated from the activities of the managing body of the airport, whether the latter relate to management of airport infrastructure or to other tasks which the managing body may perform, such as providing groundhandling services.
70.
Regulation No 95/93, as amended, does not give any indication as to the criteria relevant to functional separation.
71.
According to the Commission, although Article 4(2)(b) of Regulation No 95/93, as amended, does not require the coordinator to be a distinct legal entity from the interested parties, it is nevertheless relevant, where the Member State concerned has put such an entity in place, to take this matter into account in assessing functional separation. In the present case, the DCNS is a division of the ANA, and the staff and offices of the DCNS are those of the ANA. Furthermore the ANA is a limited company and, in accordance with Articles 405 and 406 of the Portuguese Commercial Companies Code, its board of directors manages the activities of the company, including those of the DCNS. Thus, according to the Commission the DCNS cannot be functionally separate from the ANA.
72.
It seems to me that in merely requiring separation of activities, Regulation No 95/93, as amended, does not require legal separation, that is, that it leaves it to the Member States to decide whether to create a distinct legal entity to perform the function of coordinator. I will briefly examine this point below, before proposing, by analogy with the Court’s case-law in other areas, criteria for the assessment of functional separation. I will then consider the independent system of financing expressly required by Article 4(2)(b) of Regulation No 95/93, as amended, in order to determine whether it should be regarded as one of the criteria for assessing functional separation, or as a separate requirement.
(a) The creation of a separate legal entity
73.
As I see it, it is beyond question that Article 4(2)(b) of Regulation No 95/93, as amended, does not require the Member States to create a distinct legal entity with responsibility for allocating slots.
74.
If the intention of the EU legislature had been to require a distinct legal entity to be created, it would have stated this expressly, as it has done in other areas. ( ) Furthermore, the Commission’s proposal, made in the course of preparatory work relating to Regulation No 793/2004, for the coordinator to be ‘institutionally’ separated from interested parties, ( ) was not adopted.
75.
In any event, as has been seen, the Commission does not maintain that the coordinator must be a distinct legal entity. This is also the position it adopted in its 2008 Communication. ( )
76.
It is thus of no importance, in determining whether the Portuguese Republic has failed to fulfil its obligations under Article 4(2)(b) of Regulation No 95/93, as amended, that it has not endowed the DCNS with legal personality. ( )
(b) The criteria by which functional separation is to be assessed
77.
In identifying the criteria to be used in assessing functional separation, it seems to me that the case-law relating to Article 28(1) of Directive 95/46 ( ) provides some guidance which is useful in this case. Among the factors taken into consideration by the Court in determining whether the national supervisory authority is operating with complete independence within the meaning of Article 28(1) of Directive 95/46 are: instructions from a third party (the State) which are binding on the national supervisory authority, ( ) a hierarchical relationship between the authority’s staff and the State, enabling the latter to supervise the activities of staff and, potentially, to impede their promotion; ( ) the fact that the staff of the national supervisory authority is made up entirely of federal officials, or in other words is interlinked with the federal government; ( ) the possibility of early termination of the national supervisory authority’s mandate. ( )
78.
The Court has adopted similar criteria in determining whether an entity responsible for approving telecommunications terminal equipment is, as required by Article 6 of Directive 88/301, ‘independent’ ( ) (staff made up of members of an interested third party), ( ) and in determining whether the authority responsible for issuing an opinion on the environmental effects of a plan met the requirement of ‘functional separation’ (administrative and human resources of the authority’s own). ( )
79.
It seems to me that the criteria set out in points 77 and 78 above can be applied in assessing whether the coordinator is functionally separate, as required by Article 4(2)(b) of Regulation No 95/93, as amended. I find it difficult to see how the coordinator could claim to be independent if it received binding instructions from a third party, if it did not have its own staff, or if there was a hierarchical relationship between its staff and an interested party. Further criteria should be taken into consideration, particularly the fact, where applicable, that the coordinator has legal personality. As the Commission maintains, while Regulation No 95/93, as amended, does not require a distinct legal entity to be created, this factor is nonetheless relevant in assessing whether the coordinator is independent.
(c) Independent system of financing
80.
As to the independent system of financing, for which express provision is made in Article 4(2)(b) of Regulation No 95/93, as amended, is this one of the criteria to be taken into account in assessing functional separation, or is it a separate condition which applies cumulatively with that of functional separation?
81.
If the independent system of financing were to be regarded as a separate condition, there would be an infringement of Article 4(2)(b) of Regulation No 95/93, as amended, wherever the coordinator was not financially independent, even if it met the requirement of functional separation from interested parties, defined by means of the criteria set out in points 77 to 79 above. If, on the other hand, independent financing is simply one of the criteria by which functional separation is to be assessed, infringement of Article 4(2)(b) of Regulation No 95/93, as amended, could not be established simply on the ground that the coordinator was not financially independent.
82.
I consider that the existence of an independent system of financing should be regarded simply as one of the criteria by which functional separation of the coordinator is to be assessed.
83.
There is no coordinating conjunction between the two sentences of Article 4(2)(b) of Regulation No 95/93, as amended, and thus nothing in the wording of the provision to suggest that the second sentence, which sets out the requirement for an independent system of financing, is cumulative with the first, which requires the Member States to ensure functional separation between the coordinator and interested parties.
84.
Furthermore, I note that, during the course of preparatory works relating to Regulation No 793/2004, the Commission proposed that Article 4(2)(b) of Regulation No 95/93 should be amended so as to provide that ‘the de facto independence of the coordinator shall be ensured additionally by separating the coordinator institutionally and financially from any single interested party’, and that the Member State should ensure ‘that sufficient resources are made available in such a way that the financing of the coordination activities cannot affect the independence of the coordinator’. ( ) The Economic and Social Committee had, for its part, opined that ‘Member States must offer indemnification to coordinators so that they may be clear to pursue their brief and principles unfettered’. ( ) These proposals were not adopted: Article 4(2)(b) of Regulation No 95/93, as amended, does not provide that the coordinators’ operating costs are to be reimbursed (that it is to be ‘indemnified’, to use the Economic and Social Committee’s expression), still less that it should have its own budget.
85.
It is thus apparent from the preparatory work that the Member States are not required to make sufficient resources available to the coordinator to cover its operating costs. Nor are they required, in my view, to provide it with a separate budget, as the EU legislature declined to require financial separation of the coordinator. In those circumstances, it seems to me that it would be illogical to maintain that independent financing is a separate condition, as the Member States have considerable discretion as to how such financing is to be provided. In particular, that discretion is broad enough to permit the Member States not to provide the coordinator with resources sufficient to cover its operating costs, which would seem to be a necessary condition of financial independence.
86.
I would emphasise, in this regard, that the 2008 Communication, which refers to separate accounts being kept by the coordinator, as well as to a separate budget and diversity in its sources of finance, ( ) cannot be regarded as imposing obligations of that kind on the Member States. The legal basis of Regulation No 95/93, as amended, is Article 84(2) of the Treaty establishing the European Community, which empowered the Council, deciding by qualified majority, to lay down provisions for air transport. Thus, only the Council had power to impose obligations on Member States which were not contained in Regulation No 95/93, as amended, and the Commission could not do so by means of a communication.
87.
Incidentally, that would not seem to have been the Commission’s intention, as the 2008 Communication states, in the introduction, that its purpose is simply ‘to state the Commission’s views’, ( ) and the Commission says only that the coordinator ‘should’ keep separate accounts, have a separate budget, and be financed by several different parties. ( )
88.
I note, finally, that the 2008 Communication was not published in the Official Journal of the European Union, that it was adopted 4 years after Regulation No 793/2004, and that, although the Commission presented a proposal, on 1 December 2011, which contained some of the same material as the 2008 Communication, that proposal has not, so far, led to an amendment of Regulation No 95/93. ( )
89.
Thus it does not assist the Commission, in establishing that the Portuguese Republic has failed to fulfil its obligations, to rely on the 2008 Communication. ( )
(d) Application to the present case
90.
In my view, the Commission has not demonstrated that the DCNS is not functionally separate from the ANA.
91.
Undoubtedly, the fact that the DCNS is a department of the ANA, rather than a separate entity with legal personality, does not tell in favour of its independence. The same is true of the fact that the DCNS is financed entirely by the ANA, the slot allocation charge provided for by Article 11 of Decree-law No 109/2008 not having been implemented, and its budget is approved by the ANA.
92.
However, those two considerations must be balanced against the fact that the DCNS has its own staff, and that the Commission has not demonstrated that the ANA can interfere in the allocation of slots.
93.
First, the Commission does not dispute that the DCNS has its own staff, devoted entirely to slot allocation activities. It has not put forward any matter tending to show that there is a hierarchical relationship between the staff of the DCNS and that of the ANA, such as the promotion of DCNS staff being decided by the management of the ANA, or the management of the ANA being able to penalise DCNS staff. The only argument advanced by the Commission in this regard relates to the absence of any ‘Chinese wall’ between the DCNS and the ANA, that is, of any organisational structure internal to the ANA which prevents confidential information from passing between the DCNS and other departments of the ANA. That argument is not convincing: I find it difficult to see how a requirement for a ‘Chinese wall’ can arise from Article 4(2)(b) of Regulation No 95/93, as amended, which makes no reference to the coordinator’s staff.
94.
Secondly, the Commission has not established that the ANA is able to give instructions to the DCNS. It is not sufficient, in this regard, simply to rely on general considerations of Portuguese company law, under which the board of directors of any limited company, such as the ANA, manages the activities of the company, including its departments, and examines the company’s annual report and annual accounts, including the separate accounts of the DCNS. To maintain that the DCNS is not functionally separate from the ANA because the board of directors of the ANA manages the activities of the company amounts, it seems to me, in reality, to maintaining that it is not functionally separate because it is a division of the limited company which is the ANA. However, since Article 4(2)(b) does not require Member States to ensure that the coordinator is legally separated from interested parties, but only that it is ‘functionally’ separated, the Commission’s argument cannot succeed. ( )
95.
I note, in this regard, that the Commission has not addressed the decision process of the DCNS, and has not examined whether the governing organs of that department kept those of the ANA informed and consulted them before taking decisions, or whether they received instructions from the ANA relating to individual cases, or simply general guidance, or no instructions at all. Such an examination was all the more necessary given that the Portuguese Republic asserts, in its defence and its rejoinder, that the decisions of the DCNS are not subject to the evaluation or the approval of the ANA’s board of directors.
96.
Thirdly, there is no dispute that the DCNS kept separate accounts. Article 5(2) of Decree-law No 109/2008 makes express provision to that effect. ( )
97.
As to the fact that, when the ANA was privatised, the Portuguese Republic announced the creation of an independent entity which was to be responsible for the allocation of slots, I note, first, that the decision to privatise the ANA was taken only a month before the reasoned opinion ( ) and that the privatisation seems to have taken place a month after the reasoned opinion, ( ) secondly, that, if the Portuguese government did not wish to delegate the activity of coordination to a private undertaking, which would not have been prohibited by Regulation No 95/93, as amended, it would have had no choice but to create a new entity for this purpose, given that it was privatising the managing body and the coordinator was a department of that body.
98.
Finally, it is true that when questioned at the hearing, the Portuguese Republic was not able to specify the nature or details of procedure followed in appointing the coordinator. However, leaving aside the fact that the Commission did not raise this matter either in the application or in its reply, I would point out that these matters relate to Article 4(1) of Regulation 95/93, as amended, which requires Member States to ensure the appointment of a qualified person, rather than Article 4(2) of that regulation. The only allegation made by the Commission against the Portuguese Republic is that it has failed to fulfil its obligations under Article 4(2); nowhere does the Commission refer to Article 4(1).
99.
It follows that the Commission has not demonstrated that the Portuguese Republic has failed to fulfil its obligation under Article 4(2)(b) of Regulation No 95/93, as amended, to ensure that the coordinator is independent of the managing body of the coordinated airports.
VI – Conclusion
100.
In the light of the foregoing considerations, I propose that the Court should:
( ) Language of the case: French.
( ) OJ 1993 L 14, p. 1.
( ) Judgments in Commission v Austria, C‑555/10, EU:C:2013:115; Commission v Germany, C‑556/10, EU:C:2013:116; Commission v France, C‑625/10, EU:C:2013:243; Commission v Slovenia, C‑627/10, EU:C:2013:511; Commission v Luxembourg, C‑412/11, EU:C:2013:462; Commission v Italy, C‑369/11, EU:C:2013:636.
( ) Judgments in Commission v Germany, C‑518/07, EU:C:2010:125; Commission v Austria, C‑614/10, EU:C:2012:631; Commission v Hungary, C‑288/12, EU:C:2014:237.
( ) OJ 2004 L 138, p. 50.
( ) COM(2008) 227 final.
( ) Diário da República, series 1, No 122 of 26 June 2008, p. 3965.
( ) Resolution of the Council of Ministers No 111-F/2012, Diário da República, series 1, No 251 of 28 December 2012.
( ) Judgment in Commission v Belgium, 77/69, EU:C:1970:34, paragraph 15.
( ) See Article 5(1) of Regulation No 95/93, as amended.
( ) OJ 2009 L 70, p. 11.
( ) See Article 2(4), of Directive 2009/12.
( ) See Article 10(1) of Directive 2009/12.
( ) Article 10 of Directive 2009/12 mentions, among the services which may be varied in quality and scope by the managing body, the provision of terminals or parts of terminals.
( ) See Article 1(4) of Directive 2009/12.
( ) OJ 1996 L 272, p. 36.
( ) See the Annex to Directive 96/67.
( ) In this regard, See Papy, R., L’aviation commerciale et le droit antitrust (Commercial aviation and antitrust law), Presses universitaires d’Aix-Marseille, 2013, paragraph 646: ‘since the liberalisation of groundhandling services was effected [by Directive 96/67], the number of managing airports involved in groundhandling services has not changed significantly (in the 15 Member States which existed in 1996). The market shares of suppliers of groundhandling services which are subsidiaries of managing bodies of airports have fallen but remain high. This situation creates potential conflicts of interest which are not all provided for by the directive, which may therefore necessitate the intervention of competition law in a complementary role. Restrictions on competition concern market access itself (unjustified refusal of access to suppliers), the quality of the conditions in which the supplier operates on the market (discriminatory allocation of operating premises and areas), and the cost of access to the market (discriminatory charges)’.
See also the Report from the Commission of 24 January 2007 on the application of Council Directive 96/67/EC of 15 October 1996, COM(2006) 821 final, paragraph 16 ‘In a good number of Member States (... Portugal) the airport operator is active in the groundhandling market by providing handling services and is thus a direct competitor of suppliers of groundhandling services and air carriers which provide these services for third parties. ... at many larger airports where a sufficient number of service suppliers are interested in offering their services or where airport users also provide third party handling, the management bodies of airports are active in the market by providing handling services. At many such airports they have a strong position, which makes it difficult for a competitor or a new entrant to gain (additional) market share’.
( ) On this subject, see the French Competition Council’s Decision No 98-D-34 of 2 June 1998 on competition in the market for groundhandling services at Orly airport and in the market for the premises and space necessary to carry out the activities of air carriers and made available to them by Aéroports de Paris at Orly airport (referred to by Papy, R. in L’aviation commerciale et le droit antitrust, op. cit.). In that decision, the Competition Council found that in refusing to allow the air carrier TAT to open new lines from Orly’s west terminal, but permitting them to be opened from the south terminal, the managing body of Orly airport, Aéroports de Paris, abused the dominant position (a monopoly) which it held in the market for airport infrastructure at Orly airport. The Council based that conclusion on the fact (amongst others) that, while TAT had provided its own groundhandling services at Orly’s west terminal, that was not the case at its south terminal, where TAT was constrained to use the groundhandling services provided by the managing body: ‘having regard ... to the fact that TAT, which, when it used the Orly West terminal, had provided groundhandling services for its own flights through its own staff, which had been specially trained, was constrained by [Aéroports de Paris] to use only [Aéroports de Paris] staff to operate the walkways, after being transferred to the Orly South terminal ... ; to the fact that in thus preventing TAT from using its own staff, and requiring it to use the groundhandling services that it offered at Orly South terminal, [Aéroports de Paris] discriminated against TAT’.
( ) Equally, the managing body may be tempted to give national carriers the benefit of discriminatory discounts on landing charges: see the judgment in Portugal v Commission, C‑163/99, EU:C:2001:189, paragraph 56: ‘the system of discounts appears to favour certain airlines, in this case de facto the national airlines’.
( ) In this regard, see Commission Decision 95/364/EC of 28 June 1995 relating to a proceeding pursuant to Article 90(3) of the Treaty (OJ 1995 L 216, p. 8), paragraph 17 of which states: ‘in the case at issue, ... the [Régie des Voies Aériennes, l’entité gestionnaire de l’aéroport de Bruxelles-Zaventen] is not attempting to obtain the loyalty of its customers or to attract new ones ..., but rather the State, acting through its intermediary, is giving preferential treatment to a specific undertaking, i.e. the national airline Sabena’.
( ) See point 56 of this Opinion.
( ) See recital 2 and Article 4(2)(c) of Regulation No 95/93, as amended.
( ) See recital 5 of Regulation No 95/93, as amended.
( ) See recital 6 of Regulation No 793/2004.
( ) Judgment in Commission v Germany, C 518/07, EU:C:2010:125.
( ) OJ 1995 L 281, p.31.
( ) My emphasis. Judgment in Commission v Germany, C‑518/07, EU:C:2010:125, paragraph 35: ‘the government of the Land concerned may have an interest in not complying with the provisions with regard to the protection of personal data where the processing of such data by a non-public body is at issue. That government may itself be an interested party in that processing if it actually or potentially participates therein, for example, in the case of a public-private partnership or in the case of public contracts with the private sector. That government may also have a specific interest if it is necessary or even merely useful for it to have access to databases in order to fulfil certain of its functions, in particular for taxation or law enforcement purposes. Furthermore, that government may also tend to favour economic interests in the application of the provisions on the protection of individuals with regard to the processing of personal data by certain companies which are economically important for the Land or region’.
( ) Judgment in Commission v Germany, C‑518/07, EU:C:2010:125, paragraph 36: ‘the mere risk that the scrutinising authorities could exercise a political influence over the decisions of the supervisory authorities is enough to hinder the latter authorities’ independent performance of their tasks’.
( ) Opinion of Advocate General Mazák in Commission v Germany, C‑518/07, EU:C:2009:694, point 34: ‘I am of the opinion that the Commission has not satisfied the burden of proof imposed on it. It has not proved either the failure of the system of oversight nor the existence of a consistent practice on the part of the overseeing authorities of abusing their powers and thus hindering the data protection supervisory authorities in the exercise of their functions with complete independence’.
( ) Judgment in Commission v Germany, C‑518/07, EU:C:2010:125.
( ) With the exception of the argument relating to the privatisation of the ANA, referred to in point 33 of this Opinion, which, however, does not explain why the ANA has continued to deal with coordination after its privatisation.
( ) See Article 4(5) to (8) of Regulation No 95/93, as amended.
( ) See, for example, Directive 2001/14/EC of the European Parliament and of the Council of 26 February 200 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure (OJ 2001 L 75, p. 29), Article 14(2) of which requires the infrastructure manager to be ‘independent in its legal form, organisation and decision-making’ (my emphasis). In a case where the independence of the body responsible for path allocation, the Direction des circulations ferroviaires, was at issue, the Court held that French legislation did not ensure that that body was independent in legal form because it was a department of a railway undertaking, the Société nationale des chemins de fer français. It observed that the body ‘[did] not have legal personality separate from the SNCF’ (judgment in Commission v France, C‑625/10, EU:C:2013:243, paragraph 52).
See also Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) (OJ 2002 L 108, p. 33), Article 3(2) of which provides that ‘Member States shall guarantee the independence of national regulatory authorities by ensuring that they are legally distinct from and functionally independent of all organisations providing electronic communications networks, equipment or services’ (my emphasis).
Lastly, see Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC (OJ 2003 L 176, p. 37), Article 10(1) of which provides that ‘where the transmission system operator is part of a vertically integrated undertaking, it shall be independent at least in terms of its legal form, organisation and decision making from other activities not relating to transmission’ (my emphasis).
( ) Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports, presented by the Commission on 20 June 2001, COM(2001) 335 final, OJ 2001 C 270, p.131. See Article 4(2): ‘the Member State ... shall ensure that ... (b) at a coordinated airport the de facto independence of the coordinator shall be ensured additionally by separating the coordinator institutionally and financially from any single interested party ...’ (my emphasis).
( ) See point 9 of this Opinion. The 2008 Communication defines functional separation as meaning, ‘inter alia’, that the coordinator ‘should act autonomously’ from the managing body and from air carriers or service providers operating from the airport concerned, and should ‘not be instructed by, and not have a duty to report back to’ them. It says nothing about the creation of a distinct legal entity.
( ) It is true that the Court interpreted Article 6 of Commission Directive 88/301/EEC of 16 May 1988 on competition in the markets in telecommunications terminal equipment (‘Directive 88/301/EEC’) (OJ 1988 L 131, p. 73), which provided for the approval of telecommunications terminal equipment to be entrusted ‘to a body independent of’ public or private undertakings offering goods or services in the telecommunications sector, as prohibiting such approval from being entrusted to a department of the Ministry for Posts and Telecommunications, on the ground that that ministry was also responsible, amongst other things, for operating the network (judgment in Taillandier, C‑92/91, EU:C:1993:854, paragraph 15). However, besides the fact that that provision refers to an independent ‘body’, whereas Article 4(2)(b) of Regulation No 95/93, as amended, merely requires ‘independence’ on the part of the coordinator, such an interpretation would be contrary to the preparatory work relating to Regulation No 793/2004, referred to in point 74 of this Opinion.
( ) See point 62 of this Opinion. It is true that, unlike Article 4(2)(b) of Regulation No 95/93, as amended, this provision does not require functional separation of data protection authorities. However, it refers to those authorities acting ‘with complete independence’ in exercising their functions, thus echoing Article 4(2)(b) of Regulation No 95/93, as amended, under which the functional separation of the coordinator is simply a means of ensuring its independence: the Member State is to ensure ‘the independence of the coordinator ... by separating the coordinator functionally from any single interested party’ (my emphasis).
( ) Judgment in Commission v Austria, C‑614/10, EU:C:2012:631, paragraph 42; judgment in Commission v Hungary, C‑288/12, EU:C:2014:237, paragraph 52.
( ) Judgment in Commission v Austria, C‑614/10, EU:C:2012:631, paragraphs 48 to 51.
( ) Judgment in Commission v Austria, C‑614/10, EU:C:2012:631, paragraph 61.
( ) Judgment in Commission v Hungary, C‑288/12, EU:C:2014:237, paragraph 55.
( ) See footnote 37 above.
( ) Judgment in Tranchant, C‑91/94, EU:C:1995:374, paragraph 21: the director of the laboratory responsible for the tests carried out prior to approval of telecommunications terminal equipment was an employee of France Télécom, the operator of the telecommunications network.
( ) Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment (OJ 2001 L 197, p. 30) provides, in Article 6(3), that Member States shall designate the authorities to be consulted as to the environmental effects of implementing plans and programmes. While this provision does not require those authorities to be independent, or to be functionally separated from the parties producing those plans, the Court introduced such a requirement. It held that if, under the legislation of a Member State, a single authority is responsible both for producing a plan and for giving its opinion as to the environmental effects of that plan, there must be ‘functional separation’ within the body. The Court defined such functional separation as ‘meaning, in particular, that it is provided with administrative and human resources of its own’ (judgment in Seaport (NI)and Others, C‑474/10, EU:C:2011:681, paragraph 42).
( ) See footnote 35 above (my emphasis).
( ) Opinion of the Economic and Social Committee on the ‘Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports’ (OJ 2002 C 125, p. 8), paragraphs 4.5.2.1 and 5.2.
( ) See point 9 of this Opinion.
( ) See the 2008 Communication, Introduction, p.3. See also the Conclusion of the 2008 Communication, p.8, which states that ‘in the light of ... monitoring, the Commission will consider whether it is necessary to make a proposal to amend the Regulation’.
( ) See the 2008 Communication, paragraph 1, p. 4: ‘the coordinator should therefore keep separate accounts and budgets and not rely for the financing of his activities only on the airport managing body, a service provider nor a single air carrier’ (my emphasis).
( ) Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at European Union airports (recast), 1 December 2011, COM(2011) 827 final. The Commission’s proposal would add a new subparagraph to Article 4(2)(b) of Regulation No 95/93 (which would become Article 5(3)(c)):
‘the financing referred to under point (c) shall be provided by the air carriers who operate in the coordinated airports and by the airports in such a way as to ensure that the financial burden is distributed equitably among all interested parties and that the financing does not largely depend on a sole interested party. The Member States shall ensure that the financial, human, technical and material resources and expertise required by the coordinator for carrying out his duties are at his disposal at all times’.
( ) See, to that effect, Opinion of Advocate General Jääskinen in Commission v Germany, C‑556/10, EU:C:2012:528, point 60; and judgment in Commission v Germany, C‑556/10, EU:C:2013:116, paragraph 62.
( ) See, to this effect, judgment in Commission v France, C‑625/10, EU:C:2013:243, paragraph 67.
( ) See point 13 of this Opinion.
( ) The decision to privatise the ANA was adopted on 28 December 2012, the reasoned opinion on 25 January 2013. See points 15 and 20 of this Opinion.
( ) According to the Commission, the transfer took place on 21 February 2013. |
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